How has it come to this and where does the relationship go from here?

Postwar Canada-US relations were shaped by the cold war in which the two countries saw themselves as junior and senior partners in containing Soviet expansionism.  Relations were managed by government leaders who identified and maintained trade-offs that ensured a stable relationship.  The United States gave Canada favourable economic treatment.  In return, Canada provided an open investment climate and contributed to North American and North Atlantic defence.

By the 1960s the easing of cold war tensions eroded the partnership model on which the relationship had been based.  Canadians were concerned that Canada had become too dependent on the United States.  Americans believed that the United States had become too generous with its friends and needed to adopt a more self-centered approach.  In the circumstances, it no longer seemed necessary or possible to continue the trade-offs that were critical to the partnership model.  This could be seen in 1969, when Prime Minister Pierre Trudeau halved Canada’s NATO troop contribution to Europe, and in August 1971, when President Richard Nixon refused to give Canada its customary exemption from a 10 percent surcharge on all dutiable imports as part of a restructuring of US foreign economic policy.

Nixon made it clear that there would be no more economic concessions for Canada.  The Trudeau government, after considering continuing the existing pragmatic approach or deepening integration with the United States, chose a “Third Option” to reduce Canada’s vulnerability by strengthening the country’s economy and culture and diversifying its external economic relations.  Canada reached economic cooperation agreements with the European Union and Japan, but the private sector’s response was limited.  Despite periodic friction between Ottawa and Washington, Canada-US trade continued to grow.

The conflicting national and foreign policies of the Trudeau and Reagan governments at the beginning of the 1980s created new controversies.  Renewed efforts to increase Canadian control over the economy, through such measures as the National Energy Program and expanded ties with Mexico and newly industrializing countries, clashed with the administration’s efforts to increase US national and continental strength amid deteriorating economic conditions and renewed tensions with the Soviets.  Paradoxically, this would set the stage for a new era of cooperation that would last until the coming of Donald Trump.

Prime Minister Brian Mulroney, who came to power in 1984, saw closer ties to the United States as the key to Canada’s prosperity.  He found a willing partner in President Ronald Reagan.  Mulroney initially tried to revive the old partnership approach.  He provided defence and foreign policy support and more liberal investment policies with the expectation that the president would respond positively on economic issues.  Mulroney temporarily increased defence spending, supported or did not oppose Raegan’s major initiatives, dismantled the NEP and loosened investment laws.  But while Reagan was a strong president, he could not give Canada the favourable economic treatment Mulroney sought.

Accordingly, Mulroney decided to build on Canada’s relationship with the United States by proposing a free trade agreement with binding rules and dispute settlement procedures to hold American power in check.  Reagan welcomed the proposal, which advanced his goal of closer North American cooperation.  Canada did not achieve uniform trade laws in the 1989 Canada-US Free Trade Agreement but did secure a dispute settlement mechanism to ensure each party’s anti-dumping and countervailing duties were fairly applied.  The provision was incorporated into its successor, the North American Free Trade Agreement, with the addition of Mexico, in 1994.

Though the benefits and costs were unevenly distributed, NAFTA led to a dramatic increase in trade and investment among the three countries and integrated their economies.  This occurred in a more benign international environment that saw successive Canadian governments reduce defence spending and cut back on arctic sovereignty and security initiatives.

Trump came to office in 2017 promising to put “America First.”  A long-time devotee of tariffs he vowed to scrap NAFTA, which he called the “worst trade deal ever made,” unless there were major changes.  Trump tried to leverage negotiations by invoking national security powers to impose tariffs on steel and aluminum products, prompting Canada to respond with tariffs of its own.  But he settled for modest revisions to the pact, renamed USMCA (CUSMA in Canada).  Trump hailed it as the “best deal we’ve ever made.”

Since returning to power in 2025, after a four-year exile, Trump has doubled down on his America First agenda, pulling back from international institutions, accusing allies of taking advantage of the United States and attempting to lure Russia away from China in a crude version of 19^th century balance of power politics.  He says he will not defend NATO allies that do not spend enough on defence and appears willing to abandon Ukraine to Russia. He has falsely accused Canada of unleashing a flood of fentanyl and illegal migrants into the United States, and openly discussed annexing Canada, the Panama Canal and Greenland.  

Early this month Trump used emergency economic powers to introduce a massive package of tariff increases on over 200 US trade partners (Russia exempted), which he accused of “ripping off” the United States.  However, he has offered mixed messages about what he wants to achieve.  Amid fears of a collapse of the bond market, he has since temporarily lowered tariffs on all countries except China (which he increased), though uncertainty remains.  Canada and Mexico were exempted from those tariffs.  But they had already been hit with 25 percent levies over alleged fentanyl/illegal migration concerns, aluminum and steel, and non-CUSMA compliant autos and auto parts.  Canada also faces the prospect of sharply increased duties on lumber.  Carney’s government has responded with carefully targeted measures of its own.     

Trump’s actions have roiled markets and sparked fears of a global trade war and recession.  But Trump has thus far refused to abandon his approach.  Despite anxiety, public criticism in the United States has been muted.  Trump’s stranglehold over the Republican party through its MAGA base has kept party legislators, who are in control of both Houses of Congress, in check.  They will not likely find their courage until their electoral prospects are threatened.         

Both Carney and his chief rival, Pierre Poilievre, say that if they win this month’s election they will negotiate a new economic and security relationship with Washington.  But it would be premature to engage Trump as long as he remains defiant and his endgame is unclear.  More integrated relations, which would increase Canada’s vulnerability, are not in the cards.  Nor can the partnership model, based on economic and defence trade-offs, be revived.

An early test of the relationship will be the review of CUSMA that will begin in the coming months.  Some have called for Canada to abandon Mexico and strike its own deal with the United States.  However, that would deprive Canada of an important ally and lead to a hub and spokes trading arrangement that would leave the United States as the only party with preferred access to both markets.  Yet, even a successful negotiation would not guarantee stability given Trump’s record of running roughshod over rules.

Canada needs to diversify its trade to reduce reliance on the US market.  Businesses will likely be more receptive than they once were, as new global trading patterns emerge in response to an increasingly unreliable United States.   But Canada must boost its economic infrastructure to make its efforts effective.  A good example is the Trans Mountain Pipeline, which has increased energy access to Asian markets and broken the US monopoly price.  Canada also needs to strengthen its own domestic market by reducing stubborn inter-provincial trade barriers that limit growth by hampering the flow of goods and services across the country.

Finally, in addition to border security measures already taken, Canada needs to raise its defence spending to meet US and other allies’ complaints that it is not doing its share and to strengthen its own credibility on defence and related matters.  As part of that approach, it needs to address its long-neglected Arctic security posture to shore up its sovereignty, deal with possible external challenges and avoid becoming a strategic liability to the United States. 

Donald Barry is a professor emeritus of political science at the University of Calgary.