The latest salvo in Canada and the United States’ escalating trade war — a declaration that Lake Ontario is now Lake America — is upsetting but unfortunately not surprising.
President Donald Trump has long brought a reality TV-type showmanship to the business of running government. And during his second term in particular, he has shown a vindictive side.
So it must have been foreseeable to Prime Minister Mark Carney that last week’s aborted trade talks could quickly spiral.
This does not mean Carney was wrong to walk away from the negotiating table. That was the right decision when talks hit an impasse. But some of his subsequent actions raise concerns.
In response to a reporter’s question, Carney said Canada was at war with the United States. “You’re at war when you get attacked; we got attacked,” he said.
He suspended trade talks, withdrew Canada’s negotiators from Washington, and announced retaliatory tariffs on about $28-billion of goods.
Many commentators have said retaliation is the right move. They have likened Canada’s negotiations with the United States to a game of “repeated prisoner’s dilemma.”
In this textbook game theory model, two parties do best when they both cooperate (as they do with trade). But if one side refuses to cooperate, the best course of action for the other side is to stop cooperating as well.
Under this logic, it is reasonable to impose dollar-for-dollar retaliatory tariffs, as Canada plans to do beginning Sept. 8.
The problem with this framework, though, is it assumes the parties are evenly matched in the costs they can inflict when they choose non-cooperation.
In Canada’s situation, this is unfortunately not the case. This makes a different strategic concept — one known as “escalation dominance” — more relevant. Under this concept, the party that has the greater ability to withstand escalation is the only one that should escalate.
We saw a version of this play out in the United States’ trade negotiations with China last year.
The Trump administration announced tariffs of 10 per cent on Chinese imports. China responded with retaliatory tariffs of its own, and the United States raised rates once again.
However, after China expanded export controls on rare earth minerals essential to American military and tech production, the Trump administration backed down. It paused planned tariff hikes in exchange for China suspending those controls.
Put simply, China held escalation dominance over the United States and, crucially, was prepared to use it.
At present, the same cannot be said for Canada. While the United States relies on Canadian oil, potash and electricity, both Carney and Alberta and Saskatchewan’s premiers have opposed using these exports as leverage in negotiations.
So, where does this leave us?
It means we should de-escalate — not further up the ante. While doing the latter may feel satisfying, it ultimately hurts Canadian consumers, businesses and workers — especially those who cannot afford a costly war of words.
So we are encouraged that Carney reportedly told Liberal MPs late this week to avoid further escalating tensions or provoking the Trump administration.
We would also like to see Carney bring Canadians along in understanding that we are in a new world trading order.
U.S. Trade Representative Jamieson Greer made this point repeatedly in an interview with CBC’s Rosemary Barton this week, noting the United States is pursuing a global trade policy — of which Canada is merely a part.
In this changed world, it is not helpful to necessarily view trade demands as an attack on our sovereignty. Rather, it is incumbent on Canadian leadership to try to seek the best deal possible in the circumstances.
And we should — as Carney is doing — try to diversify and reduce our reliance on the United States. But while we do that, we must temper our expectations about what it is possible to achieve with the United States.
Under this Trump administration, maintaining the status quo is clearly not an option. Therefore, pushing for imperfect but relatively favourable trade terms may be the best course of action.
We hope the coming weeks show our leaders displaying cool reserve, while making best efforts to get our negotiators back to Washington and the negotiations back on track.
Canadian livelihoods depend on it.
I disagree with the editorial. It assumes that both parties are willing to negotiate and are open to a win win deal. As we know, with Trump, it is all about his win. It also assumes this is about a trade deal. Trump has made a direct attack on our sovereignty in much of his ask and Carney is right to have stepped away. Time to work with partners who respect and will actually work with Canada. Spend no more time on Trump!!!
I agree,we should temper our expectations,as we are going to have to deal with much greater geopolitical entities in the future.
I agree that we should not get too carried away with trying to escalate the tensions. But I don’t see how any reasonable deal can ever be reached with this fascist GOP regime. So I guess the only hope is to wait out the next 2 years and hope for a return to some semblance of sanity in Washington.
Your editorial has got this moment in history exactly wrong! It may have been appropriate for Canada to negotiate with the U.S. in order to bring these illegal tariffs down, but it was right for Carney to pull out of the talks when it became clear that, no matter what concessions Canada made, that some level of illegal tariffs were going to stay. In that case, any agreement we make basically solidifies the U.S. violation of CUSMA. It would, in fact, be an admission of surrender to the American overturning of that trade agreement, and that would permanently disadvantage our country in any future trade talks with our American counterparts irrespective of who is President. Much better, as Carney has done, to pull out of talks and let the mid-terms further weaken President Trump’s political power. You don’t seem to realize that the overwhelming consensus behind Carney, something almost unheard of in democracies these days, is a leverage point against a fatally divided America. I believe that the editorial staff should seriously reconsider their position on this issue.
Absolutely agree with you PMCarney was Absolutely correct read the room,read the polls his and Trump tissue paper presidency
To make this argument, you would have needed at least a few of these things called numbers, along with fewer bunkumized generalities like “bring Canadians along”. If making trips to sign new trade deals every couple of weeks isn’t enough, along with the measured responses to the actual fact of threats to our sovereignty, what level of reasonableness are you championing. Maybe full on retreat and kneeling in obeisance like every predecessor in the job from Diefenbaker and the Avro Arrow to Trudeau fils and Trumpty Dumpty’s border security lies. That kind of reasonable? May I suggest that you read the entry for Malignant Narcissism in the current edition of the Diagnostic and Statistical Manual of Mental Disorders (DSM) from the American Psychiatric Association and apply the insight thus gained, I hope.
You have to deal directly with us type of narcissism to really appreciate how expert these people are at manipulating. Dealing with them means matching (confronting) them and then walk away. PM Carney knows this and that is exactly what is doing.
The trouble is, we cannot trust the Trump administration. Let’s accept the fact that we will not be able to reach a binding agreement with these people. Having said that, I wish to remind all of us Canadians that it is not just the Trump administration. The Biden administration also used tariff against us. It is the American playbook; not just a Republican or Democrat one.
We have been too lazy with our trade. And we have become too reliant on the Americans for our defence and have destroyed our own defence industries as a result. Never again. It is long overdue that we expand our options on whom we can trade with and rebuild our defence industries. Carney is leading us down the right track. We should never lock ourselves into an unequal and subservient relationship.
Why are we overly concerned with our retaliations anyway? It’s not like the US can replace the oil from Alberta any time soon. Venezuela cannot ramp up their oil production in the near future. The US’s oil imports from Canada is the only reason they have a trade (in goods only) deficit with us. We are putting tariffs on productions we can easily source somewhere else, and we must. We have alternatives. The Americans don’t.
I suspect the reason we are not putting an export tax on our oil and potash exports to the States is they supply us with refined petroleum products. They can really hurt Canada if they out an export tax of their own on the gasoline and diesel they ship to Canada, especially in Ontario and Quebec. Why has this editorial board overlooked this strategic issue. Noone has even raised our lack of sufficient refining capacity as critical strategic issue. We cannot afford to do what China did.
We put all our eggs in one basket!
I believe this editorial misses the bigger issue: you can’t have meaningful free trade without a trustworthy partner, and Canada’s dependence on the U.S. is partly the result of decades of poor choices.
For more than 30 years, our political leaders and captains of industry took the easy way out. We became overwhelmingly dependent on the American market instead of developing meaningful alternatives. We put all our eggs in one basket, and now we are paying the price.
I’m not suggesting Canada should rush into a trade war. We should negotiate calmly and strategically and use whatever leverage we have. But de-escalation cannot mean continually backing down while the rules of trade are rewritten.
The real answer is diversification. We need to invest in the infrastructure and relationships that allow Canadian products to reach markets around the world, rather than continuing to depend so heavily on one increasingly unpredictable partner.
We should continue to work with the United States, but we need to recognize that the old assumptions about our trading relationship no longer hold.
We made the mistake of putting all our eggs in one basket. It’s time we built another.
the liberals can’t seem to get a deal done so vote them out.
Trump is, put simply, a bully. When you capitulate to a bully, he will keep bullying, because it gets him what he wants. The only way to make him back down is to stand up for yourself and fight. In the lead-up to World War 2, Neville, Lord Chamberlain believed that Britain could negotiate peacefully with Hitler, despite diplomats sending in reports of military build-up in Danzig. The ‘we must negotiate’ mindset continued, right up until Poland was officially invaded. Like Hitler, Trump is a megalomaniacal sociopath whose ‘agreements’ are worth less than the paper they are written on. He has already violated terms of CUSMA, a deal he, himself agreed to.
Enough is enough.
I think the expression is, “Don’t poke the bear.” After what has happened in Venezuela and Iran, I think we must realize that this government is capable of all kinds of outlaw acts, nationally and internationally. I wonder if Trump is trying to push Canada into some act that he can claim makes us an enemy of the USA, and worthy of invasion. That long border is fine when we are friends but when we are enemies, watch out!
You cannot deescalate, negotiate or anything else with a rogue Band of Mobsters. Let’s just look at it like it is…they want to own us, take our resources and destroy our Economy, Healthcare and any other decent thing we own. Take a look at Venezuela, it’s a perfect example of what could happen to us. Trump officials are already throwing around the words “invade”.
We need to be prepared and this article is not addressing what needs to be done to save us. Canadians need to do their part to help Mark Carney…buy Canadian, support our Leader and be willing to sacrifice for the good of our future!…2 years from now we will look very different in a good way.
I agree that we should stop the childish rants. However, the US has a clear motive and it is to get our assets along withour sovereignty. If you listen to independent media, the US makes this very clear. We should not take this lightly.