Retaliatory Tariffs Won’t Protect Canada

Last week, Donald Trump seemed poised to plunge North America into a trade war. When he declared a 30-day pause to his threatened tariffs on Canadian imports, Canadians breathed a collective sigh of relief. But there is little cause for celebration. Like a putrid smell, the threat of a trade war lingers. Canadian retaliatory tariffs on U.S. imports also hang in the balance, with the potential to wreak havoc on consumer prices in both countries. Economic uncertainty remains.

Another showdown could come in early March, when Trump has promised to implement global tariffs on steel and aluminum imports. He has also directed U.S. departments and agencies to report on trade and tariff policy by April 1, aiming to identify even more supposed unfair trade practices requiring American retaliation. Next year, there will be a mandatory review of the Canada-U.S.-Mexico Agreement, or CUSMA. On renegotiating CUSMA, during his re-election campaign Trump vowed: “Oh, I’m going to have a lot of fun!” No doubt he would relish beating up on Mexico and Canada. 

Since the 1980s, Trump has been a consistent critic of free trade—perhaps his only consistent political position over the decades. Tariffs, he said in 2024, “are the greatest thing ever invented.” Unlike during Trump’s first presidency, when free-trade Republicans still held sway within the administration and Congress, this second MAGA administration is primarily staffed by protectionists and nativists. Many GOP legislators and state governors—who’ve historically been allies in the Team Canada lobbying approach—seem onboard with this shift toward protectionism, and there is widespread distrust of globalization among Americans. It’s certain that Canadians will have to confront unbridled American protectionism, whether that’s in the next few weeks or the next four years. The United States is turning away from free trade. This sea change is profoundly important for Canadians. 

Beginning in 1935, when President Franklin Delano Roosevelt began liberalizing international trade, successive American administrations have sought close economic interdependence between Canada and the United States. Throughout the intervening decades, it was Canadians who were skeptical about moves toward continental integration. In 1957, John Diefenbaker warned that Americans aimed to turn Canada into what then would have been the 49th state; in the 1970s, Pierre Trudeau’s Third Option policy sought to reduce reliance on the U.S. by expanding relations with Europe, Asia and other parts of the world. 

Now, as Trump reverses decades of American policy, it is the United States that is turning its back on our bilateral relationship. In recent polls, a majority of Canadians support free trade with the Americans. Canada relies on the United States as an easy and open export market—a return to the pre–Great Depression era, when protectionism was a predominant feature in Canadian-American relations, bodes poorly for us.

Everyday Canadians are responding to Trump’s jeering with newly rediscovered patriotism—booing the American national anthem, searching for non-U.S.-made grocery store items. In our family chat, my boomer mother is posting AI-generated images of Maple Leaf–clad beavers and geese, crying out in defiant anger. This public reaction reflects a deeply held sentiment. “You cannot get anything by kissing the feet of the people of the United States,” Sir John A. Macdonald told voters in 1878, the year he won re-election on a promise to build Canada’s economy on an east-west axis behind the aegis of our own Canadian tariffs. But I suspect that now, Canadians are also feeling a sense of frustration that, with the stroke of a Sharpie, a twice-impeached, convicted felon—who has expressed contempt for Canada’s very existence as an independent country—could upend our economy.

The Trudeau government’s retaliatory tariffs echo Canadian public sentiment, but they play a dangerous game. The thinking behind retaliation is that Canada must strike back at its bully, as well as cause pain to the U.S. economy in hopes of rallying opposition from its business community and political leaders. If the United States’ 25 percent tariff goes through, University of Calgary economist Trevor Tombe has estimated that there will be 600,000 Canadian jobs lost and a $160 billion blow to Canada’s economy. However necessary, either politically or as a step in negotiations, retaliatory tariffs will only compound this blow—raising prices for Canadians, thereby increasing inflation and disrupting supply chains.

At present, Canadians find themselves in suspended animation, not sure when—or if—the tariff hammer will fall. That is not good for business. Whether it is the current imbroglio over the border or some future tariff threat, say, over defence spending, investors and companies will show increasing hesitancy about operating in Canada. They will think it better to decamp for the United States and avoid a possible tariff. This judgement makes business sense, but is bad for the Canadian economy and for the country’s future.

The fact that the president is a serial fabulist adds to the uncertainty of the moment. Canadians’ immediate focus has settled on the alleged reasons for Trump’s threatened tariffs: illegal border crossings and the scourge of fentanyl making its way across the 49th parallel. In fact, the amount of drugs and people in question is minuscule. The president has also complained about a trade deficit that he characterizes as an American subsidy of Canada’s economy, and made a complete fabrication that Canada shuts out American banks. We might question whether Trump is truly concerned about any of these issues, or instead is inventing a legal pretext to impose tariffs. It bears emphasizing: tariffs would violate the very North American trade agreement that he himself negotiated. By declaring an emergency, he can use special powers to impose tariffs regardless. 

Either way, it is vital to understand that Trump isn’t just committed to using tariffs as a blunt weapon to force action by other governments. More importantly, he sees tariffs as a means of reshoring jobs back to America and paying for tax cuts at home. Given the Trump team’s protectionist goals, short-term solutions—like changes to the border, or to defence spending—miss the larger threat emanating from Washington. 

In the long term, Canadians’ true task is to safeguard our economy. We can do this by tapping into the re-emergent nationalism of the moment, not in a crass anti-American sense, but in the spirit of the Canadian Pacific Railway, Vimy Ridge, or Terry Fox. Canada formed as a country in part because of American tariffs and threats of annexation. Now is the time for bold proposals that meet the moment.  

Commentators and policymakers have begun to offer much-needed solutions, like eliminating inter-provincial trade barriers and building pipelines on an east-west axis. Others have proposed that we end the absurdity of supply management—which keeps the price of dairy products artificially high—court foreign investors through radical regulatory reform and create tax-free investment zones. Trump’s assault on his own government means that thousands of American health-care professionals and scientists are now out of a job. Surely, an enterprising provincial government could entice them north? 

Several federal governments have talked boldly of trade diversification. Now is the time for Canada’s trade commissioners and foreign service officers to help Canadian companies tap into Ottawa’s trade agreements with European, Asian, and Latin American partners, who will also feel the sting of U.S. protectionism.

Geography matters. So does the market. Trump’s tariffs aside, the United States will always remain our biggest trading partner. But America is turning away from 80 years of foreign and economic policy, and Canada must adapt to the changing world order.

Asa McKercher is the Steven K. Hudson Research Chair in Canada-U.S. Relations at St. Francis Xavier University.