Anything written about President Donald Trump’s tariffs needs a date and time stamp. At the time of this writing, Trump has issued a 30-day postponement on his threatened tariffs. So no one, not even Trump, knows what will come next. But still, it’s worth some background on the president’s actions.
Unfortunately for Canada, Trump has always been—and will likely remain—a protectionist, believing the U.S. economy should be largely self-sufficient and that any nation running a trade surplus with America is taking advantage of it. So, to respond effectively, Canada must first understand his mindset.
See through the smokescreens
When assessing Trump’s rationale for slapping across-the-board tariffs on Canada, forget the notion that lax border enforcement has fueled the flow of fentanyl and illegal immigrants south. The facts don’t support it. Canada has a higher per-capita opioid death rate than the United States, and in 2024, less than 1 percent of fentanyl seizures occurred at the U.S.-Canada border. The same goes for immigration—unlawful crossings from Canada account for just 1.5 percent of all illegal U.S. entries.
Trump simply needed a pretext to invoke the U.S. International Emergency Economic Powers Act (IEEPA) and impose tariffs that benefit American companies—likely his true objective. So, to withstand public and legal scrutiny, he framed the tariffs as a response to a supposed national emergency.
On other occasions, Trump has pointed to the U.S. trade deficit with Canada as justification. While the U.S. does run a $41 billion deficit (which Trump claims is hundreds of billions), that figure jumps to $63 billion when excluding energy. However, the U.S. actually comes out ahead because energy is a fungible commodity, and American manufacturing and services benefit from access to the Canadian market. More importantly, the trade deficit exists almost solely because the U.S. dollar is vastly overvalued, making Canadian imports to the U.S. cheaper. That’s not Canada’s fault—it’s America’s. And it’s a problem Trump could solve quite quickly.
What is really going on?
Given Trump’s mercurial nature, his true motives are hard to pin down. However, I believe three key factors explain his embrace of tariffs. First, Trump is reacting to the excesses of utopian globalists who dictated trade policy in Washington from the 1980s to 2016. Trump and his allies are proving to be antipodalists—people who habitually swing to the opposite extreme. If the last phase of global trade was flawed, then by their logic, the only solution is to close the borders entirely. As Trump has stated, the U.S. does not need Canadian-assembled cars, lumber, or energy—it produces them itself. Never mind that U.S. auto trade is balanced or that Canada has lost much of its auto sector: To Trump, those are just inconvenient details.
Second, Trump embraces protectionism because he was always a national businessman, surrounded by others who ran companies that primarily sold to U.S. consumers. In his view, who needs trade?
Finally, Trump is a protectionist because, in his heart, he wants to return the Republican Party to its pre-New Deal roots. From Lincoln to Hoover, the Republican Party was the party of tariffs. Like them, Trump—who proudly calls himself “Tariff Man”—sees tariffs as both a tool for economic development and a revenue source to replace the income tax.

Canadian Prime Minister Justin Trudeau delivers remarks at a Canada-US relations meeting at the Ontario Investment and Trade Centre in Toronto, on Friday, Jan. 31, 2025. Chris Young/The Canadian Press.
How should Canada respond?
The first thing Canadian officials must remember is that this is all about the “Art of the Deal.” As Trudeau appears to have done, at least for the time being, strike a deal that imposes little hardship on Canada but gives Trump a win, take it. While Trump may not have immediate demands, he will likely dangle the possibility of lifting tariffs as a bargaining chip in negotiations down the line.
But Canada must also make market-opening moves. Trump has raised concerns about U.S. firms’ limited access to the Canadian banking market, Canada’s digital services taxes on U.S. tech companies, and Canada’s somewhat closed dairy market. Canada could—and should—make compromises on these issues. Doing so would avert what is sure to be an unmitigated disaster for the Canadian economy at relatively minimal costs.
If Trump reimposes the tariffs, even after Canada offers some market opening concessions, Canada should stick to its strategy of imposing tariffs on specific final goods, not intermediate goods. Tariffs on intermediate goods will only raise input costs for Canadian producers and inadvertently weaken Canadian manufacturing. In addition, the current approach of targeting items that Canadians can easily source from non-American suppliers makes sense.
While it may not generate an immediate response, Canada should also pursue a case with the USMCA tribunal and file a claim with the World Trade Organization (WTO). While the WTO may not be able to provide much relief, as it can only authorize retaliatory tariffs—something the Trudeau government is already doing—it can help exert greater global pressure on Trump.
Canada should avoid responding in ways that unnecessarily harm its economy. Jim Balsillie and the Council of Canadian Innovators have been pushing for policies that actively discriminate against U.S. firms in Canada. They are using the heightened emotions from Trumpian tariffs to advance these measures. But while it might make sense to retaliate against American firms in the U.S. if Trump reinstates tariffs, why would Canada want to target U.S. companies that invest heavily in Canadian R&D and employ tens of thousands of workers?
Finally, Canada should use this threat as a wake-up call for the raft of internal reforms that are needed to make its economy stronger. For too long Canadians have been comfortable, knowing the U.S. market and military are right next store. Time to shrug off the complacency and make bold reforms.
As a dual citizen born in Calgary and a staunch supporter of a strong U.S.-Canada alliance to counter China’s growing global influence, I remain hopeful that the enduring partnership between the U.S. and Canada will prevail despite these challenges. Hopefully, Trump will move on to some other “shiny object,” allowing these two nations to overcome these temporary hurdles and emerge stronger.