When he enters the arena on January 20th, 2025, an emboldened President Trump won’t need a net. The rest of us will. He is spoiling for a fight and suiting up. The challenges which have become evident in very short order will test us and test us again.
We in Canada must urgently think through how to engage with the incoming Administration. With the US far and away our largest trading partner (it is, has, and always will be thus), the stakes are very high. With the threat of across-the-board tariffs, the United States has launched a trade war. For Canada, this could be an existential challenge.
For the next four years (at least) the US is unlikely to ink another comprehensive deal with Canada or accede to any multilateral deals. Instead, it will be the hard slog of protracted sector-by-sector negotiations, the disruption that tariff walls inflict, and the inflation triggered by the resulting higher prices. Some sectors and some businesses that rely on exports to the US and operate on tight margins would not survive tariffs on the scale being threatened.
Trade wars are not unprecedented. It is just that in our lifetime, trade peace has been the norm. Canadians can thank Conservative Prime Minister Brian Mulroney for the trade peace (mostly) that followed the negotiation of the Canada-US Free Trade Agreement, followed by NAFTA and the prosperity that ensued. And a few years later, the Liberals came to embrace the deal they had so bitterly opposed. This Canadian national consensus cannot break down now. Finding a way to preserve our prosperity, which is largely based on trade with the US, is a shared political responsibility across party lines, and between the Federal Government and the Provinces.
Addressing this challenge is too important to be left to politicians alone. Business leaders must engage on both sides of the border – just as they did in the 1980’s. Indeed, Canadian business played an instrumental part in building the case for free trade, as well as providing specific sector input and sharing expertise to support Canada’s free trade negotiators. Sitting in the stands to be amused by the combat in the arena among political leaders and then offering a “thumbs up” or a “thumbs down” is not enough. This is not a movie; this is real. There is a human tendency to believe that things will somehow work out. There is also an old ode to Canadian optimism that says: “things will get real bad before they get worse”. Not sure which moment this is, but sitting back is not an option.
So, what can we do?
It should be clear to our Government that it will be unable to charm Trump and team, although Prime Minister Trudeau’s Friday night dinner of meat loaf with President Trump was an attempt to do so. He appears to have come away with nothing, except perhaps indigestion. However, Trudeau’s surprise visit on November 29 makes him one of the first foreign leaders to meet with Trump since he won the election, and Trump certainly enjoyed the attention.
In dealing with the United States over the next few years, Canada will need to be more strategic and tactical than the last time President Trump occupied the White House. And nakedly aggressive in protecting our interests. Past is not prologue.
But Canada is not without leverage. Americans covet our energy (oil, natural gas, and electricity); our minerals (“critical minerals” and otherwise); timber and paper; our water and the Arctic for a host of commercial and geo-political reasons. And the American auto sector has long been fully integrated across our shared border. Trump’s trade war with Canada puts all this at risk and provides us with an opportunity. Given how transactional the US Administration will be, the question is: What can we offer?
This is not just about migration and fentanyl. Expect a push from the US for Canada to open its financial sector to greater outside investment. Ditto telecom, broadcasting, agriculture, dairy and poultry, energy and other protected sectors. We have kept many sectors off limits to significant foreign ownership for historical reasons or to maintain cultural sovereignty or to placate various constituencies. This is not sustainable in the current context. The time is long past in any event to re-examine these restrictions which have contributed to inefficiencies and forced Canadians to pay higher prices. Similarly, we must use this opportunity to finally remove inter-provincial trade barriers.
We will have to take a hard look at what we keep and what we let go as the price for broader trade peace. “Governing is about choosing”. And the choices will require trade-offs not only from our government, but from Canadian industry as well.
The tariff threat is a blatant economic attack. But out of every crisis Canada has emerged stronger. With the right leadership and engagement by business leaders and others we will this time too. Disruption will be unavoidable before things find new equilibrium. But we cannot be just “takers” enduring what others impose. We have leverage. We have pride. We have collective wisdom to bring to bear. Let’s use all of it.