Canada vs. the United States — evenly matched

Canada’s “trade war” with the United States, ignited on Aug. 21 when Prime Minister Mark Carney walked out of trade talks with the Trump administration, is not the foredoomed David vs. Goliath struggle it seems.

It’s really about sovereignty, not trade, and Canada stands a fair chance of winning.

“Winning” in this context, of course, can be defined as surviving with as little damage as possible despite the tenfold superiority in population and wealth of its giant neighbour. Canada has had more than two centuries of practice at that. If Carney can keep his nerve, it can do it again.

The tariffs that Trump has imposed on some Canadian products (and the precisely equal tariffs that Canada has slapped on some American imports) will cause some job losses and considerable economic pain in both countries. However, they only affect about five per cent of the US$872 billion of annual trade between the two countries.

The rest is covered by the Canada-U.S.-Mexico Agreement (CUSMA or USMCA), most recently renegotiated by Donald Trump himself in 2020. He described it then as “the largest, fairest, most balanced and modern trade agreement ever achieved” — and it runs until 2036.

Trump has since changed his mind about how wonderful it is, but he’s more or less stuck with it. It is a binding international treaty, ratified by the U.S. Congress, and although he is currently in breach of some parts of it, he cannot simply cherry-pick which bits he would like to change.

He could simply cancel the treaty wholesale with six months written notice if he could get Congress’s assent, but he probably can’t. Such a sudden break would wreak havoc in too many sectors of the American economy, with terminal political consequences for too many members of the Senate and the House of Representatives.

This is a large part of the reason why Canada, alone among America’s trading partners except for China, has boldly responded to Trump’s tariffs with equal tariffs of its own (to Trump’s great irritation). Even after Trump’s latest tariffs come into force, about 80 per cent of Canada’s exports to the United States will enter tariff-free. So, what is all the fuss about?

As many Canadians have already concluded, Trump’s imperial vision of an exclusive U.S. “sphere of influence” in the Americas requires explicit acts of submission from the involuntary residents of that new domain. The reason Carney walked out was because Trump’s demands were not about the economy; they were about sovereignty.

The “trade talks” with Jamieson Greer, chief U.S. trade negotiator, seemed to be coming to an acceptable conclusion until the last-minute intervention of a rival team: White House trade adviser Peter Navarro and Commerce Secretary Howard Lutnick. It was they, presumably on Trump’s instructions, who added the offending demands that blew it all up.

First, Canada was to give Washington an effective veto on making trade deals with countries other than the U.S. A country that cannot choose whom it trades with is no longer sovereign.

It was to change the laws that give the French language equal rights in all federal jurisdictions, and superior status in Quebec. (Currently, even the labels on U.S. imports have to be in both languages. Outrageous!)

And, according to some accounts, Canada was to give the United States exclusive access to the country’s rare minerals, or at least first refusal. It was clumsy, it was insolent, and above all it was stupid.

Or was it? Could the Navarro-Lutnick intervention have been intended to make a deal with Canada impossible, because the real goal was to make a horrible example of Canada.

Mark Carney, after all, is now the de facto leader of a loose coalition of middle powers trying to stop the destruction of the international rule of law. Discrediting him by wrecking Canada might discourage those other fools from messing with the Master of the Universe.

But no. Trump and his cronies are far too disorganized and distracted to come up with such a clever and complex plan. It’s just as stupid as it looks.

So Carney walked, and the U.S. government will deploy all its economic power against Canada, which will make it even more of a symbol of resistance against the rise of the authoritarians. That might end up making Canada a victim of actual violence, but we are still a long way from there.

The more likely outcome, going by Canada’s long history of evading the wrath of the local imperialists, is that it will survive the current unpleasantness intact. However, there will probably be a good deal of economic pain in its near future.

Gwynne Dyer’s new book is Intervention Earth: Life-Saving Ideas from the World’s Climate Engineers.