Should Canada Go Rogue On Trade And Security?

I haven’t watched The Simpsons for a long time, but one of my favourite episodes was “Homer the Great”  from the sixth season, where Homer joins an ancient secret society known as the Stonecutters. Homer ends up becoming the leader of the Stonecutters Lodge, then he alienates all the other members so much that they quit to form the “Ancient Mystic Society of No Homers” club.

As a nation, Canada hates to be left out of any club or organization, and we have helped to found numerous new organizations with other countries, like the United Nations. We joined NATO when it started, because it was mostly allies from WW2 or the defeated countries who we wanted to prevent from falling under Communism. We were part of the original Bretton Woods agreements, which led to the World Bank, IMF, and the GATT (later to be replaced by the WTO).

Canada hates being left out of any club, particularly when our friends are working together.

We managed to get into the G7, and then the G20. We are also members of the Commonwealth and La Francophonie. If there is an organization or potential international treaty proposed, you can bet that Canada will try to be first in line to join it.

We also like doing lots of bilateral deals, particularly since WW2. We did NORAD with the US in the late 1950s, and a bilateral deal with the US to build the St. Lawrence Seaway, then the 1988 Free Trade Agreement with the US (soon followed by NAFTA, which added Mexico). Then we did a lot of other deals, or tried to, including bilateral free trade deals with Chile and Israel, and a deal with the EU. When the US withdrew from the Trans Pacific Partnership (TPP), we stuck around and did the Comprehensive and Progressive Agreement for Trans-Pacific Partnership (CPTPP) deal with 11 other countries.

Canadians generally believe that agreements will be “win-win”, or mutually beneficially, and we expect that the countries that sign agreements with us may not always abide by them, but that generally the agreements will be respected and entered into in good faith.

Enter into this picture one Donald Trump, a man long known for not paying contractors bills, and someone who, despite a degree from Wharton, is the most ignorant US President in living memory. Trump is blissfully unaware of even the simplest facts of US history, like the year the Civil War ended, though he seems to have read a book on President William McKinley.

Trump also goes beyond purely being “protectionist” – he seems to believe in bullying other countries for maximum US advantage. Win-lose seems to be his goal.

Trump also seems to have no belief in working with allies, with the possible exception of his warm feelings towards authoritarian leaders like Putin, Erdogan, or Orban. Trump seems to think that the closest ally of the US is Israel, enough to join in the bombing of Iran once Israel had air superiority. He also seems to view Saudi Arabia and some of the other Gulf countries as being close to his heart, while he views most European countries as freeloaders – a category which also seems to include Canada.

How Canada should deal with Trump is an extremely difficult question. We saw how Ukraine’s Zelenskyy got into a tussle with Trump at the White House, and South Africa’s Ramaphosa was also ambushed. Britain’s Keir Starmer essentially sucked up to Trump, and the UK seems to not be treated as harshly as other countries. Canada in particular seems to bother Trump, with his claims that we are “difficult”.

Trump clearly hated Justin Trudeau, who was like one of the “cool kids” who joked about Trump behind his back at meetings. In turn, Trump denigrated Trudeau by calling him “Governor” and commenting about Canada as the potential 51^st state.

During the recent election, PM Mark Carney talked about “elbows up” and said that our relationship with the US had permanently changed. At the White House, Carney did not stand up to Trump, other than to make a mild comparison between Buckingham Palace and Canada to make the point that some things are “never for sale”.

Carney managed to make some progress with Trump in June, and then quickly agreed to Trump’s demand that NATO members increase defense spending to 5% of GDP. NATO let Spain escape this demand. Then, Trump said he would cut off negotiations with Canada unless the Digital Services Tax was immediately cancelled, and Carney “caved”, as the White House Press Secretary herself phrased it.

Former Liberal Foreign Affairs Minister Lloyd Axworthy made scathing remarks about Carney’s approach to dealing with Trump. While the public may not know any of the details of where negotiations stand or if the US has made any concessions, Carney’s approach seems to not be working.

I actually think Donald Trump is stupid enough to be serious about the whole “51^st state” crap.

If you look at a map, the idea of combining the US and Canada is an intriguing idea, since this theoretical country would be bigger than Russia and add 42 million people to the 340 million of the US – as well as adding waters and natural resources. Given that India and China each have more than 1 billion people, and the EU has about 450 million people, the combined entity would be far more formidable than the US is now.

Frankly, I think Trump has no clue about Canada, and has not thought things through to any degree, particularly in regard to Quebec nationalism and fears over the fate of the French language.

Trump also keeps stating some other idiotic things – such as that Canada has nothing the US wants or needs when it comes to trade. However, Trump has shown some interest in reviving the Keystone pipeline, and he certainly wanted the natural resources in Ukraine enough to demand the US get a chunk.

Trump seems to also want to kill off the Canadian auto industry.

In the deals he did with Britain and Vietnam, Trump got a 10% minimum tariff. If Canada is stuck with a permanent 10% tariff on autos, virtually no finished autos will be exported to the US from Canada once the auto manufacturers have adjusted. The same will be true for other manufacturing, unless Canada devalues our dollar enough to counter the tariffs.

Canada risks a process of making lasting concession after concession, getting only temporary relief in return – a death by a thousand cuts.

A pundit on a US news channel said about Canada “why should they do a deal with Trump when he will just break his word?”. Why, indeed.

The USMCA is useless if we cannot enforce it. And we are only six months in to Trump’s four-year term – nothing will stop him from making more demands on Canada, starting with supply management and moving on to other policies.

Trump thinks Canada has no cards to play. Well, we do have cards to play. These cards are things the US takes for granted. These are cards that, if dealt, some Canadians might perceive as not in keeping with our notions of fair play.

Many of Trump’s tariffs and actions might actually be illegal under US laws, but the US courts are fickle and slow. There was already one ruling against Trump on tariffs, but it is being appealed, and the tariffs remain in effect.

After WW2, the US was willing to accept somewhat lopsided relationships with its allies, some of whom were weak and still recovering from the war. The US needed help in fighting the Cold War, and was willing to make accommodations. Take the Marshall Plan as an example.

With Japan, the US put up with Japanese economic protectionism. Japan provided military bases and helped in other ways without rearming and returning to being a militaristic society.

In contrast, Britain got almost no help, even though it won the war and incurred great costs. Canada and Australia were unscathed and did not need aid from the US.

But unlike any other country, Canada was located right on the flightpath that Russian and American bombers would use in a theoretical future nuclear war. Canada (including Newfoundland, which had been a separate country until 1949) and Greenland were used very much like Alaska as a first line of defense for airbases and radar. US ships also used Canadian waters, including the waters around Vancouver Island that were needed for access to and from the port of Seattle.

Canada did not get any special economic treatment, but we joined the US to form NORAD in the late 1950s. We signed the Auto Pact in 1965, eliminating most tariffs and guaranteeing that Canada would have an auto industry. The Big Three (GM, Ford, and Chrysler) made cars and parts in Canada for the domestic Canadian market, with some exports to other countries, particularly the Commonwealth.

When I have been in Cuba, I have even seen Canadian-only Pontiac models (Laurentians) and there are also “Plodges” (which were made in Canada and were a mix of Plymouth and Dodge parts). But this is no longer the 1950s, and it might not be practical to export models from Canada to the rest of the world in large enough numbers for our current auto plants to remain open – particularly if Canada does not have high tariffs against Europe, Japan, and South Korea in addition to the current tariffs on the US.

The G7 is useless while Trump is President, and this year’s meeting accomplished little. The USMCA is also useless as long as Trump is in office.

Possibly, Canada could join or strengthen ties with the EU, and Britain as well.

One way around the US would be to form various “Ancient Mystic Society of No Homers” clubs that exclude the US. There was talk of having a G6 without the US, which could be formed without killing off the G7 itself.

The same could apply to NATO. There are eight Arctic nations (Canada, Denmark, Finland, Iceland, Norway, Russia, Sweden, and the US). Canada could work with Denmark, Finland, Iceland, Norway, and Sweden to oppose Russia, without US involvement. NATO need not be disbanded, but since NATO will be largely irrelevant except where the US is firmly on board, parallel organizations that do not include the US may be needed.

The above approach might help on some issues, but it does not work when it comes to trade issues and the future of the Canadian economy, if in effect the US can unilaterally dictate the terms of trade and discriminate against Canadian goods and services on a whim.

Apart from watching the Simpsons, I grew up watching Warner Brothers cartoons – in particular, I loved Bugs Bunny. While Daffy Duck is often devising crazy pranks, Bugs is usually minding his own business in his rabbit hole when Elmer or someone else comes and interferes. His usual response is: “Of course you know, this means WAR!”.

Well, Canada will not actually go to war. That being said, Canada could be bold and tear up treaties and agreements that do not serve our interests, and begin to approach the US-Canada relationship from scratch.

If Trump won’t play by “the rules” and the US Congress or courts will not stop him, they why should we not use every tool at our disposal, even if it might seem like we are playing dirty.

Canada could start by tearing up NORAD, but Canada and the US have hundreds of agreements, and we can pick and choose from any of them.

Cuba is the extreme example of a neighbour where the US has no favourable rights or bilateral agreements. The US has singled out Cuba for punishment. Canadian airlines fly to Cuba (and there used to be Cuban airlines flying to Canada). When flying to Cuba once from Toronto’s Pearson Airport, I noticed something odd – the plane did not fly directly south before flying over the US, even if it was a Canadian charter company.

Well, it turns out there is this explanation, which is summarized by AI:

“Commercial flights between the US and Cuba generally adhere to standard altitude restrictions, but there are some unique considerations due to airspace restrictions and overflight permits. Generally, commercial airliners fly between 31,000 and 42,000 feet, but flights to and from Cuba may be lower due to airspace limitations. A Cuba overflight permit is required for flights entering Cuban airspace, and fees apply.”

Ignoring flights that leave or depart directly from Canada or the lower 48 states, the US needs access to Canadian air space far more than Canada needs access to US airspace. For reference, take a look at an airspace map like the one below from 2009:

Canada could play hardball by leveraging airspace restrictions to exert pressure on the US.

Despite the trade embargo since 1960, Cuba has managed to survive despite its lack of good relations with the US. The US economic embargo is not really the reason for Cuba’s economic problems. In effect, Cuba can still trade with the rest of the world, including China and Europe. Cuba has few tourists from the US, and cannot sell its rum, sugar, or cigars in the US, but what truly holds Cuba back is its internal corruption and lack of a capitalist economy.

In fact, look at Iran and Russia. Despite the sanctions imposed by the US (and other countries) on Iran since 1979, and on Russia since 2022 (or earlier), both countries have muddled through, largely on oil exports. Apartheid South Africa, Israel, and other countries have survived despite embargoes or boycotts. China also had tremendous economic growth while outside of the WTO and other institutions, until it reached a point where it stood enough to benefit from things like “most favoured nation status”.

Trump is right about one thing – access to the US market is a huge prize, and he can get concessions from other countries who want in. Canada is around the 9^th largest economy in the world – access to the Canadian market is of significant value, though not as much as access to the US, EU, or even Chinese markets.

In fact, Trump wants to bring manufacturing jobs back to the US, but with only 4.2% unemployment, the US actually lacks the labour to repatriate all those jobs. In contrast, if Canada raises tariffs or other barriers to American goods or services, we are unlikely to replace the majority of those goods and services with domestic ones.

But if WTO membership is useless to stop Trump’s barrage of tariffs, why stay in the WTO? We have a lot of existing trade deals with the EU and various specific countries. If we slap huge tariffs on US vehicles and other items, we may just increase exports from these other countries, with no reciprocal gains.

Much of what Canada exports now are commodities. Auto manufacturing is composed of branch plant operations, but there is also auto part manufacturing that is integrated into North American supply chains. We also build planes for Airbus in Quebec, and foreign pharmaceutical companies make some things here. Canada lacks our own domestically owned and headquartered multinationals in fields including high tech, where Shopify is the biggest company we can claim. Canada currently has no social media platforms of our own, though one called Gander is supposed to launch later this year.

Many things we export now, mainly commodities, will still be sold into world markets, on top of what we manage to sell to the US even with tariffs applied (aluminum is hard for the US to replace). But how do we move beyond exporting just those goods, while still having to import things we currently import from the US or elsewhere?

Free trade is based on an idea known as “comparative advantage”, which goes back to economist David Ricardo. In effect, even if Country A is less productive or efficient in everything compared to Country B, there are gains to be made from trading in the goods where differences in efficiency are greatest. Trump seems to not understand this theory, and he seems to want autarky (which would mean the US making everything and import nothing).

An alternative theory is called “neo-mercantilism”, whereby countries use tariffs and other barriers to catch up with other nations, until such time as they are able to compete or even out-compete other nations, and free trade begins to work in their favour. Japan and South Korea used this approach. German thinker and economist Friedrich List wrote about this in 1841, and in some respects, it is based on the ideas of American founding father Alexander Hamilton.

Trump and his appointees actually understand that a “non-market” economy or nation, like China, can compete unfairly by using neo-mercantilism and other policies. In fact, when Trump re-negotiated NAFTA into USMCA/CUSMA, one of the restrictions put on Canada was that we agreed to not negotiate free trade deals with non-market countries like China, unless the US approved it.

So, what are Canada’s options?

First, we can continue on the path PM Carney seems to be on – to not upset Trump, negotiate in private as much as possible, and muddle through.

Maybe the US courts will strike down some of the tariffs and other measures Trump is implementing. There is also the hope that the 2026 midterms will see the Democrats win the House of Representatives, providing some relief. But the Senate is unlikely to return to Democrat control in 2026. And we also have to hope that the Democrats take back the Presidency in 2028, and reverse Trump’s policies – but even then, will we win back the ground we lost?

Could Canada join the EU?

Unlikely, though it would help if the UK also decided to undo Brexit and rejoin the EU as well. Canada’s 42 or so million people, plus the UK’s 68 million, would increase the EU population to 560 million. Canada can join things like the European space program, and work closely with the EU and whatever NATO-like defense group is formed to defend Europe in the East and in the Arctic. But, if Canada and Britain became the 28^th and 29^th EU members, Canada would give up some sovereignty. Iceland, Liechtenstein, and Norway are in the European Economic Area (EEA) instead of being full EU members – this could be an option for Canada. We would be stupid to adopt the Euro, but I will leave that topic aside.

Canada joining the US is not going to happen, despite Trump’s persistence. Perhaps Trump might propose something short of a full merger that guts Canadian sovereignty without complete annexation, but that is also unlikely to fly (and Canadians would just wait until circumstances changed after the next Presidential election).

Canada has been subject to election interference from China, Russia, and India. Going back to the 1963 Canadian election, John F. Kennedy was seen as interfering to favour Lester B. Pearson over Diefenbaker. Maybe Canada could interfere in US politics, such as by running ads promoting our position, funding PACs or other lobby groups aligned with Canada’s interests, or by more clandestine means. If Trump is already treating Canada like an enemy in most respects, and trying to cause us harm in order to force a merger, then why not?

The other option is for Canada to go for broke – go rogue, and tear up or ignore agreements, treaties, and organizations where our interests are no longer being served due to the breakdown of Canada-US relations.

Canada could also remain a member of groups and organizations where the US is a member, but otherwise we could put our main efforts into “No Homers” clubs meant to circumvent Trump.

On trade, Canada would have to live with a return to our pre-1988, or pre-1965, or pre-WW2 relationship with a protectionist US by creating a new National Policy designed to ensure Canada remains sovereign and self sufficient where it is practical, as well as developing bilateral relationships one at a time.

Unlike the Canada of 1867, we have a highly skilled and educated population. Canada is a rich country, in terms of financial and other assets. We did not have capital markets of our own in 1867, and had to rely on London or New York.

We built an array of agreements with the US, but if Trump is going to effectively tear up NAFTA/USMCA and ignore the WTO, then why should we not tear up anything that prevents us from doing what is in our best interests in terms of our economy, sovereignty, and security?

Perhaps the mere threat of Canada breaking free of ties to the US, denying the US the use of our airspace or waters, and resetting relations generally would be enough to cause Republicans to counter Trump’s approach. Maybe intentionally leaking a radical plan to break away from the US, cancel treaties, and deny US access to our air and waters would be enough to get US politicians to take us seriously, and to go back to something close to our relationship since the 1990s.

The US has had an antagonistic relationship with Cuba since 1959, but other than the disastrous support of the Bay of Pigs Invasion, the US did not invade or attack Cuba in 60 years.

Canada’s problem has often been a certain timidity in the face of the US. English speaking Canadians often see things similarly to the way Americans do, because we are so exposed to US media sources – and our own are often unwilling to be seen as “Anti-American”.

Cuban nationalism and sense of identity is strong in large part because of American involvement in Cuba in the 1890s and the imposition of terms that let the US have a base at Guantanamo Bay, and enshrined into the Cuban Constitution the right of the US to intervene. Mexico lost massive amounts of land to the US in multiple wars or transactions. After the Mexican revolution was over in 1920, Mexican governments were usually very anti-American, and Mexico even nationalized its oil industry in 1938, mainly at the expense of American interests.

The Canadian attitude has been quite the opposite of the views of countries to the South of the US, because we have not been in direct conflict with the US since the War of 1812. The last border disputes over Maine and Alaska were settled by having Britain intercede through arbitration, with Britain ultimately siding mainly with the US.

Mark Carney has said that negotiations with the US are covering both trade and security issues. I fear that Carney is being too timid and is taking for granted that we have cards in our deck that we have been too hesitant to play.

The US and China are the only two real world superpowers, since Russia is only a fraction of the old USSR and cannot even defeat Ukraine. Despite its strength, the main foreign policy threat or concern of the US is to its own national security. Canada is not really focused on defense or military conflict, no more than Mexico or other Western Hemisphere nations. If Canada is a military target, it is only because we are next door to the US, and the US might stumble into a conflict that would then draw us in.

Canada’s main “existential” threat is not actual war, but a combination of several other things, starting with our own national unity (Quebec and Alberta often being in conflict with the federal government), and our dominance by the US in terms of our economy and our culture.

Many Canadians took it for granted that while we often had minor trade or economic disputes with the US, Canada and the US were generally partners in foreign policy (democracy, anti-communism, human rights) and benefited from a mutually beneficial trading relationship that grew out of the Bretton Woods conference that promoted trade, low tariffs, and economic stability.

Mark Carney made a speech in which he said that Canada’s old relationship with the United States, “based on deepening integration of our economies and tight security and military cooperation, is over”.

The funny thing is, it sounds like what we are getting is less integration of our economies, less military co-operation, while the US is getting Canada to spend more and give up more to meet the demands of the US on security at the expense of our own economic and other needs. The US is headed towards autarky, leaving Canada’s economy in shambles as the ties that made us more dependent on the US market are severed or impaired, and we are doing little or nothing to stand up to the US to get our own needs and priorities respected.

Many people will no doubt say that the approach I am outlining is nuts.

Carney has been quoted as saying: “I say this often: we can’t change President Trump”. But, we may be able to get his attention by being bold, so that his attitude towards Canada and US-Canada relations changes. If not, then maybe we have no choice but to scrap most of the agreements we have with the US and build a new relationship. The alternative is to keep being bullied by the US, gradually losing our sovereignty as well as seeing our standard of living fall farther and farther behind not only the US, but behind most of Europe and Australia too.