How Canada Can Win a Trade War with Trump

One chestnut I remember from my time as a cadet at the Royal Military College of Canadain the ’90s comes from Sun Tzu, the Chinese military strategist credited with writing The Art of War: “Know yourself and you will win all battles.”

Sun Tzu is, of course, also known for the axiom of knowing your enemy by becoming your enemy, but at the same time he believed that, to plan for victory, knowing yourself was key. In war or in life, we may not always understand our adversary. But, since we can plan the next battle only by measuring the last, knowing yourself means taking a clear-eyed look at both your successes and your failures. Owning those shortcomings may be uncomfortable, but it can be critical to turning the next contest in your favour.

This wisdom applies to the trade war that Canada finds itself embroiled in with the United States. We may not understand why President Donald Trump is upending the global trade order or why he is being antagonistic with us, but it is a political battle we must face nonetheless. Without a deal, Trump’s transactional approach could keep Canada’s largest economic relationship in constant jeopardy. Amid the verbal barrages of the “51st state” and other taunts, Canada must respond not with rashness but with a resoluteness grounded in lessons from the past. We should take stock of where we fell short in the last tariff war with the aim of breaking this painful stalemate.

As shadow minister for foreign affairs during Justin Trudeau’s first term, I was on the political battlefield the last time Trump foisted tariffs and trade renegotiations upon us, between 2016 and 2019. I share my advice now with the full knowledge that I am only an armchair general on the sidelines, but I am a patriot first and a partisan second.

To begin, I believe that Prime Minister Mark Carney has learned from the last trade war. Gone is the virtue-signalling. The Trudeau government’s progressive trade agenda, which centred climate change and gender—topics the president and the US trade representative have scarce interest in—has been set aside. As before, the Trump administration wants to talk turkey on China, critical commodities, energy, and military capacity. This time, we’re meeting them on their terms, and we hold a strong hand on most of those priorities.

Gone, too, is our former prime minister’s habit of publicly contrasting his government’s image with Trump’s. Seven years ago, Canadian speeches in the US were laced with veiled criticisms of the president. That set an antagonistic tone when common cause was needed. This time, the prime minister is serious and respectful at sit-downs with Trump and in the surrounding media coverage. He also shows principled resolve when necessary. This is critical to keeping negotiations brass-tacks and issue-driven rather than being distracted by emotion or animus.

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The prime minister has also sent a strong message that Canada no longer intends to be the free rider on national defence and global security (we consistently spend well below NATO’s target of 2 percent of GDP on defence and rely heavily on the US and NATO for broader military guarantees). In his ten days as the new prime minister before calling the 2025 election, Carney took just three official trips: Paris, London, and Iqaluit. This set a tone that our allies have not seen since the war in Afghanistan ended. Long before we became the North American wingman for the US in NORAD, Canada was a reliable partner to the United Kingdom and Europe (we fought in both world wars and were a founding NATO member).

Quick visits to both capitals signalled Canada’s intent to be a reliable partner again. The stop in Iqaluit underscored a renewed seriousness about domestic defence and Arctic sovereignty. Together, these seemingly small gestures sent big signals to the US and NATO allies.

While the Carney government has clearly absorbed some lessons from the last trade war, I’d like to offer advice that I believe could help us make real gains. The first is to acknowledge, up front, that any deal Canada will achieve with the Trump administration will have some degree of tariffs applied to it. There was never going to be a deal without tariffs. We must be serious and recognize that Trump has been speaking about the use of tariffs for over forty years. The president will need to show that he was “right” even if his use of tariffs reveals an outdated view toward global trade. Not only does Trump view tariffs as serving US interests, but he sees them as an important source of revenue at a time when the nation’s debt is rising. The US has already brought in over $100 billion in tariff revenues, and the president is counting on more over the rest of his term in office.

If Canada will face some level of tariffs, our strategy must be to try to secure the lowest general tariff level possible while fighting hard to justify key industry tariff carve-outs or exemptions. We must seek continued exemptions under the existing CUSMA, but we also need to approach every negotiation through a security lens, evaluating trade decisions not just on economic terms but on how they affect the safety, stability, and resilience of both countries. That includes energy security, food security, and supply chain security for industries like shipbuilding and defence. In each of these areas, we should push for carve-outs or lower tariffs, emphasizing that they are vital to the economic and strategic security of both the United States and Canada. US policy makers—Republicans and Democrats alike—regularly link trade and security, so we should capitalize on the fact that Canada is the United States’ only homeland security partner in the Arctic and a core ally through NORAD. We should also stress that Canada is uniquely positioned to help the US build more ships, aircraft, and armoured vehicles, restoring its military procurement capacity quickly and cost-effectively.

It is also critical that the government recognize the psychological dimension at play. This holds true in settings from the schoolyard to the boardroom to the White House. Knowing how your counterpart thinks—and using that insight—should be a deliberate part of your strategy. With this in mind, we must recognize that Trump will want to declare a special “win” from the negotiations with Canada that he can emphasize to the media and his political base. This has been the case in recent deals with Japan and the European Union. Both have committed to liquefied natural gas investments and the purchase of military equipment. To Trump, this is showing he is bringing money and jobs to the US.

With this in mind, our strategy must be to present negotiation options that provide a win to the US but also a win for Canada. Ballistic Missile Defence—now called the Golden Dome—is an obvious choice. BMD has been an American priority since Barack Obama’s administration, but Canada has always refused to participate despite our NORAD relationship. Support for BMD would be an expensive item for Canada that the president could make waves about, but it would also be in our national interest. We need a full seat at the table or we risk the US making northern defence decisions without us. North American defence must not become a conversation we’re left out of. The US and some allies still reject our claim that the Northwest Passage is a Canadian waterway. Every Arctic asset we have today was built in partnership with the US, and we should preserve some degree of cooperation as we build up capacity to stand on our own.

A renewed Keystone XL pipeline to the United States is also a strong contender for a win we can offer the president. To begin, it would be a way to deal with the psychological aspect of Trump that the Trudeau government simply did not get. Keystone is the only policy Trump mentioned when Trudeau flew down to Mar-a-Lago. It is partly political: Obama cancelled it, Trump reversed, then Biden reversed. It is also strategic, because US refineries need the feed stock of Canadian oil for at least the next fifteen to twenty years. A pipeline expedited and paid for by Canada could even be a victory for Canada if we can leverage the energy security—or a North American Energy Security Pact—as something that can lead the president to allow better terms for sectors like manufacturing, steel, and aluminum.

We are in the final stage of negotiations with the United States, and we must hold the line. Court challenges to some of the emergency tariffs the president has imposed may be struck down in the coming months. Inflationary pressures and supply chain challenges are just starting to be felt in the United States, so the Trump administration may soon feel the pressure for trade deals to be concluded almost as much as Canada does. All of this means that, while the pressure is greater on Canada, there is pressure on the US too. Let’s not forget this as we hold our resolve for a fair deal in the final stretch.

Adapted from “Lessons from the Trade War” by Erin O’Toole (Substack). Reprinted with permission of the author.