The Topline
- US President Donald Trump imposed 25 per cent tariffs on Canadian imports in February and increased those tariffs to 35 per cent in August
- Ottawa has since diversified trade beyond the U.S., ramped up defence spending, and invested in infrastructure that will connect Canada to Europe and Asia
A much-needed kick in the pants
Trump’s unprovoked tariff tantrums were designed to make Canada buckle. Or so we assume. We don’t know what’s going on inside that head.
But rather than cave in, Canada went, well, elbow’s up , finally breaking its overreliance on the U.S. and becoming more independent. As Lawrence Martin writes in the Globe and Mail, “The Canadianization is happening on many levels. We’ve never seen anything like it.”
Trade diversification is no longer the strategic plan Ottawa had been slow-rolling for decades, but an urgent and much-needed pivot. Canadian exporters responded by expanding their reach , increasing sales to markets like Singapore, Italy, Germany and Australia, among others. Last week, Ottawa announced a pact to provide Germany with liquefied gas and critical minerals. The UK recently overtook China as Canada’s second-biggest export market.
It’s also forced a shift in the nation’s military thinking, pivoting from peacekeeper to defender. Ottawa injected $9.3 billion into defence for the 2025–26 fiscal year, ensuring Canada hits NATO’s 2 per cent of GDP benchmark this year – five years earlier than initially planned.
These aren’t just numbers, either. This is about substantive self-sufficiency. Investments span new submarines, aircraft, drones, Arctic sensors, and more active infrastructure to secure Canada’s sovereignty, rather than relying on the maniacal elephant down south.
Then, of course, there’s the show of national unity that Trump’s trade war, plus annexation threats, have generated across the country. Depending on your political affiliation, we avoided an inexperienced party leader as prime minister, partly due to Trump’s trade war.
But the effects are more economic – Canadians are ditching U.S. travel and choosing to explore their own country instead. Same with products at the consumer level. And in a delicious ironic twist, Americans are spending more time and money north of the border even as Canadians stay closer to home.
So what?
Trump’s bully tactics have given Canada the shake it had been needing for years. He helped turn a national complacency and a lazy reliance on the U.S. into sparks of ambition – recalibrating trade, ramping up defence, and prioritizing other alliances, all on its own terms.
A slow-release poison pill
Tariffs aren’t theoretical – t hey raise costs across the board , and tank the Canadian dollar in the process. You know why Americans are spending more time and money in Canada these days? Because the dollar has been weakened.
Manufacturers face higher input costs, and those costs trickle down to everyday Canadians. As a result, Canada could be pushed toward recession, with thousands of jobs on the line . We’re already seeing wage increases stagnate.
Industries reliant on U.S. supply chains are particularly exposed , including autos, steel, and aluminum have already taken a hit. Canada’s second quarter GDP shrunk by nearly two per cent . Exports are down 7.5 per cent, while vehicle shipments plunging nearly 25 per cent. That’s not good! Total exports are slightly up, tariff-heavy sectors are underperforming significantly, and that’s not a great sign of things to come over the next few years.
Meanwhile, pivoting trade with Europe or Asia isn't quick or cheap. Supply chains, shipping routes, and new deals take years, if not decades, to build. Meanwhile, Canada’s biggest trade partner, the good ol’ U-S-of-A, has outsized impact on our economy for the foreseeable future.
Trump and Co. know this. They are banking on it. Is it to secure a better deal – better than the one Trump himself signed ? Or is it something more nefarious, to actually annex the country ?
At this point, it doesn’t really matter. The economy is slowing in the short-term and it could get a lot worse if something doesn’t change. Canada is not necessarily in an optimal position.
If the world’s largest economy can weaponize tariffs at will, what’s to stop them from doing so in perpetuity – especially if a MAGA autocracy remains in place? It sets a new normal, and could be deeply problematic for a mid-sized, trade-dependent country. It’s frankly existential.
So what?
Trump has shoved Canada into survival mode. Nationalist pride and military swagger has its benefits, sure, but life in Canada is likely to get a lot more expensive. Trade diversification is less a choice than a pressurized reaction, and as a result, the foundation this country is built on, for better or worse, has been eroded, and is now vulnerable to external shocks to the system.
