To state that an across-the-board 25% tariff on a country that sells nearly 80 percent of its exports to the U.S. would be devastating is putting it mildly. Since President-elect Trump made the threat a few weeks ago, Canadian policy-makers have been left scrambling, and rightfully so. Ottawa is working overtime to show the incoming administration it can address any concerns at the border. Prime Minister Trudeau even dropped everything to meet Trump – on his turf in Florida, no less. Meanwhile, export dependent provinces like Quebec and Ontario are in overdrive, hammering home the message that tariffs on Canadian goods will hit American consumers where it hurts.
Make no mistake: all this posturing is playing directly into Donald Trump’s hands. It matters little what steps and statements Canada makes in the days and weeks ahead. Rule #1 when dealing with the bully who steals your lunch money is that it’s best not to remind him that you bring lunch money to school every day.
It is no secret that Trump, and virtually every single person in his inner economic circle, have no time for free trade. The ‘Washington Consensus’ of successive Democrat and Republican governments that celebrated free trade has been replaced by a belief that trade deficits are inherently unfair and tariffs are the magical cure. Enter ‘managed trade’—a protectionist policy that prioritizes state intervention in global commerce, unravelling the interconnected web of supply and demand in today’s globalized economy.
For massive U.S. trade deficits with countries like China, Japan, Germany, Mexico and others, this managed trade approach might seem plausible on paper. But when applied to Canada, it’s downright self-defeating. In an era where global trade is dominated by intermediate goods – materials used in countless manufacturing and production processes – taxing Canadian imports is effectively taxing American exports. It doesn’t just hurt Canada; it makes U.S. goods less competitive on the world stage. Whether it’s cars assembled with Canadian steel and aluminum, food products made with Canadian agri-food inputs, or petrochemical, lumber, and other materials fueling U.S. industries, these inputs are foundational to American production. Slapping tariffs on Canadian goods isn’t just a bad idea — it’s economic self-sabotage.
And let’s not forget the consumer. Tariffs on Canadian imports mean higher prices for cars, food, gas, electronics, and utilities. For an incoming administration swept into office on promises to ease the financial strain on middle-class voters, his policy is wildly counterintuitive.
The reality is these fact-based arguments are unlikely to penetrate the noise. Trump’s tariffs are less about policy and more about messaging—a simplistic pitch to the base, dressed up as a fix to trade imbalances. But sooner or later, the facts will force their way back into the conversation. When that happens, Canada will move from defensive scrambling to deal-making.
The even better news? There are far bigger trade deficits to tackle than the one with Canada. And the best news? A deal is inevitable. The problem is, we’ll just have to wait for the new year before the president-elect is ready to make one.
Adam Taylor is a partner at NorthStar Public Affairs, where he advises companies and governments around the world on complex trade and economic issues. As a senior advisor on international trade in the Conservative government of Stephen Harper, Adam helped Canada expand its access to global markets through various free trade and trade-related negotiations.