In 1988, Presidents Reagan and Mulroney signed a free trade agreement eliminating tariffs between the U.S. and Canada.
While the treaty lacked controversy in the U.S., many Canadians feared a loss of sovereignty. Mulroney faced accusations of selling out Canada during that year’s election.
Liberal leader John Turner criticized the agreement, arguing it would make Canada a U.S. colony due to economic dependence.
Mulroney won reelection, securing the deal’s survival. However, 36 years later, Trump’s repeated tariff threats are proving Turner’s concerns prescient.
Trump’s threats have fueled Canadian anxieties about U.S. influence. Polls indicate increased openness to measures promoting national independence, despite Canada’s vulnerable trade position with the U.S.
Since the agreement, Canadian trade with the U.S. has significantly increased, becoming a substantial portion of Canada’s economy. Trump’s 25% tariffs could trigger a Canadian recession.
Canada’s economic reliance on the U.S. exceeds that of the U.S. on Canada. Even for Michigan, Canada-U.S. trade represents only 11% of its economy, in contrast to approximately one-third of Canada’s.
Canada has long navigated the U.S.’s influence. Canada’s first Prime Minister built a transcontinental railway to counter U.S. expansion. Post-World War II, Canada’s resistance lessened, culminating in the 1965 Auto Pact. Nixon’s 1972 policies prompted Trudeau Sr. to pursue reduced economic dependence through initiatives such as a foreign investment review and the National Energy Program, which ultimately failed due to regional opposition.
Subsequent Canadian governments have pursued trade diversification with limited success, continually grappling with the powerful U.S. economic pull.
In 1969, Pierre Trudeau likened Canada’s relationship with the U.S. to a mouse sharing a bed with an elephant, highlighting Canada’s vulnerability.
Trump’s actions now go beyond mere twitches and grunts; he temporarily delayed the 25% tariffs, but this respite is insufficient for Canada to adjust decades-old trade relationships.
Canada lacks the infrastructure to quickly redirect exports if the U.S. curtails demand for Canadian goods like aluminum and potash, or its significant crude oil exports.
Trump’s threats have spurred a shift in Canadian public opinion on issues such as pipelines. Premiers are committed to dismantling internal trade barriers; even Stephen Harper urged prioritizing national independence.
Canada has responded with retaliatory tariffs and removed U.S. alcohol from liquor stores, yet this represents a small fraction of U.S. alcohol production.
The 2019 USMCA negotiations offered limited progress. Canada employed targeted tariffs hoping to influence U.S. lawmakers, but a subsequent White House visit resulted in a deputy chief of staff suggesting annexation as a goal.
U.S. opposition to Trump’s tariffs might emerge from affected workers and consumers. However, Republican support for Trump and his dismissal of price increases hinder this opposition.
Canada faces an upcoming election, with Trudeau and Poilievre vying for leadership. Carney’s potential role is also relevant, given his experience managing complex economic situations.
Canadians will choose between leaders committed to confronting Trump and bolstering Canadian resilience. Ironically, Trump’s actions may have inadvertently prompted necessary changes in Canada.
The mouse, startled, is actively seeking self-preservation.
