By Harry Storm
Americans generally have never taken Canada seriously, so they have no idea how serious Canadians are about our separate identity
You know that old expression: “when life gives you lemons, make lemonade”? Well, U.S. President Donald Trump recently handed Canada bushels of lemons, in the form of a threatened 25% tariff on all goods from Canada (and 10% on Canadian oil and gas), with the ultimate goal, he says, of using “economic force” to make Canada the “51st state” of the United States. Trump’s threats and actions have the Canadian political and business establishment in panic mode, with many fearing that Canada’s unique story may be coming to an end.
They may be right: If Trump’s tariffs go ahead – he’s postponed them for 30 days for both Canada and Mexico after both countries promised to boost border protections – Canada will be faced with an existential trial of a kind it has never faced before: a U.S. administration determined to remove what Trump called “the artificial line” i.e. the border separating our two countries.
But Trump’s tariffs, should they come to pass, could also be the catalyst for a renewed Canada that diversifies its trade, ends its reliance on exports to the U.S., gets rid of the inter-provincial barriers that have hampered trade between provinces throughout our nation’s history, and builds coast-to-coast pipelines to reduce reliance on U.S. energy in the eastern provinces. In other words, lemonade.
I’ve been thinking a lot about the future of Canada since Trump first joked about Canada being the 51st state to “Governor” Justin Trudeau. At first I thought Trump might be trolling Trudeau, who, during Trump’s first term, would be obsequious in Trump’s presence and then mock him to other foreign leaders, something I suspect Trump has never forgotten.
But then Trump repeated the comment and also complained that Canada – along with Mexico, which faces the same punitive measures – was not doing enough to stop the flow of illegal migrants and drugs such as fentanyl into the U.S., and since then has talked about using “economic force” to pressure Canada, with the tariffs being his opening salvo.
Canada’s prime minister didn’t help matters when, according to Trump, he told Trump during his visit to Mar-a-Lago after Trump’s election victory that Canada couldn’t survive for even a little while if 25% tariffs were imposed. Trump clearly took the PM at his word, even though Trudeau is a dead man walking politically and not known for his deep insights into the economy.
Trump later elaborated his views in a speech about the U.S.’s trade deficit with and subsidies to Canada, as follows: “Canada has “a very small military. They rely on our military. It’s all fine but, you know they’ve got to pay for that. Why should we have a $200 million deficit, and add on to that, many many other things that we give them in terms of subsidy. … That’s OK if you’re a [U.S.] state, but if you’re another country…..”
“We don’t need their cars. You know, they make 20% of our cars. We don’t need that. I’d rather make them in Detroit. … We don’t need their milk, we’ve got a lot of milk. We have massive fields of lumber, we don’t need their lumber.”
These remarks have caused consternation, to put it mildly, among federal and provincial politicians, businesses and ordinary Canadian citizens, with good reason. The U.S. is by far Canada’s largest trading partner. The vast majority of our traded goods go to the U.S. So, as one might expect, Canadians have responded to Trump’s remarks and plans in a variety of ways. Ontario’s premier, Doug Ford, threatened to cut off the export of electricity to the U.S. and tore up an $100 million Starlink contract with Elon Musk, while Alberta premier Danielle Smith has urged the federal government to tighten the border as per Trump’s demand. Calls to impose retaliatory tariffs against the U.S. abound, though a wait-and-see attitude prevailed until the tariffs were set to go into force (but were paused a day before they were to take effect)..
It’s obvious that Trump’s tariffs would cause severe short-term harm to the Canadian economy, and by extension, to Canadians, particularly those working in the industries specifically targeted.
Canadian politicians and media repeatedly point out that (a) the U.S. trade deficit with Canada isn’t a subsidy; (b) many countries have far larger trade deficits; and (c) that the deficit is mainly because of American imports of Canadian oil, which creates jobs in the U.S. and supports its economy.
All of which is true. That being said, I don’t think Trump had trade deficits in mind when he talked about subsidies to Canada. Based on his speech, I believe that Trump’s reasoning regarding subsidies goes something like this: If we (i.e. the U.S.) can make, or provide, or build something, but we import it instead, that’s a subsidy to the exporting country. It’s a very curious and self-serving definition of a subsidy, but that’s why he’s instituting the tariffs: to protect his domestic industry. And as much as it pains Canadians, we have to understand that this is an entirely legitimate policy position for any American president to take, even if it displays a heartlessness toward an ally that we don’t believe we deserve.
It’s also important to note that while Trump’s definition of what a subsidy is may not be accurate, his observations about U.S. subsidies to Canada still carry some truth. For one, the U.S. subsidizes Canada militarily, which allows Canada to spend more on social and environmental programs. And although it’s true that many other NATO countries also don’t live up to their obligation to devote 2% of the GDP to military spending, Canada has been getting even more of a free ride because of its contiguity with the U.S. Trump’s warning – “we will not protect you” if Canada doesn’t fulfil its NATO obligations – is something of an empty threat precisely because if the U.S. didn’t protect us, it would have the enemy on its borders. That being said, Trump is correct about Canada not fulfilling its obligations, and frankly, it’s a scandal that we haven’t paid our fair share all these years.
Canada’s outsized role in the manufacture of American automobiles also can be considered a subsidy, one that began with the signing of the Auto Pact in 1965, and which continued after the Auto Pact was discontinued in 2001.
As for the dairy and lumber industries, trade disputes with the U.S. are longstanding, with the Americans claiming, successfully in some cases, that Canada subsidizes those industries and dumps subsidized products onto the U.S. market, which hurts American producers.
By slapping tariffs on dairy, lumber and other products, Trump says he hopes not only to end subsidies and what he considers to be unfair trade practices, but to apply “economic force” to pressure Canada into becoming the 51st state (or, more likely, the 51st to 60th states, as well as three territories).
However, Trump has ruled out military force to achieve this goal. Of course it would be natural for Canadians, long accustomed to their close relationship with the U.S., to see this as no great concession, given our countries’ close cooperation in the past, the world’s longest undefended border, and the myriad of ties between Canadians and Americans. One is tempted to say “Hooray for Trump, he won’t invade” sarcastically, given that I can’t think of anything more expensive, risker, or more stupid than an attempted military takeover of a friendly ally simply for profit and for supposedly better access to resources (especially since Canadian resources have been and still are readily available to the U.S.)
Ruling out a military option also likely means the only way to annex Canada would be to ask Canadians whether or not they want to join the U.S. in a referendum. The severe economic pressure from the U.S. would no doubt cause some people, particularly those in affected industries, to throw in the towel and vote to join the U.S. to boost our suffering economy.
Still, I believe a referendum on joining the U.S. would be unlikely to succeed, despite the economic pressure. Why? Because Canadians are among the most patriotic people in the world. That may not be obvious to Americans, because unlike them, Canadians don’t wear their patriotism on their sleeves or constantly repeat that our country is the greatest, even though that’s precisely what many Canadians believe, and except for backpackers travelling abroad, Canadians aren’t particularly interested in flag-waving.
Additionally, Americans generally don’t take Canada seriously or fully grasp that it’s an independent country. You can see it in the smiles on the faces of serious Americans when they discuss annexing Canada. And because they don’t take Canada seriously, they have no idea how seriously Canadians take their separate identity.
But success in maintaining our independence is hardly a given, despite Canadians’ love of country. For one thing, there has always been a small but not insignificant number of Canadians who have long supported joining the U.S., and those numbers have swelled during the nine disastrous years of the Trudeau government. Trump’s economic pressure would surely turn even more Canadians toward the idea.
But if Canadians have the courage and the will to remain an independent country that is less reliant on U.S. trade, Canada could carve out a new path. Given the richness of our natural resources – 20% of the world’s water supply, vast amounts of oil and gas, lumber, agricultural produce and metals and minerals — Canada has a lot to offer and trade with the rest of the world.
Getting rid of inter-provincial trade barriers would allow more Canadian goods to be sold in Canada, and building nationwide pipelines would allow Ontario, Quebec and the Atlantic provinces to end their reliance on American energy sources and provide a significant market for Western oil and gas.
My own feeling is that the tariffs will never happen or, if they do, won’t last long, and the “51st state” is a pipe dream. Trump had already lowered the tariff on Canadian oil to 10% (because Canada supplies so much of America’s domestic oil consumption) and his sudden decision to pause the tariffs altogether was clearly influenced by stock market jitters and anticipated complaints from U.S. industry, politicians and ordinary citizens concerned about prices rising in the U.S. because of the tariffs. After all, the U.S. imports more from Canada than any other country; retaliatory Canadian tariffs also would have made it harder for Americans to sell their goods here. That’s why I believe Trump’s real goal has always been to shake things up ahead of as yet unannounced trade negotiations to gain some advantage.
I may be overly optimistic. The worst-case scenario – American economic pressure eventually forcing Canadians to give up and become Americans – would be difficult, and for many proud Canadians, almost impossible to swallow. One small consolation for English Canada: We might find some delight in the spectacle of Americans dealing with Canada’s very own never-ending political ulcer, namely, Quebec nationalism. Interesting times.
