The current international order—where despots sit on human rights councils and where our enemies like China enjoy the benefits of preferred trading arrangements—needs reform. But the Trump administration’s focus on Canada, in particular, doesn’t make sense on its own merits and is likely to be harmful to the needed project of building a trade system that protects workers and places democratic nations in a position of strength against tyrannies.
The liberal “rules-based international order” was always a bit of a sham for those of us who did any work in the world of international trade and foreign affairs, and who had their eyes open. I recall when I was a young trade union representative, and was responsible for my union’s efforts to try to secure labour rights in Cuba and China. I routinely heard, from Canadian foreign affairs officials working at the building named for the mascot of the liberal rules-based order, Lester B. Pearson, that “engagement” with China and Cuba—particularly via trade—was the best path to democracy. The fact that, in the case of Cuba, a group of Cubans who tried to start an independent union were literally tossed into jail for their attempts and, in China, that the sole trade union was directed by the same entity—the Chinese state—that controlled its economy, barely seemed to faze anyone.
The officials—not just in Canada, but also at the UN and especially within the international business community—were content to make their money, host their conferences, and pretend that one day, if we waited long enough and traded enough, these clearly totalitarian regimes would suddenly discover democracy, that workers would be able to start independent unions, and citizens would have agency and power over how they were governed. It was a joke. We all knew it. But while big business and state officials laughed and popped the champagne to celebrate “anniversaries of engagement” those of us who cared about democracy and justice, and especially those in jail, didn’t find it funny.
I say all of this to establish that I’m in on the joke. The liberal vision of trade ignores political considerations at the level of both international relations (bad) and the effects of this trade on the working class (often worse). That said, it strikes me that even relying on helpful distinctions on the purpose of tariffs, yesterday’s tariffs on Canada are not likely to align with the goals of building a stronger America. I think this is true economically as well as on the level of international relations. And the actions of the current administration, which are premised on unpredictability in negotiations as being a power move are more likely to weaken Americans in the long-term.
Understanding why requires an understanding of what trade between the two countries looks like today.
Canada’s trade with the US, if one removes energy, is largely balanced. Moreover, the bulk of energy that we sell to the US is sold at a severe discount when compared to global markets, largely because of failures of Canadian governments to provide the conditions necessary to transport to our coasts where we could sell our energy to global markets at competitive rates. If anyone follows Canadian discourse about trade over the past decade, you will note that the overriding concern within our country is that we’re the ones getting fleeced on our major export, oil, and that, worst of all, we only have ourselves to blame. This discount arguably contributes to a marginal growth in American working class jobs, particularly in major refinery hubs in the US.
And this doesn’t just matter in terms of international relations. A large part of Canada’s trade with the US is, in reality, trade within companies themselves, the majority of which are American. As Alicia Planicic notes in the Hub, “more than half of the purchases subject to the proposed tariff on Mexico and Canada would fall on American companies ‘trading’ with themselves, increasing their cost of production and decreasing their competitiveness beyond North America.” Rather than being a net drain on American production (and the jobs associated with it), the Canadian trading relationship appears to be a model of actual gains from trade rather than mercantilism, which is truer for China.
Canada buys, as they say, a boatload of American goods. We’re your number one customer. The numbers show that “Canada is the single largest market by a large margin with nearly US$350 billion goods and services crossing Canada’s border over the first three quarters of 2024. Some 34 U.S. states sell more goods to Canada than any other foreign economy.”
For conservative elected officials looking to advance the interests of their constituents, tariffs on Canada seem even more self defeating. The state level impact of tariffs is likely to be deleterious to both the working class in those states, and the electoral prospects of the Republican party (especially in places like Minnesota where Republicans appear to be gaining ground as a result of working class realignment). The road to the White House might run through Iowa, but it’s there where some of the biggest effects of tariffs are likely to hit hardest.
Tariffs against Canada, as opposed to China, are likely to disproportionately affect the working class, which risks upsetting the coalition that is most likely to elect conservatives. And this would only be worsened if Canada were to place retaliatory tariffs on American goods and services. If working class jobs, and the rebuilding of a robust working class are your primary concern, then China’s the biggest problem, and it’s not even close. There’s a reason why economists call the results of opening of trade with China “the China Shock.” As Autor notes: “Even using higher-end estimates of the consumer benefits of rising trade with China, a substantial fraction of commuting zones appears to have suffered absolute declines in average real incomes.” It’s real, it’s persistent, and that cannot be said of Canada. In fact, the evidence seems to show that trade with Canada was a net gain for American welfare and, if there is a disproportion in trade on the North American continent, that Canada should be the last target for tariffs.
But the rhetoric from the White House, while it occasionally mentioned the “bad deal” that Americans were getting from a trade perspective, focuses more on political and security matters (Americans concerned about the separation of powers take note). Trump’s evocation of an “emergency” on the matter of fentanyl and terrorists suggest that political or security matters were the rationale for the tariffs. Are these issues crises?
We all have a drug problem, and we all have an interest in stopping drugs from being used and distributed. As a Canadian who has serious concerns with Canadian political leadership on the issue of drugs (see “safe injection sites”), I share the President’s concerns about the impact of fentanyl and other drugs being trafficked. However, while there are problems with the ease with which drugs can be accessed here, the flows coming from Canada are tiny, especially when compared with Mexico as, in fact, the executive order acknowledges. In fact, a recent investigation notes that American “law-enforcement officials across the sector, which covers eastern Washington, Idaho and western Montana, said they could not think of a single case of Canadian fentanyl flowing into their jurisdiction.”
Again, for those with eyes to see, the major problem is not Canada, but China. American data notes that “China remains the primary source of fentanyl and fentanyl-related substances trafficked through international mail and express consignment operations environment, as well as the main source for all fentanyl-related substances trafficked into the United States.” The imposition of tariffs on China make sense; the imposition on Canada does not, and there is a critical imbalance in the level of economic pressure placed by tariffs when seen against the level of threat.
The same is true for migrants. While I share the administration’s concerns about Canada’s immigration policy and its failure to properly vet immigrants for terrorist and criminal activity, the flows are much smaller than discussed, and of an order of magnitude different between Mexico and Canada. Moreover, if we have concern about hostile actors on American soil from outside sources we should, again, focus on the biggest threat, including the one country, China, which has set up police stations on your (and our) soil.
But what if this is a negotiating tactic intended to get to the real problem of Canada’s free-riding on American defence? What if tariffs are merely a tactic of unpredictability aimed meant to compel better behavior from America’s northern neighbor?
First, we can admit that Canada has been underspending on defense, something that even a past defense minister has acknowledged is a problem. Canada needs to spend more on defense, both as a matter of national sovereignty (one never knows when one’s enemies, or neighbors, will turn belligerent) and as a matter of securing, along with our allies, a bloc of nations that can stand against and contain tyrannical governments such as Russia and China.
This is the key for America too: it has enemies. Russia and China (not to mention Iran) continue to be countries that wish to see American weakened and that stand in opposition to both its way of life and its democratic constitution and traditions.
And if America wants to maintain its position of strength, weaken its enemies, and contain them, it must work to build a new order of international affairs that will require some sort of new institutional setting. And such institutions are unlikely to be successful or long-lasting if the executive acts in ways that are unpredictable and ignore the non-economic aspects of the political communities that America wants to be part of such a coalition.
The unpredictability that some point to as a means of strength in negotiations can sometimes work in the short run, but it doesn’t work in the long run because unpredictability undermines trust. Trust is built by setting clear expectations and delivering on them. In the case of tariffs on Canada, there is no clear or cogent description of the desired end America is seeking or a compelling reason for the magnitude of the response. And even if there was such an end described, America has not set clear expectations as to what Canada needs to do to achieve it. Trade is a good-faith exercise that relies on trust. The US, as the largest player in that game, should act in a way that cultivates a global order that recognizes that our enemies—China, Russia, Iran—are anti-democratic and, in the long run, likely to undermine the unique character of what makes America a great nation. American interests are not likely to be furthered if it acts in a way in which its allies lose trust in it.
We can rightly critique the naiveté of many proponents of the liberal order and institutions such as the UN without throwing away the fact that, for all their faults, democratic countries, by their nature, have a hard-earned suspicion of politics seen purely through the lens of interest and power. And without a policy that will build that trust Canada is likely to extend that suspicion to their neighbor to the south.
Keep in mind that building trust does not mean America should jettison its own national interests for some vague notion of the common good. What is needed is not a rough antagonism of these democracies. How willing would you be to work with or trust a partner who has articulated a desire for annexation? What is needed is a firm and clear vision prodding us toward the type of international community that we want, with clear steps for how to get there. I use prodding intentionally. This may require hard words, and it is realistic to acknowledge that it can even come with negotiation and carrots and sticks. But agonism is not the same thing as antagonism. There has to be a greater vision and action aligned with it, that transcends pure national self-interest and power—something that, after all, one normally equates with totalitarian China, and not republican America.
As it stands right now, Canada is facing a friend who wants to punish it economically, and which is articulating (whether you think Trump means it or not doesn’t really matter—words have force) a policy and a desire for annexation, without any clear articulation of a policy outcome or a larger international strategy for restraining and shrinking the influence of our mutual enemies, China and Russia. If the US wants a new international order, it’s hard to tell what that is, and harder to tell how this type of threat achieves it. But if it looks like this, the only person this serves is Xi Jinping, who has to be smiling like Winnie the Pooh with his hands in a honey pot at the sight of his enemies fighting amongst themselves.
Ultimately, a new order on global trade is deeply needed. That should involve countries like the U.S. and Canada coming together—economically and politically—against our shared enemies in a multipolar world. Spending time instead taking shots at our friends—to the north and otherwise—serves no one.
