Canada is in a precarious position when it comes to international trade. With the recent election of Donald J. Trump to the Oval Office, trade security is being threatened by a long-time ally who misunderstands the norms that govern international trade and the global economy. Trump asserts that he will apply a 25% tariff on Canadian goods entering the United States. Such a tariff would not only make it difficult for the United States to acquire much needed Canadian goods, such as steel, exports of which some Canadian suppliers have already started to halt to the United States, but would also damage the Canadian economy. While there was hope that an agreement could be made with the U.S. to completely avoid tariffs, as of March 3rd, 2025, those tariffs went into effect. Yet, President Trump seems to not understand the wide-reaching effects of such an action.
Canada and the United States’ economies are incredibly interconnected. In 2022, the United States was Canada’s largest trading partner, accounting for over 960.9 billion in total trade, with $598.0 billion dollars being exports. As such, both Canada and the United States benefit from a unique trade relationship that is not only based on proximity but also on our shared values of democracy, freedom of expression, and liberty. With the disruption caused by the current administration, with claims from President Trump that Canada is acting “very nasty to us [the United States] on trade” and calls to turn Canada into the 51st state of the United States, Canada faces a severe existential threat from the current U.S. administration. While some have argued that this is not such a radical departure from U.S. economic policy historically, it still represents a grave threat to the security of Canada. A security issue Ottawa must deal with if Canada is to effectively contribute to NATO and meet the 2% GDP spending goal. If Canada is too reliant on only one trade partner, any disruption that happens to our sole trade partner would impact us greatly. If Canada’s economy contracts due to economic difficulties imposed by the U.S, it would significantly shrink the country’s GDP.
This raises an important question for Canada: How can Canada ensure its economic sovereignty in the face of a hostile administration governing a well-established ally? To ensure its economic sovereignty, Canada must look to expanding its trade relations with other, more stable allies and with emerging economic powers. While this may be difficult in the short term, as the proximity to the United States makes trade easy, coupled with the fact that it is the world’s largest economy, it is necessary for Canada to maintain its own national interests.
Canada should leverage its position as the United States’ largest trading partner to put pressure on it to gain trade concessions. One of the most forceful proponents of this approach is Premier Doug Ford of the province of Ontario, who suggested that Ontario should cut off energy exports to the United States as a deterrent for tariffs and seems to be willing to follow through with his threat. Yet such a move risks further antagonizing the United States and putting further trade deals at risk.
Instead, Canada should focus on diversifying its trade relationships with other countries to lessen its reliance on the United States. One such country that might be worth increasing trade with is Guyana. Guyana is a South American country that has the world’s fastest-growing economy. Canada has already established deep trade relations with Guyana through the Caribbean Community (CARICOM), but a further deepening of relations would help lessen its reliance on the United States. Investing in Guyana would allow Canada access to a fast-growing economy that could provide opportunities to emerging Canadian businesses.
In Europe, Canada should continue to deepen ties with the European Union. In 2020, Canada was the EU’s tenth-largest exporter of goods and its 16th largest partner for imported goods. The EU is Canada’s second biggest trading partner, supported by the Canada-European Union Comprehensive Economic and Trade Agreement (CETA), which gives Canadian businesses preferential access to European market opportunities. The foundation is already there for Canada to further its economic relations, and the Government of Canada should take the opportunity to do so. The European Union, despite some possible shifts in each member’s country’s domestic spheres, such as the rising popularity of the AFD in Germany, is a relatively stable entity which could benefit Canada greatly. In addition, by deepening ties with the EU, Canada is simultaneously strengthening its relationship with fellow NATO members through economic means. As the EU has many NATO members in it, it not only stands to strengthen Canada’s economic position by diversifying, but there is also a chance for it to integrate further with other NATO nations. This is all in keeping with Article 2 of the North Atlantic Treaty, whose signatories pledge to “seek to eliminate conflict in their international economic policies and will encourage economic collaboration between any or all of them.”
Similarly, Canada should continue to deepen its relationship with the Association of Southeastern Asian Nations (ASEAN). With a very fast-growing economy and the possibility of free trade with Canada, improving trade with ASEAN could very well help Canada alleviate the pressures put on it by the threat of U.S. tariffs. As such, much like the EU, Canada should look towards ASEAN as a possible trade solution.
In summary, Canada must act decisively to diversify its trade portfolio and partners if it wishes to maintain its sovereignty. The threats made by President Trump cannot be ignored. As such, Canada must look to other countries and allies to create more stable trade networks. Canada’s hard-won global reputation as a middle power gives it these opportunities to pursue multiple new avenues of trade. By strategically expanding economic partnerships, Canada can secure its trade future while maintaining its role as a key global economic player, ensuring a brighter future for Canada and its citizens.
Photo: “Money and Wallet” (2024) Released via StockCake. Public Domain
Disclaimer: Any views or opinions expressed in articles are solely those of the authors and do not necessarily represent the views of the NATO Association of Canada
