The belief that economic integration with the United States—epitomized by the 1989 Canada-U.S. Free Trade Agreement, the 1994 North American Free Trade Agreement and finally the Trump-led 2016 Canada-U.S.-Mexico Agreement—would protect Canadian commercial interests from arbitrary political interference has been exposed for the myth that it always was.
Make no mistake, Trump’s 25 per cent tariff on Canadian goods—with a fossil-fueled discount for energy products—is illegal, unjustified and irrational, and it will not solve the problems in the United States that it is purported to address. Trump’s smaller round of tariff increases in 2018 and 2019 were almost entirely passed on to U.S. households and businesses and had a negative impact on both U.S. GDP and employment.
Canada must respond quickly and forcefully to this existential threat. Doing so requires that we put heat on the American economy in the short term and restructure our economy away from American dependence in the long term.
The prime minister announced an initial wave of retaliation on Saturday. Canada will roll out a 25 per cent tariff on $155 billion worth of U.S. imports over the coming weeks. It is a predictable opening salvo, but it fundamentally misunderstands the nature of the Trump-imposed crisis.
This is deliberate economic warfare against Canada, not a routine trade dispute. Trump’s ultimate goal remains unclear and seems to change by the day, but whether these tariffs are a negotiation tactic or the first step in a broader annexation plan, Canada must make Trump and his hawkish inner circle truly think twice. To do so, our response must embrace a more radical politics that directly and strategically challenges American economic interests in Canada.
Outlined below are a raft of measures Canada could take that would counter Trump directly while insulating Canadian workers, households and communities from the greatest costs. More importantly, these measures would have a positive, transformative effect on the Canadian economy—one that emphasizes resilience, sovereignty and security now and into the future. As the trade war intensifies, these are the types of tools we should be prepared to use.
Impose an export tax on energy products of at least 15 per cent. There is a good reason why Trump’s tariffs on the energy sector are only 10 per cent versus the 25 per cent rate facing the rest of the economy. Canadian oil and electricity exports play an irreplaceable role in U.S. energy markets. An export tax would force U.S. consumers and businesses to shoulder the full cost of Trump’s measures while generating Canadian public revenues for emergency social support. Even the threat of an export tax, which Canada has so far refused to entertain, would be a powerful warning shot.
Implement export quotas and bans for strategic resources. The U.S. counts on Canada for its supply of many critical resources, including oil, potash, uranium and various metals. Canada should prepare limits on the volume of resources that may be sent south of the border—and even consider outright bans. The federal government can step in as a buyer for any surplus, which has the added benefit of creating strategic reserves of key resources.
Repatriate U.S.-owned assets, especially in the resource industry. As long as Trump wages economic war against Canada, American assets here should be considered forfeited. Simply freezing those assets as a first step would send alarm bells ringing across corporate America. Going one step further and taking U.S. companies and capital under public control would mark a powerful turn toward independence.
Curtail U.S. patents and copyrights. U.S. companies enjoy extensive monopoly rights for their intellectual property abroad, but only so long as foreign governments enforce them. Restricting U.S. patents in Canada through compulsory licensing and other policy tools would hurt large U.S. companies and make Canadian companies in those industries more competitive. It could even lower costs for some consumer goods, such as former name-brand drugs that could now be manufactured domestically as generics. Bolstering Canada’s fledgling pharmacare program with cheap, Canadian-made drugs is a win-win-win opportunity for Canada.
Target U.S. oligarchs and Trump enablers. The billionaires cheerleading Trump’s musings about Manifest Destiny cannot be permitted to operate and propagandize in Canada. American companies tied to Trump’s inner circle, such as Elon Musk’s X, Starlink and Tesla, should be blocked, frozen or punitively taxed, as appropriate. Imposing heavy financial penalties or outright bans on X and Mark Zuckerberg’s Meta, in particular, would serve the dual purpose of hitting Trump’s allies directly while insulating our media environment from obvious foreign interference. As with Russian oligarchs after the invasion of Ukraine, Canada could freeze real and financial assets held by American oligarchs.
Enact “Buy Canadian” procurement rules and consumer programs. Wherever possible, Canadians and Canadian governments should be buying goods and services that are made in Canada. New packaging and advertising regulations, for example, could be used to highlight Canadian alternatives to U.S. goods and services. That goes double for governments, which should immediately halt procurement contracts with American firms wherever feasible and prioritize Canadian options moving forward. Canceling defense contracts with U.S. arms companies is especially important—Canada has imported more than US$1 billion in U.S.-made weapons in the past decade.
Review and tax new foreign investments in Canada. At present, foreign investments in Canada worth $1.386 billion or more automatically trigger a government review. That figure should be significantly lowered. As the Canadian dollar falls against the U.S. dollar, there is a risk that investors from the U.S. and elsewhere try to sweep in and buy up Canadian companies at fire sale prices. Triggering more reviews would allow Canadian governments to keep U.S. investors from controlling strategic sectors. In addition, a large surtax on incoming American investment—potentially pegged to the U.S. tariff rate—could be used to apply additional pressure abroad.
Deepen economic ties with non-U.S. trading partners. Canada has existing trade relationships with the UK, the EU, Japan and other countries that will also be affected by Trump’s rampaging on the world stage. A common front to deepen trade linkages away from the U.S. would be in everyone’s interest, perhaps including alternatives to the U.S. dollar as an international reserve currency. Mexico remains a vital ally that Canada cannot throw under the bus—we hold more sway over the U.S. when we work together. Re-evaluating our relationship with China, which has deteriorated due in part to Canada lining up with the U.S. on tariff issues, would also force Trump to take notice. For example, we should revisit the imposition of tariffs that currently keep low-cost Chinese electric vehicles out of the Canadian market.
Make the Canada Emergency Response Benefit (CERB) permanent. The COVID-19 pandemic laid bare the inadequacy of the Employment Insurance system. The federal government’s emergency benefits, on the other hand, minimized layoffs and social dislocations and precipitated a rapid economic recovery. Reviving and making permanent the CERB program could mitigate the human cost of the “Trump Bust” that will be concentrated in trade-exposed sectors and regions.
Enact price controls on essentials. Tariffs risk triggering a new wave of inflation that will make life even more unaffordable at a tenuous moment for Canadian households. Price controls need not be permanent, but, in the short term, they can blunt the effect of Trump’s aggression on Canadian consumers. These measures could include an expansion of Canada’s supply-managed agricultural sectors, such as dairy and eggs, to ensure domestic production for the Canadian market.
Strengthen domestic media and cultural industries. In addition to the risk of billionaire controlled social media algorithms, the Canadian public sphere is inundated with American media influence, from Netflix to Fox News to the various podcasts and online media personalities encouraging annexation from abroad. Canada requires a reinvigorated public voice, which could be achieved through a combination of regulations, such as CanCon, and investments in the CBC, independent local media and the arts.
Develop and implement an aggressive green industrial strategy. Over the past decade, the federal government has pursued a half-hearted embrace of industrial policy, mainly through subsidies and tax incentives for certain industries. The federal government has also promoted investment vehicles, such as the Canada Infrastructure Bank and Canada Growth Fund, that feebly attempted to incentivize more private investment in public goods. These half-measures have failed to transform the economy. The federal and provincial governments must aggressively support a state-led expansion of strategic green industries that reduces Canadian dependence on U.S. trade and the volatile fossil fuel industry more broadly. Such a strategy could build on several of the measures outlined above, such as the repatriation of parts of the oil industry.
Nobody wins a trade war. The economic and social costs for Canada—both from Trump’s attacks and Canada’s necessary retaliation—will be dramatic. Hopefully, those costs will be short-lived. But governments should be prepared to take aggressive measures to support the workers and communities across the country that are caught in the crossfire.
Even if Trump’s tariffs were retracted tomorrow, the ground has forever shifted. Canada can no longer trust the U.S. to act as an honest partner. There is no return to “the way things were.”
The preceding measures are ambitious and not without their costs, but they would resist U.S. imperialism, insulate Canadian workers, households and communities from the worst of the economic consequences, and set up the economy for a long-term pivot toward independence. The future of Canada may depend on them.