As trade tensions between Canada and the United States intensify, experts are calling for strategic measures to counter potential tariff threats from former U.S. President Donald Trump. With Trump suggesting the imposition of 25% tariffs on Canadian and Mexican goods, Canada faces a critical moment to protect its economic interests while navigating a delicate political landscape.
This isn’t the first time Canada has been confronted with such threats. During Trump’s presidency in 2018, Canada responded to U.S. tariffs on steel and aluminum with its own carefully targeted retaliatory measures. As tensions resurface, many believe Canada can draw lessons from its previous strategy and leverage its position effectively. Here’s how Canada could respond.
The Challenge of Finding Leverage
Trump’s proposed tariffs stem from his demands for tighter border controls to curb the flow of drugs like fentanyl and illegal migrants into the U.S. However, the implications of these tariffs extend far beyond border issues, potentially disrupting deeply integrated North American supply chains.
Trade expert Gary Hufbauer from the Peterson Institute for International Economics suggests that Canada must identify products that would resonate politically with Trump’s base. By targeting U.S. goods linked to influential constituencies, Canada could create economic and political pressure.
“The challenge,” Hufbauer notes, “is finding iconic U.S. items that would make a significant impact on Trump’s supporters if subjected to tariffs.” He points to U.S. agriculture, particularly dairy products and field crops, as areas of political sensitivity.
Lessons from 2018: Retaliation That Resonates
Canada’s response to Trump’s steel and aluminum tariffs in 2018 provides a blueprint for potential retaliation. Back then, the Canadian government imposed tariffs on a range of U.S. goods, including bourbon, ketchup, and playing cards, targeting products from states with strong political ties to Trump. This approach garnered attention and eventually contributed to the removal of the U.S. tariffs.
Finance Minister Chrystia Freeland recently acknowledged the success of this strategy, describing Canada’s response as a “smart” and “measured” retaliation. Although she did not confirm whether Canada would pursue similar measures now, experts believe targeted actions remain a viable option.
Trade consultant Peter Clark emphasized the importance of leveraging Canada’s “hit lists” of U.S. products that could be subjected to tariffs. “We know who their senators are and who represents them in the House,” Clark said. “Our professionals are always ready to respond with countermeasures.”
Navigating Complex Supply Chains
One of Canada’s strongest arguments lies in the interconnected nature of North American supply chains. Wendy Wagner, an international trade lawyer, underscores the difficulty U.S. businesses would face in replacing Canadian suppliers. For example, auto parts sourced from Ontario cannot simply be replaced overnight by suppliers in Ohio.
“Hopefully, industries on both sides of the border will work together to highlight the potential impact of these tariffs,” Wagner said. She believes this collaborative approach could make U.S. stakeholders realize the broader economic consequences of Trump’s proposed actions.
Potential Targets for Retaliation
Experts suggest Canada could explore several areas for retaliation. Beyond agriculture, targeting products associated with Trump allies or influential corporations might be effective. Hufbauer suggests imposing tariffs on products from companies like Apple or Tesla, whose CEOs have connections to Trump. Such measures could prompt business leaders to lobby the former president to reconsider his tariff threats.
Tyler Meredith, a former advisor to Prime Minister Justin Trudeau, also advocates for strategically targeting products from key U.S. states. However, he warns that Canada must adapt its strategy to reflect the shifting political landscape, as Trump’s priorities and state-level dynamics have evolved since 2018.
Exploring Alternatives: Carrots Instead of Sticks
While retaliatory tariffs are one option, some experts argue that Canada should also consider offering incentives, or “carrots,” to de-escalate tensions. Meredith points to the federal government’s ownership of the Trans Mountain Pipeline as a potential bargaining tool. By exploring energy supply agreements with U.S. refineries, Canada could appeal to Trump’s interest in increasing energy imports.
“This is all about striking a deal,” Meredith said. “Offering something attractive, like energy agreements, could align with Trump’s priorities and help diffuse the situation.”
The Long Grind Ahead
Despite these strategies, experts caution that resolving the tariff dispute will require persistence and patience. A senior Canadian government source told that the focus remains on maintaining open communication with Trump’s circle and influential stakeholders in the U.S. However, they acknowledged that there is no “silver bullet” solution, and progress may take time.
Hufbauer warns that a full-blown trade war would likely hurt Canada more than the U.S. but maintains that strategic retaliation could still yield results. “It’s about finding areas where Canada can apply counter leverage effectively,” he said.
Conclusion: Balancing Strength with Diplomacy
As Canada navigates this challenging trade dispute, it faces a delicate balancing act: protecting its economic interests while avoiding escalation. Whether through targeted tariffs or creative incentives, Canada must demonstrate its willingness to stand firm against unjustified threats.
Ultimately, the goal is not just to retaliate but to encourage constructive dialogue and cooperation. By combining strategic retaliation with diplomatic efforts, Canada can strive for a resolution that benefits both nations and preserves the integrity of their economic partnership.