Forty-one million Canadians experienced collective whiplash this week.With trepidation, we awaited Donald Trump’s inauguration and his threatened day-one 25% tariff on imports from Canada. We heaved a national sigh of relief when his initial executive orders merely instructed U.S. officials to study bilateral trade issues, reporting back by April 1.
Hours later we were back in the abyss, after Trump casually repeated his 25% tariff pledge, now for February 1.
Is there any method to Trump’s to-and-fro madness? The optimistic view is that he’s creating leverage to bargain on other issues: border security, defense spending, our Digital Services Tax (hated by the tech billionaires hogging the front row at inauguration).
The pessimistic view is that Trump has bigger, nefarious ambitions: to go down in history as the first President in 65 years to enlarge the USA.
Either way, Canada is in big trouble.
Even in the optimistic scenario, and we avoid the tariff through concessions on other issues, we’ve learned where we stand. More importantly, global businesses have also learned where we stand. The long-standing sales pitch that Canada offers low-cost guaranteed access to U.S. markets is no longer credible.
Indeed, the flight of business investment following Trump’s threat (even if he doesn’t follow through) will likely be the worst consequence of this chaos. And that is probably his main goal: to show companies if they want to sell in America, they need to be in America.
If Trump’s strategy works, he will use it again. The idea of a rules-based trading system (whether in North America, or globally) is out the window. We are back to an era in which brute force rules. And Canada needs to get ready.
Bluntly, Canada once again confronts the fundamental challenge of preserving a viable economic and democratic entity that is more than the northern hinterland of an integrated continental behemoth.
The border is not an “artificial line,” as Trump claims. And it is not just a ‘friction’ interfering with efficient trade.
Modern trade theorists understand that borders can foster investment, development, and prosperity in places where they wouldn’t have occurred otherwise. Of course, that’s on top of the even more important dimensions of sovereignty that borders facilitate.
To preserve our viability as a going concern in the face of Trump’s aggression, Canada needs an emergency national response. This should include:
The content and context for this emergency strategy are both reminiscent of the original National Policy, implemented by John A. MacDonald’s Conservative government in 1878. That plan included high tariffs on manufactured imports, tariff reductions on imports of raw materials and unfinished goods, and extensive financial and other assistance to develop Canadian industry.
A modern National Policy would likely use different tools (with more focus on innovation, capital investment, and sustainability). But the overarching goal – to develop a diversified, self-reliant national economy with critical mass to exist independently from the U.S. – is identical.
Moreover, the original National Policy followed a failed attempt by Alexander Mackenzie’s Liberals to negotiate free trade with the U.S. It was fundamentally motivated to resist America’s 19th-Century expansion.
Fast forward to 2025, and it’s déjà vu all over again. Yes, we had a trade deal with the U.S., but it was useless (Trump unabashedly ignores it). And expansionism is clearly on the agenda again: Trump’s inauguration speech pledged to “expand our territory,” days after he proclaimed using “economic force” to absorb Canada.
The threat is existential, the coming debates will be fierce, and the burden of adjustment will be high. But if we stand up as we did at other defining moments in our history, Canada could emerge as a more independent country than we have recently imagined.