Preparing Canada for a Pragmatic Response to Washington’s Trade Demands

In May, I argued that Canada needed a new grand strategy – a Carney Doctrine of sorts – to navigate a post-American world marked by fragmentation, energy insecurity, and a brutal contest between democracies and autocracies. But now, some three months later, we face a sobering truth: the world may be post-American, but America is not yet post-Trump. And Donald Trump, once again, is reshaping our national destiny – by force, not diplomacy.

With a series of executive orders and combative trade measures, Trump 2.0 has re-emerged with familiar tools: tariffs, transactionalism, and unilateralism. Once again, Canada is in the crosshairs, this time facing increased tariffs on lumber, steel, aluminum, and potentially electric vehicles.

Canada has shown resolve. We are one of only two countries, alongside China, to impose direct counter-tariffs in response, totaling nearly $60 billion. Moreover, roughly 86 percent of Canadian exports are still protected under the Canada-United States-Mexico Agreement (CUSMA), which offers a crucial buffer against the worst of these new tariffs – a luxury not enjoyed by the EU or Japan. Still, our geographic proximity, our alignment with multilateral institutions, and most recently, our intended recognition of a Palestinian state and our alleged lack of enforcement on fentanyl trafficking, have made us a more visible and vulnerable target in Washington’s eyes.

At midnight on 1 August, the Prime Minister’s Office released a statement expressing “deep disappointment” with Washington’s decision to increase tariffs on Canadian goods outside CUSMA protection from 25 percent to 35 percent. The statement reiterated Canada’s commitment to working “with all levels of the US government” to protect Canadian jobs and industries. While the tone was firm, the approach was also familiar: reactive diplomacy, not strategic recalibration.

For Ottawa, this is a pivotal moment. The default mode of passive resistance and moral outrage, which characterized Canada’s response to Trump 1.0, is no longer viable. We cannot afford to merely hold the line, hope for allies, and pray for change in 2028. If we approach Trump 2.0 the same way we did in 2018 – responding defensively and relying on back-channel fixes – we risk squandering the hard-won gains of CUSMA and repeating the same mistakes of delay and division. And this time, the cost may be higher.

The EU Just Proved Us Wrong

Ottawa’s bet that a united transatlantic front would restrain Trump’s protectionism has not paid off. The new US-EU trade agreement signed last week offers tariff relief in exchange for major EU concessions on agricultural access, data rules, and long-term energy contracts. Brussels did not challenge Trump’s worldview; it adapted to it.

Canada, by contrast, remains without exemptions or a proactive deal. While we hoped for solidarity, the EU moved swiftly to protect its own interests. We must now do the same.

From Preaching to Planning

Values matter. But values without leverage are sermons, not strategies. Trump governs through visibility and domestic optics, not institutional goodwill or historical alliances.

Consider Japan. In anticipation of trade pressure, Tokyo negotiated a broad package worth over $550B USD in investments, including semiconductors and clean tech, alongside enhanced defence cooperation. This transactional posture delivered wins for both sides.

Canada must take note. Rather than resisting Trump’s tariffs on principle, we should offer a carefully crafted, pragmatic agreement aligned with US economic priorities, especially in politically consequential states, while protecting our national interests.

At the same time, our efforts to diversify trade must be reframed. China remains our second-largest trading partner, and expanding ties with Vietnam, India, and South Korea should be pursued discreetly as diversification, not as defiance. New efforts to engage Brazil, Türkiye, Indonesia, Saudi Arabia, and South Africa can also broaden our strategic options without provoking Washington.

What a Strategic Approach Could Look Like

1. Reinforce CUSMA as the cornerstone of a renewed North American bargain

To navigate Trump’s return, Canada must avoid improvisation and lean into strategy. Our priority should be preserving and strengthening CUSMA, which remains our most effective economic buffer. With its formal review approaching in 2026, and consultations starting this fall, Canada must act early and deliberately to shape the terms of engagement.

Rather than framing our relationship with the US as one of dependency, we should also present it as a strategic partnership that delivers for North America. We can reinforce this narrative by proposing high-visibility, mutually beneficial initiatives such as expanded cooperation on EV supply chains, integrated rare-earth mineral processing, and trilateral innovation corridors for artificial intelligence and clean technology. These proposals should be tied to job creation and industrial growth on both sides of the border.

The EU and Japan have committed billions in US investments to manage their relationships with Washington. Canada may not be able to match them dollar for dollar, but we should consider targeted investments, such as committing to our F-35 procurement or co-investing in energy and infrastructure projects that align with American priorities. Strategic industrial alignment, not reactive concessions, will position Canada as a reliable and indispensable partner in North American prosperity. This is not about pandering, it’s about showing strategic initiative before we’re backed into a corner.

2. Make a tactical trade

Canada could offer modest, symbolic concessions – a narrowly defined dairy opening, alignment on LNG permitting or a final cancellation of the now-rescinded digital services tax in exchange for a multi-year tariff freeze and carve-outs for key sectors like steel and autos. Trump’s advisors understand the value of deals; it’s time we offer one.

3. Engage US states and diversify globally

Many federal and business-led efforts already highlight Canada’s role in US state economies. But a more integrated initiative, like an expanded “Canada in Your State” campaign could deepen ties with governors and local business leaders. Simultaneously, Canada must go beyond symbolic diversification. For example, by renewing dormant free trade talks with India and Türkiye while advancing existing agreements such as the Comprehensive and Progressive Agreement for Trans-Pacific Partnership and the Comprehensive Economic and Trade Agreement with the EU. As mentioned already, strategic engagement with other major economic partners, especially G20 countries, will give us leverage and we need more of it.

What We Must Avoid

We should not mistake stubbornness for strategy, nor assume Trump’s tariffs will be reversed through legal review alone. And we cannot count on allies who will ultimately prioritize their own deals, as the EU just did. Trump’s return signals a shift from alliance-based policymaking to a more transactional and conditional order. Canada is no longer a trusted default partner – we must earn that status anew.

This does not mean compromising our values. It means advancing them with strategic intent.

Time to Act, Not React

In May, I called for a Canadian foreign policy that adapts to a more fragmented and competitive world. That world is no longer theoretical. With Trump in the White House and tariffs on our doorstep, strategic engagement – not passive endurance – must guide our approach.

Canada cannot afford to wait until 2028. The time to act is now.

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Author’s Note: This article reflects the author’s independent analysis and is not affiliated with any political party or candidate.