CANADA IN THE CROSSHAIRS
These days, we in Canada are receiving a great deal more attention than we are used to or comfortable with, and the nature of it is somewhat disconcerting, even alarming. We are used to being envied for our consistent ranking as one of the best places on earth to live, for our stunning geography, for our multicultural society and welcoming disposition to refugees and new immigrants, and our tolerance of being teased about our tendency to apologize too much. But to be criticized and accused, almost daily, of being a bad partner and a huge burden on our southern neighbour is hard to take and is forcing us to be far more aggressive in our defense than we have ever felt necessary.
The threat by the incoming US administration to impose 25% across-the-board tariffs on its two neighbours and largest trading partners, Mexico and Canada, was not implemented on day 1 as promised, but we have been put on notice that tariffs are coming on February 1st and there may be more to come after the study on US trade policy is completed. Tariffs at the proposed level would, needless to say, devastate the Canadian economy. But it could all be avoided, we were told by the new President, if only Canada were to become a state - an idea to which our Prime Minister, reflecting the sentiment of most Canadians, responds: “Not a snowball’s chance in hell!”
One minute, the new president doesn’t need anything we produce, and the next minute he wants the lot! For the record, this imagined 51st State consists of ten provinces, each with its own government, three territories spread across an area larger than the United States with a total population of 41 million.
What is truly behind all this? Is it, as Trump has intimated, about drugs and illegal immigrants crossing our border into the US? Assuming that that might be the case, and because greater security at the border also benefits Canada, federal and provincial governments have committed significant additional resources to bolster security along the undefended 5,525-mile border between our two countries. America’s new border Tzar, Tom Homan, welcomed these measures, but the hostile message coming from President Trump, rather than abating, seems to have escalated.
So, is this mainly about the negative and “unfair” trade imbalance with Canada, and Trump’s contention that the US subsidizes Canada to the tune of $200 billion annually? It is a matter of established fact that the actual trade deficit is $45 billion, but even that does not give the true picture. Most of this figure is accounted for by the purchase of raw materials (mainly crude oil from Alberta), which then has value added in the US to the net benefit of the US economy. When the sale of services to Canadians is factored into the trade equation, the US actually shows a trade surplus with Canada.
IS IT ABOUT DEFENSE?
Some have suggested that the tariff threats represent an opening position for the re-negotiation of the free trade agreement between the US, Mexico and Canada, the USMCA (currently due for review in 2026); but when asked about this by CNN before the inauguration, the Trump-Vance team suggested that there was a link to defense spending. The $200 billion “subsidy” reference, they said, included $150 billion in costs to the US for Canada’s defense. Canada undeniably benefits from the military strength of the US for its defense but, once again, that is not the whole picture. Our joint continental defence, as I understand it, is determined by agreements within NATO and NORAD. The latter – North American Aerospace Defence Command – is certainly of great benefit to Canada, but also benefits the US, through the positioning of early warning systems in Canada’s north.
Canada faces justifiable criticism over its failure to meet NATO’s agreed 2 percent defence spending target by 2025. The Canadian government has deferred the attainment of that goal to 2032, by which time the target may have been revised upwards. Trump in the meantime is asking NATO countries to spend 5 percent on defense. There is a growing consensus in Canada that the process of attaining the NATO spending goal should be accelerated, but there is a limit to how quickly this can be done. We like to think that not everything can be measured in dollars, and that Canada’s leadership of a NATO battlegroup in Latvia, and the 150 Canadian soldiers who died fighting alongside Americans in Afghanistan, should also count.
As well as trying to find ways to avoid tariffs by addressing concerns expressed by President Trump, Canadian federal and provincial and industrial leaders have been meeting to plan concerted responses to tariffs should they come, with “nothing off the table”. Their strongest argument remains that tariffs on Canadian exports will negatively impact US consumers through higher prices.
UNCERTAINTY AT HOME
These new challenges come at a time of great political change and uncertainty in Canada itself. Prime Minister Trudeau, after almost ten years in office, has been forced to resign by a revolt within the Liberal Party, which is trailing the Conservatives by 25 points in the polls, due largely, it is said, to Trudeau’s personal unpopularity. A process to replace him is under way, with the new party leader (who will also become PM) to be chosen by a national vote of party members by March 9. The front runners are Mark Carney, former Bank of Canada and Bank of England Governor, and Chrystia Freeland, Trudeau’s former Finance Minister and Deputy PM, who led the re-negotiation of NAFTA (USMCA) during the first Trump administration. Carney, casting himself as the outsider, despite his role as an advisor to Trudeau, appears to have the greater momentum.
The day Trudeau announced his intention to resign, he also announced that Parliament would be prorogued until March 24th, to allow a new leader to be chosen. All three main opposition parties have vowed to bring down the government at the first opportunity, so we may head quickly into an election after Parliament reconvenes -- that is, unless the new Prime Minister manages to persuade at least one opposition party to support it (for instance, to pass legislation to address the impact of US tariffs). When the election comes, which must be no later than October this year, the Conservative Party is largely favoured to win. Its leader, Pierre Poilievre, has skillfully played on anti-Trudeau sentiment and particularly the unpopularity of the government’s imposition of a price on pollution in the form of a carbon tax, even though taxpayers receive a rebate that leaves most of them better off. Poilievre promises to “Axe the Tax”. Interestingly, the main contenders for the Liberal leadership are now backing away from the tax, promising to keep only the part that applies to industrial emitters. Poilievre may need to adjust his strategy.
PROVINCES FILLING THE VACUUM
While governing Liberals sort out their leadership, provincial leaders have been vocal in Canada and on U.S. airwaves. Doug Ford, Conservative Premier of Ontario, Canada’s most populous province (15m) and #1 trading partner with 19 U.S. states, has been leading the charge in proposing a strong response to the tariff threat, including the possibility of cutting off energy supplies to millions of U.S. customers. Taking a different position, Alberta’s Premier, Danielle Smith, does not want the energy products that her province sells to the U.S. to be used as a bargaining chip. A whopping 60 percent of U.S. crude oil imports (4.3 million barrels a day) comes from Alberta and a 25 percent tariff could lead to an immediate jump in U.S. gasoline prices of as much as by $0.70 per gallon. Just in the last few days, Premier Ford (Ontario) has called a snap provincial election for Feb 22, asking for a fresh mandate to meet the tariff challenge. He also knows that we Ontarians like to hedge our bets -- voting for Conservatives provincially when Liberals are in power federally, and vice versa. With the likely victory of Pierre Poilievre’s conservatives in a federal election later this year, he fancies his chances are better now than they will be later!
CANADA’S TRUMP?
Pierre Poilievre, the Canadian Conservative Party leader, who seems likely to be Prime Minister before the year is out, has often been compared to Trump, chiefly by his opponents. There are some similarities in policy if not in personality, but also significant differences. Poilievre shares some of Trump’s disdain for mainstream media and wants to defund Canada’s national broadcaster, the CBC. He strongly criticizes Trudeau for prioritizing a social agenda and virtue-signalling over pocket-book issues. Poilievre, in contrast to Trump, is a strong believer in free trade. He is firm in Canada’s support for Ukraine, deriding Putin as a tyrant bent on global conquest. On immigration, he considers the system broken, favors immigration that is helpful to the economy and that meets needs in the healthcare system. Immigration levels, he thinks, should be tied more directly to the housing supply, where there is currently a severe shortage.
Even the Liberal government has responded to these concerns by reducing projected immigration levels over the next three years. Regarding the threat of tariffs, Poilievre said in a recent interview, “I have the strength and the smarts to stand up for this country and my message to incoming President Trump is that first and foremost, Canada will never be the 51st state of the U.S… He wants a deal, and my belief is that he wants America to win. I want to show him that Canada can win at the same time.”
Do some readers remember that fifty years ago, in 1975, there was a conference held in Banff on the theme “The US and Canada – Partners in a World Task”? Maybe we can rekindle that vision of partnership, while recognizing that neither the U.S. nor Canada can take the other for granted.
Some additional facts about Canada:
90% of Canada’s 41m people live within 100 miles of the US border.
In recent years Canada has accepted approximately 450,000 immigrants annually. Targets have recently been revised downward over concerns about the strain on the housing supply.
People of South Asian origin constitute the largest visible minority in Canada and India accounts for the largest annual inflow of immigrants.
Canada has the second largest Sikh population in the world after India and the largest as a proportion of the population (2.1%).
Canada has the world’s third largest Ukrainian population after Ukraine itself and Russia.
French is the first official language spoken by 22.0% of the population. The majority of Francophones (84.1%) live in Quebec and close to 1 million live in other provinces and territories of the country.
Political Parties with number of seats in Parliament: Liberal Party (153) - leader Justin Trudeau; Conservative Party (120) – leader Pierre Poilievre; Bloc Quebecois (33) – leader Yves-François Blanchet; New Democratic Party (25); Green Party (2) – leader Elizabeth May; Independents (3).
Governor General of Canada: Mary Simon, Inuk – the first indigenous Canadian to hold the office. She was Canada's first ambassador for circumpolar affairs from 1994 to 2004 and Canadian ambassador to Denmark from 1999 to 2002. (Of note, given recent interest in Greenland).
POSTSCRIPT
I feel the heaving of a continental sigh of relief following the last-minute thirty day reprieve from tariffs on Mexico and Canada. This gives an opportunity to re-examine whether there truly is an emergency on our border with the US, as President Trump contended when invoking the International Emergency Economic Powers Act (IEEPA) - the legal pretext for imposing tariffs. An emergency, to my mind, is not established by hyperbole but by objective assessment of facts. Once the real damage inflicted on our relationship is repaired, I dare to hope that we can return to the common sense that we are one continent.
