The Self-Harming Logic Of The U.S.-Canada Trade War

Politics is almost never about the merits. This is one of the toughest lessons to learn in Washington. Some people never learn it, especially intellectuals who spend their days debating evidence-based arguments about policy issues. But the gut-feeling theory of politics is key to understanding President Trump’s trade war with Canada. For him, this isn’t about economics or foreign policy. It’s personal. Also, he just likes tariffs.

In fairness, Trump administration officials do have rationalizations for the various rounds of Canadian tariffs he has enacted since 2018. A partial list includes national security, trade deficits, fentanyl, and forced labor.

National security is the stated reason for the administration’s steel, aluminum, and copper tariffs, which are currently at 50%. The problem is that Canada is not a national security threat.

Canadians have fought alongside Americans in nearly every major American war in the last century. This includes wars unrelated to Canadian interests, such as the post-9/11 wars in Afghanistan and Iraq. They’ve been there for us when we’ve needed them.

Canada is also part of the Five Eyes intelligence-sharing alliance, along with Australia, New Zealand, and the United Kingdom. For the last 85 years, Canadian and American intelligence agencies have shared their secrets with each other and the other Five Eyes members. If this were causing national security problems, surely these would have emerged by now.

Instead, when then-Prime Minister Justin Trudeau phoned President Trump about his first-term steel and aluminum tariffs, Trump was reduced to invoking the War of 1812. This was clearly not about the merits.

The law Trump cited for these tariffs is Section 232 of the 1962 Trade Expansion Act, which requires a national security justification for the president to enact tariffs. Citing the War of 1812 might be within the letter of that law, but it violates its spirit.

Trade deficits are another Trump bete noir and were cited to justify the Liberation Day tariffs the Supreme Court struck down. A country has a trade deficit when it imports more than it exports. Economists since Adam Smith have dismissed the balance of trade as an economic health indicator, for the same reason I am not concerned about my long-running trade deficit with my local grocery store: I get things in return for my money that I value more.

Trump’s threat to impose tariffs to prevent nearly non-existent fentanyl trafficking across the Canadian border followed the same pattern. First, Trump decided he wanted tariffs; then advisors rationalized it.

In the last few months, Trump declined to renew his own United States-Mexico-Canada Agreement (USMCA) free trade pact with Mexico and Canada, though the agreement will remain in place through 2036. He also cited forced labor as a rationale for enacting tariffs, drawing on the same Depression-era tariff that Ben Stein mocked in the 1986 Matthew Broderick movie “Ferris Bueller’s Day Off.”

This has a problem. Canada already bans forced labor. The USMCA trade agreement, which Trump negotiated, also contains provisions banning trade in goods produced with forced labor.

Add to this Trump’s continuing stream of personal insults against both Trudeau and current Prime Minister Mark Carney, such as calling them “Governor,” regular threats to make Canada America’s 51st state, and most recently his executive order renaming Lake Ontario as Lake America, and we see why Canadians are upset.

Canadians were at first shocked and betrayed that America, of all countries, out of nowhere started imposing tariffs and hurling insults across the border. Now they are angry, which risks making things even worse.

Matthew Broderick offers wisdom here, too. In the 1983 movie “WarGames,” he learned that the only way to win a nuclear war is not to play. The same is true of trade wars. Tariffs are a self-harming policy. If America wants to hurt itself with tariffs, it doesn’t make any sense for Canada to respond by hurting itself with its own tariffs. But again, this isn’t about the merits.

Even if Carney wanted to maintain his dignity in the face of Trump’s bluster, his supporters wouldn’t let him. Shock and betrayal have given way to anger, and Canadians want revenge, even if it will cost them economically.

That gets us to the current moment. Just this week, after Canada enacted a tranche of new tariffs on September 8, Trump announced a further tariff increase. One can only hope that this spat doesn’t go as far as Trump’s China trade war did in 2025, when some tariff rates briefly reached 145%.

At some point, temperatures will cool. Rebuilding the trust Americans and Canadians have shared for generations will take years, if not decades. While there are all kinds of merit-based economic and geopolitical reasons a strong US-Canada alliance matters, in the end it comes down to a simple fact: cooperation is better than conflict, and peace is better than war.

***

 Ryan Young is senior economist and director of publications at the Competitive Enterprise Institute.

More from this network:
Domains for Sale · GOTPeople.org · TheDSAPlatform · The Truth About Socialism

Donate to GOTPeople.org