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Globe and Mail
a day ago
- Business
- Globe and Mail
How to win a trade war
On Wednesday, the U.S Court of International Trade struck down President Donald Trump's most sweeping tariffs. But the decision, while favourable to Canada, has already been stayed pending an appeal, and it does not cover all such duties. And even if Mr. Trump ultimately loses in the courts, he can simply find other ways to impose tariffs. Canada continues to stare down the barrel of the American trade war. The United States-Mexico-Canada Agreement faces its first big review in 2026. This country remains in a uniquely high-stakes moment. Prime Minister Mark Carney came to power on a promise to rewrite the playbook and a declaration that the old, cozy Canada-U.S. relations are 'over.' Tuesday's Throne Speech, delivered by King Charles III, outlined an economic strategy focused on fostering domestic innovation, enhancing productivity and reducing reliance on U.S. trade. But make no mistake: This will, and will always be, an uneven fight. Canada is 40 million people and only the world's ninth largest economy. A middle power is going up against the world's richest and most powerful country, on whose dynamism it is unusually dependent. How exactly is it even possible for Canada to win in this asymmetric trade war? Crucially, this conflict isn't just about steel, soybeans or softwood lumber – it's about narrative and power. This time, a tariff isn't just a tax; it's a message. U.S. President Donald Trump frames trade deficits as proof that the United States is 'losing' – a zero-sum narrative in which he casts himself as the country's saviour. What was once a rules-bound negotiation now feels more like a bizarre reality show starring the global economy. For Canada, winning will require strategic creativity and a dash of against-the-grain thinking. The Globe and Mail asked experts on how, in a conflict fought as much on stage as in the marketplace, Canada can craft a savvy new script. Andreas Schotter, professor of international business at the Ivey Business School at Western University. Paradoxically, Canada's path to winning the next trade war lies in giving the U.S. administration what it wants – publicly. But only when the substance still works in our favour. The 2026 USMCA review will not be a legal negotiation; it will be a political performance. The Trump administration will seek loud, symbolic victories. Canada must prepare now to offer performative wins that cost little – or even buy us leverage in return. We've seen this strategy succeed. In 2018, when Mr. Trump threatened auto tariffs on Europe, the European Union defused the crisis with performative concessions, agreeing to buy more American soybeans and liquefied natural gas, both of which it was already importing. Mr. Trump got a press-conference win. Europe kept its industrial base untouched. Canada must now apply the same choreography – but do it better. Start with dairy. Rather than stonewall, Canada should offer a reasonable quota expansion for U.S. milk protein concentrate – surplus supply with limited market threat. It feeds the U.S. narrative of 'cracking supply management,' while the system itself remains intact. In automotive, we can accept a modest increase in U.S. content thresholds, but only if tied to a binding trilateral electric vehicle and critical parts supply chain agreement that includes Mexico. This would lock in U.S. reliance on Canadian battery minerals and processing, a real strategic gain wrapped in a symbolic concession. Border security? Codify existing controls in a bilateral framework. It lets Mr. Trump claim he 'hardened the border,' even if Canada is already acting. Appearances win the press conference; substance shapes the future. But in one domain, the concession is real and should be used as leverage: defence. Canada will increase procurement in coming years regardless, to meet NATO and NORAD commitments. By announcing strategic defence buys from U.S. firms early, we give Mr. Trump a concrete 'Made in America' win – and gain negotiating space elsewhere. This is where optics align with long-term need. The point is not to win louder. It's to win smarter. Performative concessions – if scripted early and sequenced well – can neutralize trade aggression while embedding Canadian advantage across sectors. The art is to give headlines in exchange for leverage. And in trade wars, that's the only kind of winning that lasts. Adam Waterous is executive chair of Strathcona Resources Ltd. Despite Mr. Trump's 'drill baby drill' ethos, the U.S. is desperately short of oil. It produces 13 million barrels a day (which is likely to start to fall in the next few years owing to its aging fields) but consumes 20 million barrels a day. Canada supplies the U.S. with four million barrels a day – that's more than 90 per cent of this country's oil exports. But this dependence cuts both ways: Canada's oil represents fully 60 per cent of the U.S.'s shortfall. It's difficult for the U.S. to replace Canada's oil on the international market, as American refineries are specifically configured to process Canadian heavy crude. The U.S.'s large dependence on Canadian crude and lack of substitutes provides Canada with something to bring to the negotiating table. In fact, oil is Canada's unique economic hard power. How? Canada can provide Mr. Trump with the only thing he's asked for (aside from strengthening the border): an agreement to build the Keystone XL pipeline, which was killed by Democrats in the U.S., but supported by both Conservatives and Liberals in Canada. While the original proponent has moved on, renewed political will can surely spark renewed interest. This new pipeline would provide the U.S. with more of what Mr. Trump wants: Canadian oil at a discount. In exchange, Canada must require that all tariffs are eliminated on all Canadian industries. In doing so, Canada would use oil as the tentpole under which all other sectors are sheltered. Simultaneously with the resurrection of Keystone XL, Canada must start construction on two more pipelines to tidewater – ones Ottawa blocked some eight years ago. The Northern Gateway pipeline, which takes oil west, was previously approved, and construction could start almost immediately. At the same time, a pipeline heading to Eastern Canada, such as the cancelled Energy East, needs to be urgently advanced. This dual-pronged strategy – give the U.S. the pipeline that it wants, while at the same time building new energy infrastructure – will protect Canada's future trade relationship in all sectors. Similarly, Canadian energy sold internationally can be used as the sharp end of the spear to help Canada negotiate favourable trade terms for all sectors with other countries. Let's not forget that oil has long been a cornerstone of Canada's economy and will be one for a long time, despite shifts toward renewable energy. When Ronald Reagan discussed nuclear disarmament treaties with Soviet leader Mikhail Gorbachev in the 1980s, the U.S. president had a backup plan, describing his philosophy as 'trust but verify.' In negotiating tariffs with Mr. Trump, Canada should think: 'trade but diversify.' Jack Mintz, President's Fellow, University of Calgary's school of public policy; and Munir Sheikh, research professor, Carleton University, and former chief statistician of Canada. The best offence is a good defence. We have a tool to give us some protection from the main damage of the trade war, which is the hit to businesses in Canada. That tool is the tax system. Contrary to popular perception that corporate taxes hit the rich, the reality is that they pass them on to consumers through higher prices, workers through lower wages or layoffs, and shareholders through lower investment returns. This means less investment by businesses in this country and depressed living standards. The U.S. tariff threat is already encouraging Canadian businesses to move south. Our own tax policy provides little advantage to stay here. For example, the top corporate tax rate in Ontario and Quebec is now 26.5 per cent, compared with 21 per cent in Ohio and Texas. Mr. Trump has promised to reduce the federal manufacturing tax rate to 15 per cent. Data on foreign direct investment flows tells the sad story of Canadian tax policy discouraging investment in Canada: FDI abroad by Canadian companies in 2023, the last data point we have, was $2.1-trillion. That compares with international companies' FDI in Canada of $1.3-trillion. Canada needs serious reform to its corporate tax regime, a simplification of the system, and the scaling-down of inappropriate and ineffective taxes. This takes time to complete, but it can begin right now. We propose that the government exempt small and large company profits from taxation if they're reinvested in Canada. The revenue cost would be roughly about a tenth of current corporate tax receipts, since companies no longer need many tax preferences that would be redundant. Such an announcement is sorely needed to send a powerful signal to the world that we are dead serious in protecting our economy and are open for business. Whatever incentives bad Trump tariffs create for businesses to move to the U.S., we'll counter them using economically defensible economic tools such as the corporate tax. A natural question follows if we substantially lower the corporate tax burden: whether there would be lower revenues to the government and a potential negative impact on our fiscal position. That may well be so, but a lower corporate tax burden would result in more business activity, which would result in more taxes paid that should provide an offsetting revenue source. Over time, overall tax revenues will ramp up again. Any deterioration in our fiscal situation is temporary and should be accepted as the price we need to pay to protect us. Ian Robertson, partner with The Jefferson Hawthorne Group. This isn't a trade war. It's a narrative war with tariffs as proxy. The real fight is for sovereignty. Mr. Trump has said this much out loud. The U.S. is winning because Canada has not been listening and still treats it like a conventional trade dispute. Mr. Trump doesn't seek resolution. He seeks narrative dominance through strategic chaos: disruption that traps opponents in constant instability and reactive decision-making. Control of the story means you define the debate, dictate choices and assign meaning to actions. The longer Canada remains reactive – rushing to boost border security when Mr. Trump uses it as a pretext to impose tariffs, for example – the more we lose, not just in trade but across all leverage points. Traditional diplomacy has been exposed as obsolete, a slow weapon in an asymmetric information war. To win, Canada must create its own controlled chaos by engineering an Arctic crisis. The move: Canada quietly proposes limited Arctic access and dual-use infrastructure rights – minerals, icebreaker basing, ports, satellite relays – to non-U.S. actors such as China, India and the EU. The announcement is low-key and bureaucratic. Then global headlines erupt, surrogates weigh in, analysts speculate and Washington scrambles, because it, too, has an Arctic presence and deems the region important. Canada eventually walks it back – calmly, diplomatically – while extracting concessions in the process. By then, the strategic terrain has shifted, the narrative altered and Canada reframed as a mature nation capable of asserting agency. Yes, there is a risk to this approach. Mr. Trump's obsession with territorial dominance and need to control the chaos means he will threaten serious retaliation. And the U.S. is the stronger country and is capable of hurting Canada much more than we can hurt it. But despite Mr. Trump's bluster, he has no stomach for a real fight. Over-broad retaliation fractures his coalition. 'America First' populists don't want more international entanglements. Already wobbly pro-business Republicans loathe further instability. Defence hawks demand U.S. dominance. If he stays silent, he looks weak on China. No reaction works cleanly – and every reaction repositions Canada from passive rule-follower to strategic actor. Either way, Mr. Trump loses control of the narrative, and once lost, it's nearly impossible to recover. It feels taboo, which is why it will work. The cost of remaining reactive is greater than the risk of the brief use of strategic ambiguity. Conventional wisdom, which Mr. Trump counts on, says small nations will stay predictable, de-escalate and wait for multilateral consensus. As Sun Tzu taught, 'If your enemy is temperamental, seek to irritate him.' Canada has the unique advantage of being underestimated, and we should exploit that perception. In today's world, you don't win by being reasonable. You win by being unconventional, prepared and unafraid. Control the story, and you control the choices. It's time Canada does both. Tom MacDonald, former director for automotive policy in the Department of Industry and member of Canada's negotiating team for the North American free-trade agreement. On autos, Canada is among the top 10 global markets, with more than 1.8 million vehicle sales in 2024. I've seen first-hand the power of using our market as leverage. Under the 1965 Canada-U.S. Auto Pact, we gave tariff-free access to Canada for the U.S. Big Three (GM, Ford, Chrysler – now Stellantis). But, in exchange, they had to maintain Canadian vehicle production equal to their sales, plus meet specific Canadian value-added levels. We no longer have such production agreements. But let's not forget that our auto industry was built on that trade-off: access to our large and lucrative market in exchange for investment commitments. When Japanese auto imports soared in the 1980s, we again used our market leverage. Both Canada and the U.S. got the Japanese to accept 'voluntary' export restraints, inducing them to build cars in North America in order to avoid potentially more draconian restrictions. I went to Toyota City to help land the first Japanese automotive investment in Canada, an aluminum wheel plant in Delta, B.C. Now Toyota is Canada's largest vehicle producer, and the combined Canadian production of Toyota and Honda has surpassed that of the Big Three. Now we should similarly put the Big Three on notice. Mr. Carney has already said that they will face our 25-per-cent retaliatory tariffs if they wind down their Canadian production. But that needs more teeth – specific production and Canadian value-added requirements like we had in the Auto Pact. We should then go further and globalize our 25-per-cent tariff so we're on an equal footing with the U.S. Mr. Trump's tariffs are global, and he'll use them to pressure the Japanese, Korean and European auto companies for U.S. investment in exchange for tariff relief. We need to do the same and fight again for our fair share. We should initiate urgent discussions on the investment plans of all players in the Canadian market, not only those with current assembly facilities but also those, such as Hyundai or Kia, that might consider investing to avoid the tariff. If others balk, we can consider China. They produce the most economical and arguably most advanced EVs. We have imposed a 100-per-cent tariff on them, mostly to please the U.S. Might BYD be interested in making vehicles in Canada if it gave them some duty-free access? While much of the above is against World Trade Organization rules, so are the Trump tariffs, our own retaliation and our EV duties against China. Mr. Trump has pushed us all through the looking glass on trade policy, into a topsy-turvy world where old rules and norms no longer apply. We need to adapt to win in the new world disorder.
Bloomberg
a day ago
- Business
- Bloomberg
Canada Defends Golden Dome, Reaffirms Military Ties With US
Canada reaffirmed its close military ties with the US and spoke in support of President Donald Trump's proposed 'Golden Dome' missile defense system, which Ottawa is thinking about joining. 'From a defense perspective and on the military side, I collaborate very, very closely with my US counterparts,' General Jennie Carignan, Chief of the Defence Staff, said in a Bloomberg TV interview on Friday. She was responding to a question on whether Washington remains a reliable partner.
CBC
2 days ago
- General
- CBC
Canada-U.S. friendship exhibit goes on display in Windsor
A new exhibit at the University of Windsor's Leddy Library is paying homage to the history of the Canada-U.S. relationship — all while that relationship is currently being tested. The exhibit is called called Building Bridges (and Tunnels) between Nations. Archivist Sarah Glassford gave CBC a peek at the display. The exhibit can be viewed by appointment.
CBC
3 days ago
- Business
- CBC
Canada should still trust U.S., Trump's former secretary of state tells defence convention
Social Sharing Former U.S. secretary of state Mike Pompeo delivered a reassuring, fence-mending message on Wednesday, saying Canadians ought to trust the United States and shouldn't feel as though their sovereignty is under threat. He told an international gathering of defence contractors in Ottawa that he's confident relations between the two countries remain strong and that they will endure beyond the current tensions, which are fuelled by President Donald Trump's talk of annexation and the ongoing trade war. When asked if Canadians should feel threatened by the rhetoric, Pompeo, who served in Trump's first administration, said: "No." He added that he's confident the Canadian government will do all that's necessary to ensure the country's continued sovereignty. "The answer is that Canadians ought to trust the United States in the same way Americans ought to trust [Canadians] to be able to survive. I'm convinced, in the sweep of history, that will remain," said Pompeo. His soothing tone stands in contrast to his former boss, who has repeatedly spoken about how he'd like to see Canada become the "cherished 51st state" in the American union — a notion that has awakened a sense of Canadian patriotism which was on full display Wednesday at the annual defence trade show. "We were complacent, but we've woken up," said Christyn Cianfarani, president of the Canadian Association of Defence and Security Industries in her opening address of the event organized by her association. "We recognized that the defence of North America is a shared responsibility. But make no mistake, Canada will govern itself." Pompeo spoke to reporters following his lunchtime remarks at the CANSEC defence industry convention, which featured — as usual — a number of large U.S.-based defence contractors. Prime Minister Mark Carney has made it clear that Canada intends to invest more in defence, and that he sees an overreliance on American weapons and munitions makers. He said the federal government is hoping to join the European Union's $1.25-trillion rearmament plan — pivoting Canada away from U.S. contractors. Pompeo said Carney is simply standing up for his country. "That's his job, and that's what the people hired him to do," Pompeo said. "He should make good decisions." One of the counterarguments to Canada buying its sophisticated military equipment elsewhere is that the United States is a world leader in technology and industrial innovation — something Pompeo said the prime minister should take into account. "American human capital, American business, it is a very attractive proposition for Canadian defence," he said. On Tuesday, Trump took to social media to say that Canada has been told that joining his administration's so-called Golden Dome missile defence plan would cost the country about $61 billion US, but the cost would be "zero" if the country chose to join the United States. Trump wrote that Canada was considering it — a claim the Prime Minister's Office flatly denied. WATCH | Carney's says Trump's post is 'not an offer': 'It's not an offer,' Carney says about Trump's Golden Dome post 6 hours ago Duration 0:18 Heading into his first question period Wednesday, Prime Minister Mark Carney was asked by a reporter if he was considering an 'offer' by the U.S. president for Canada to spend $61 billion US on a new missile defence system. Carney said 'it's not an offer' as he walked past. Carney, on Wednesday, said he wasn't going to negotiate in public and Defence Minister David McGuinty said Ottawa will continue "to do what's right for Canadians and that includes making sure that we are secure, that we are sovereign." Pompeo said he wasn't in a position to evaluate whether the $61-billion figure was accurate. But conducting missile defence over territory as vast as North America would be expensive, he said. "It's an engineering problem. It is a physics problem, a technical problem and it is a deeply expensive challenge as well. But I think that that is one that is worth the investment," the former secretary of state said. "So, my guess is that the $61 billion number is low."
Associated Press
3 days ago
- Business
- Associated Press
Senior Canadian diplomat compares Trump's Golden Dome missile program to a 'protection racket'
OTTAWA, Ontario (AP) — Canada's ambassador to the United Nations compared U.S. President Donald Trump's Golden Dome missile defense program to a 'protection racket' on Wednesday after Trump said America's northern neighbor could pay $61 billion to join the program or it could be free if the country agrees to annexation. Trump posted on social media on Tuesday that if Canada becomes the 'cherished 51st State' it won't have to pay to join the proposed U.S. missile defense system. Ambassador Bob Rae took exception to Trump's comments in two social media posts, comparting it to something organized crime does. 'In another context, this would (be) called a 'protection racket,'' Rae said of Trump's post. Rae later posted that both Canada and the U.S. signed the U.N. charter in 1945 that states: 'The Organization is based on the sovereign equality of all nations.' 'Threats to sovereign integrity also prohibited,' Rae noted. In his post, Trump said: 'It will cost $61 Billion Dollars if they remain a separate, but unequal, Nation, but will cost ZERO DOLLARS if they become our cherished 51st State. They are considering the offer!' Trump made his comments on the same day King Charles III said Canada is facing unprecedented challenges in a world that's never been more dangerous as he opened the Canadian Parliament with a speech widely viewed as a show of support in the face of annexation threats by Trump. The king is the head of state in Canada, which is a member of the Commonwealth of former colonies. Trump's repeated suggestion that Canada become the 51st state prompted Prime Minister Mark Carney to invite Charles to give a speech from the throne outlining the Liberal government's priorities for the new session of Parliament. Canadians are largely indifferent to the monarchy, but Carney has been eager to show the differences between Canada and the United States. The king's visit clearly underscores Canada's sovereignty, Carney said. A spokesman for Carney responded to Trump's post on Tuesday by saying the prime minister 'has been clear at every opportunity, including in his conversations with President Trump, that Canada is an independent sovereign nation, and it will remain one.' 'Canadians gave the Prime Minister a strong mandate to negotiate a comprehensive new security and economic relationship with the United States,' the statement said. 'To that end, the Prime Minister and his Ministers are having a wide ranging and constructive discussions with their American counterparts. These discussions naturally include strengthening NORAD and related initiatives such as the Golden Dome.' The newly elected Carney won the job of prime minister by promising to confront the increased aggression shown by Trump. He met with with Trump in the Oval Office earlier this month. 'Some places are never for sale,' Carney said to Trump and the media. Canada is one of them, he added, and 'it won't be for sale, ever.'
