Canada’s Pearl Harbour – OpEd

‘The only thing to fear, is fear itself’. — FDR

The November 2024 election of Donald Trump has set in motion a sea change in international relations around the world. This has been done not by nailing radical new religious theses on wooden church doors like Luther or implementing the post-World War 2 Marshall Plan to save Europe from Stalin and the menace of Communism. On August 1 2025, or so-called ‘Emancipation Day’, the sitting American President enumerated an extensive number of trade tariffs on nations setting off alarm bells in many capitals. Throughout the first year of the second Trump four-year mandate, bellicose talk of tariffs on goods has made its way into the news and lives of practically everyone on the planet. 

Canada is a long-standing political ally and a key indisputable economic partner of the United States. Both countries are intricately linked through the Canada-United States-Mexico trade agreement (CUSMA). ‘Emancipation Day’ hit Canada especially hard with tariffs on agricultural and industrial sectors. World powers stagger under the weight of economic tariffs as they collide with the patchwork of traditional trade links and pathways established under the freer trade regime. The previous calculus based on the avoidance of economic protectionism now reveals itself inadequate to explain in the tariff world how this policy can assist in pursuit of the ‘Make America Great Again’ slogan and where it may take the world next.

Once a star in the free trade movement, Canada, in an instant, became a central victim of trade protectionism. The country was totally unprepared for the advent of this strict tariff regime, its leaders having wrongly assumed that the mantra of free trade would win over even the most parochial of leaders. Canadian leaders lulled their people into a false sense of security. Poor preparation, surprise mixed with dismay and an abiding sense of rights denied characterize how most Canadians are feeling after months of tariffs. 

Replacing PM Trudeau with Mark Carney may have soothed the US President’s ego but it has yet to produce any economic deal. Upon assuming office, the Carney government started by levying a series of counter tariffs against the Americans and played the nationalist card by boycotting some US products like bourbon and helping mobilize a popular boycott of US products in grocery stores. 

More recently, Canada has lifted some of the retaliatory tariffs including the removal of the digital sales tax. Carney’s new softer strategy may be to make a few concessions before the major CUSMA renewal negotiations as the country attempts to find an exit strategy from the American protectionist straight-jacket. CUSMA is up for revision in 2026 before the mid-term elections in November of that year. Banking on Trump’s fear of a Democrat Party revival and possible taking of majority control of Congress make this strategy highly doubtful. There is no reason to believe Trump will be any more conciliatory as the mid-term electoral challenges approach. Any Democrat surge in the polls up to the November mid-terms may even provoke a worse MAGA reaction fearing possible defeat. Trump boxed into a corner is no less volatile and dangerous to Canadian interests. In the meantime, Carney’s early ‘elbows up’ strategy appears to have stalled.

The Carney Gambit

A different interpretation of these events posits that Trump’s tariff policy is triggering a Canadian industrial and political renaissance by having this northern resource-rich giant turn inwards to maximize domestic demand using local steel, aluminum and minerals to spawn its own industrial expansion. In a word, the imposition of tariffs might have simply multiplied the value of such scarce resources with massive returns to their owners. Trump’s tariffs are a major reason why there is bipartisan support for Canada to diversify the quality and number of its trading partners. This was already the policy direction of the Justin Trudeau era before the tariff regime. Putting these calculations together, one slowly perceives an image of economic prosperity with a corresponding increase in the power of its international political clout.

This is the ‘positive’ vision for Canada’s future. In attempting to negate certain foreign industrial and agricultural imports, Trump may have triggered an immediate free trade response. On this view, the Canadian economy can be characterized as a slippery duck and a moving target that has had to change its orientation to either avoid tariffs or profit from retaliatory tariffs. What comes out at the other end though, might surprise many.

In response to the tariff imbroglio, the new Mark Carney Liberal government in Ottawa has raised the issue of interprovincial trade as a possible antidote to American protectionism. For example, if Trump insists on exorbitant levies against Canadian steel and aluminum, why not use these resources for domestic infrastructure projects sharing contracts between different provinces? These industrial materials could be used in the defence sector to deflect longstanding Trump and NATO complaints that Canada has yet to meet its defence spending targets. Interprovincial trade could help address the defence spending issue while, at the same time, build Canadian domestic industry and agriculture.

Domestic Obstacles to Prosperity

Although Canada has an ace in the hole with its massive resources and their new enhanced value thanks to the tariffs (one has only to think of copper and potash), clear sailing does not appear to be in Canada’s DNA. Our pessimism is based on the essential historical contradiction between the central power and provincial or state power. Past talk of resource management and ownership necessarily involves raising the Constitution. The 1867 act of Confederation, a business deal arranged between English and French Canadians in Upper and Lower Canada respectively, did nothing to fix permanently this difficulty, which has only grown in time as the country’s economy and international status increased. Indeed, even the French and English founders of Canada, and their descendants, cannot agree on matters of culture, language and immigration. Both Québec and Alberta are under a referendum watch to ultimately decide their political fate; that is, in or out of the federal union.

The issue of inadequate interprovincial commerce has been knocked around by many governments for years. Little has been done and there are a number of reasons why. The first obstacle is differing trade objectives and interests. While Ontario is deeply committed to the automotive industry using the 2019 re-negotiated tripartite commercial agreement between Canada-U.S.-Mexico Agreement (CUSMA), Alberta is an oil producer. Saskatchewan produces potash and canola. British Columbia, Ontario, Québec and the Maritimes export softwood lumber, a heavily tariffed product lying outside the purview of CUSMA. In negotiations with the Americans, these differences can be used to play one province off against another or they can be used against America as retaliatory tariffs on goods necessary to the US economy like potash, gas and oil, aluminum and other materials. 

Accordingly, each province and region has a different conception of its own interests. This does not prevent a unified Canadian position on the imposition of tariffs, but it does make managing expectations difficult given the phantasmagoria of economic and political interests. In order to please the United States and Ontario, the Canadian government slapped a huge tariff on Chinese electric vehicles. It reflects the choice of Ottawa to prioritize the auto sector to Ontario’s advantage. China responded with a huge tariff on Canadian canola to retaliate. Canola farmers in the West are outraged that the cost of defending the Canadian and Ontario economies is canola farming, which has only one main market – China. Thus, the old Central Canada versus the West paradigm, rears its ugly head complicating the Canadian response to Trump and giving him extra leverage prior to CUSMA 3 talks.

Canadian politicians have long talked about economic diversification of overseas markets. Market diversification is the second Canadian response to the tariff crisis of the same importance as interprovincial trade and national infrastructure projects in defence. Instead of the steel leaving for American markets, it will be used in defence and infrastructure projects at home profiting the domestic industry and its unions and workers. In terms of scale, these projects, subject to environmental and First Nations review, will attempt to fill the yawning gap created by the tariffs. 

All this will take time. It will take time to increase interprovincial trade and replace industrial exports to the United States with other foreign markets. So far, interprovincial trade is fast out of the gates. Some Market diversification has taken place as the LNG pipeline to the BC coast has already begun shipping resources to Asia. 

‘Emancipation Day’ or Tariff Day will go down in history as Canada’s own Pearl Harbour when America’s closest neighbour and ally was deliberately attacked by a legion of irrational MAGA tariffs. Investment has disappeared from sight. Stock markets cringe. Agricultural imports like canola have been gutted by the perceived need to cater to American automotive interests and the Province of Ontario. 

Carney intends on negotiating with Trump who, he hopes, will be indulgent by not demanding too many concessions in a CUSMA 3. Many observe that this speculation has not materialized even if PM Carney’s government has removed the threat of a digital sales tax. No reciprocal concessions have been forthcoming.

If we take the 1941 Pearl Harbour analogy, Japanese war planners were hoping to force the Americans to negotiate. Canada’s is in n trade war, not military. Yet, to negotiate under these unfavourable tariff conditions and confusion may spell the end of Canadian economic independence and becoming in every way a 51st American state. They have the big stick and use it liberally.

At Pearl Harbour, the Japanese sought to eliminate the US Pacific fleet in one fell swoop. Significant damage was done. However, the damage was not complete, and left the American aircraft carriers intact. In a parallel vein, Trump tariffs are far from absolute in either their conception or delivery. They ignore the human element that seeks to navigate around them as the new tariff regime increases red tape and general confusion in the business sector. Given time, determination and steady but crafty leadership from Ottawa, Carney’s dream may take hold as the country uses its own vast limitless resources (oil and gas, rare minerals, lumber etc) to rise like a Phoenix from the ashes as a major G7 industrial, agricultural and military power of the 21st century.

A historical precedent? In the solemn words of the ‘émminence grise’ of Pearl Harbour, Admiral Isoroku Yamamoto, upon analysis of the outcome of that dastardly attack in the Hawaiian islands, lamented:

I fear all we have done is to awaken a sleeping giant and fill him with a terrible resolve.