Carlo Dade: Canada still woefully unprepared for a trade war with the U.S.

Canadian foreign policy establishment remains wedded to an outdated vision of the U.S. relationship

Published Jan 20, 2025  •  4 minute read

U. S. President Donald Trump salutes during the Star-Spangled Banner during inauguration ceremonies in the U.S. Capitol Rotunda on Jan. 20 in Washington, D.C. Photo by Kevin Lamarque/Pool/Getty Images

Back in September, this paper published an opinion piece entitled: “Why a U.S. global tariff is the real existential trade threat facing Canada: Canada must prepare for a world where the old trade playbook no longer applies.”

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In the intervening five and half months, Canada has done little, if anything, to prepare, and that inaction is now coming back to bite the country and the exporters who earn 30 to 50 per cent of provincial GDP from their exports to the U.S.

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Other than New Brunswick, these U.S. exports as a percentage of provincial GDP are highest out west, which is why western Canada has the most at stake and has been paying the most attention.

Preparing for the second administration and the clear, explicit tariff promises — and, more importantly, policies developed by the America First movement — was and is a two-part job.

Part one is to engage the Americans — not just to change minds about tariffs, but to understand the reasons and motivations of those proposing them. This entails actually listening to the tariff advocates, to take note of what they say, how they formulate their world view. This cannot be done if the sole motivation in engaging is to change minds. Engaging to listen is not the same as engaging to, from the perspective of the other side, elite-splain how things should work.

You may not like or agree with the other point of view. But if you are to develop effective counter narratives and arguments, you first have to listen. Looking at the current discourse between Canadians and the tariff advocates in the America First movement, you see two groups talking past, not with, each other.

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The exceptions are the Alberta and Saskatchewan premiers. As distasteful as visits to Mar-a-Lago and smiling photo ops may be, they are necessary to gather the intelligence and build the relationships to manage what is inevitably to come. Here, Alberta Premier Smith appears to be taking a page from the playbook of former Japanese Prime Minister Shinzo Abe. Premier Smith has not yet shown up at Mar-a-Lago with a set of gold-plated golf clubs, but she appears to be following Abe’s successful path.

The second part of dealing with Donald Trump’s tariffs is more difficult, and it’s where all levels of Canadian government and private sector associations have failed. That is preparing Canadian business for the shocks.

Engaging with the U.S. is crucial, but that was never going to prevent the tariffs. A critical reading of the preparatory work done by the America First movement, and even a cursory study of U.S. trade history, is essential — especially the New Economic Policy of the Nixon administration, where the Americans did what establishment thinkers of the time thought would never happen, including imposing a ten per cent across-the-board tariff. The Americans are once again rebalancing the global economy to correct perceived structural injustices that harm the U.S.

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Back in 1971, Nixon’s Treasury Secretary, John Connally, one of the architects of tariff policy, explained their use with a Texas idiom: sometimes you need a baseball bat to get a mule’s attention. Simply waving the bat does not work, you actually have to use it.

If tariffs are inevitable, then preparation is more important than engaging to try and prevent them. Engagement might ease and expedite their removal, after the point of their use has been made, but mitigating the damage from the coming blow is paramount.

What industries will be most harmed? What measures can we take to protect them? Are there lessons from the experiences of other countries? Or from analogous economic shocks, such as natural disasters? Should compensation — as the Americans did with U.S. farmers who suffered losses from Chinese retaliatory tariffs — be on the table? In the spirit of not letting a crisis go to waste, can this shock prompt needed domestic reforms on internal trade — building pipelines to diversify our largest source of export income and break dependence on the U.S.?

All of this should have been on the table from the start. It was not.

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This is partly because the Canadian foreign policy establishment remains wedded to an outdated vision of the U.S. relationship. Until we break with backward-looking thinking about the U.S., we will remain mentally stuck in the past while the country suffers in the present.

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In thinking about our philosophy and practice for engaging with the U.S., it may be time to throw the baby out with the bath water and start anew.

Carlo Dade is Director of the Trade and Trade Infrastructure Centre at the Canada West Foundation.

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