In a recent Hub Dialogues with editor-at-large Sean Speer, Meredith Lilly, professor and Simon Reisman Chair in International Economic Policy at Carleton University’s Norman Paterson School of International Affairs, discussed Canada-U.S. trade relations, following President-elect Donald Trump’s threats to impose 25 percent tariffs on all Canadian goods.
Here are three takeaways from their discussion.
1. A warning and a negotiation tactic
Lilly views Trump’s tariff threats as destabilizing but not entirely unexpected, given his previous actions against Canada. She advises Canadian policymakers to take these threats seriously, while recognizing their dual purpose: signaling Trump’s focus on border security and serving as an opening negotiation tactic. Lilly warns against overreacting to every provocation from the President-elect, as it risks playing into Trump’s strategy of dominating the media narrative. She acknowledges that while Canadian border issues like fentanyl trafficking and illegal crossings are minor compared to the U.S.-Mexico border (which saw a quarter of unauthorized crossings between 2020 and 2024 come from Mexico into the U.S.), they remain politically significant in the U.S. and warrant proactive Canadian engagement. Lilly emphasizes the need for Canada to prepare for a “roller coaster” of similar challenges over the next four years, balancing serious responses with a strategic focus on leveraging Canada’s strengths in trade and diplomacy.
2. Navigating U.S. trade relations amid rising American protectionism
Lilly discusses the broader implications of Trump’s trade policies, noting the increasing rejection of free trade in favour of repatriating production within the U.S. She argues it is unlikely to signal the end of USMCA or NAFTA, especially given the high-wage, high-standard alignment between Canada and the U.S. Lilly believes that most U.S. trade involve Mexico rather than Canada, because the U.S. heavily relies on Canadian energy and other exports. However, she cautions that Canada’s leverage is limited, especially in a global environment where trade is increasingly shaped by raw political power rather than mutual economic benefit. She advises Canadian policymakers to adapt to this changing paradigm and maintain open communication with U.S. counterparts to protect shared interests.
3. Measures Canada can take to address border and trade concerns
Lilly stresses the importance of Canadian action to address U.S. concerns about border security and illegal crossings. She advocates for quick responses to legitimate issues, paired with a clear narrative showcasing Canada’s efforts in border management.
At the same time, Lilly highlights the need to remind U.S. officials of the interdependence of our two economies, particularly the reliance of the eastern seaboard on Canadian hydroelectricity and oil exports. She warns that imposing tariffs on these essential goods would hurt U.S. interests more than Canadian ones. Lilly also identifies a broader challenge for the Canadian business community in influencing Canadian government policy, suggesting a need for better public communication and stronger connections between business leaders and policymakers to navigate the rocky political and trade landscape.
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