By Jacob L. Shapiro
The United States and Canada were just selected to host the 2026 World Cup together (along with Mexico), but when it comes to trade, the two countries are miles apart. On May 31, the U.S. decided to lift Canada’s exemption from steel and aluminum tariffs. Canadian Prime Minister Justin Trudeau hit back on June 9, saying that Canada, which last year exported 83 percent of its steel and 87 percent of its aluminum to the U.S., would impose retaliatory measures by July 1. Three days later, U.S. President Donald Trump said Trudeau’s statement would cost Canada “a lot of money.” Trudeau declined to respond to Trump’s most recent comments, and the war of words seems to have ended there, at least for now.
This isn’t the first time the Trump administration has clashed with a key U.S. ally. Shortly after taking office, Trump had an unpleasant exchange with Australian Prime Minister Malcolm Turnbull over an immigration dispute, though both sides quickly patched things up. Trump’s relationship with U.K. Prime Minister Theresa May has been rocky from the start, and British police even briefly suspended intelligence sharing with American officials following last year’s Manchester bombing, citing U.S. leaks of sensitive information. Now the U.S. appears to be locking horns with its northern neighbor. But as with Australia and the U.K., the rhetorical duel with Canada is superficial, based more on political grandstanding than on a change in the bilateral relationship.
Canada is highly dependent on its relationship with the United States, especially in economic terms. Last year, 76 percent of Canadian exports went to the United States. According to Canada’s National Energy Board, a staggering 99.1 percent of Canadian crude oil exports went to the U.S. as well. A recent study by economist Trevor Tombe at the University of Calgary showed that trade with the U.S. accounted for 49 percent of the gross domestic product in Ontario – by far Canada’s most populous and wealthiest province.
The U.S. is also reliant on Canada, but to a far lesser degree. Only 18 percent of U.S. exports are destined for Canada. But for a number of states, especially those along the northern border and that import Canadian crude, U.S.-Canada trade is far more critical than it is on the national level. (Michigan, for example, derives 5 percent of its state GDP from exports to Canada.) Even so, the economic relationship between the two countries is hugely imbalanced. Whatever economic vulnerabilities the U.S. has, Canada’s are much larger.
But the relationship is not simply an economic one. The United States owes its position as the world’s sole superpower in part to the fact that it has not had to deal with security threats on its land borders for over a century. Mexico hasn’t been a serious threat to U.S. national security since the Mexican-American War of 1848. The U.S. and Canada haven’t fought a major conflict since the War of 1812, when the British still ruled over the territory north of the U.S. In World War II, Canada and the U.S. became stalwart allies, coordinating defense policy and sharing intelligence, even to this day. When U.S. military planners consider how best to organize U.S. forces, they don’t have to worry about protecting the United States from a northern enemy – and it’s difficult to put a price on that.
A Threat to U.S. National Security
This is the reason the steel and aluminum tariffs are causing such angst in Ottawa. It is not about the trade spat itself. Canada and the U.S. have trade disputes going back centuries, and disagreements are inevitable in such a close economic relationship, especially when one side has significantly more leverage than the other.
The problem for Canada is that, to be able to impose the tariffs in the first place, Trump had to claim that the existing trade model posed a threat to U.S. national security. For a country like Canada, whose foreign policy for the past 80 years can essentially be boiled down to not being a threat to U.S. national security, this stretches the bounds of credulity and politeness. Sure, the United States can argue that its increased reliance on steel and aluminum imports necessitates protectionist policies. As a result of Chinese dumping, the price of steel and aluminum has plummeted and, in the process, destroyed U.S. companies. Canada took advantage by almost doubling steel and aluminum exports to the United States in the past 17 years, when Chinese dumping kicked off in earnest.
But for Canada, the insinuation that it somehow poses a threat by exporting steel and aluminum to the United States is a ludicrous argument, one that takes for granted Canada’s contributions to the U.S.-led post-war world order. It also fails to recognize that Canada’s share in U.S. trade has dropped precipitously since 2001, when the U.S. began importing cheaper Chinese goods at much higher rates – which Canada accepted without nary a protest despite the damage done to Canadian manufacturers.
Canada doesn’t have much room for maneuver when it comes to foreign policy or trade with the United States. After World War II, aligning with the U.S. in the global conflict against the Soviet Union was a fait accompli. Canada, like the United States, is protected from most global conflicts by the Atlantic and Pacific oceans, and because the United States dwarfs Canada militarily, economically and in terms of population, Canada has few alternatives other than to follow the United States’ lead. Canada, for the most part, does this willingly and without protest – few countries are as prosperous and secure as Canada is today, and that is in no small part due to the United States. In fact, the most remarkable aspect of the United States’ relationship with Canada – and indeed with the U.K. and its English-speaking former colonies – is that it carries on inexorably, immune to the politics of the day.
That’s because politics and strategy don’t always align. Like the United States, Canada has its own political divisions, and Trudeau represents the same urban, well-educated, socially liberal segment of the population in Canada that would have voted for Hillary Clinton in the United States. (It is no coincidence that Trudeau has become something of a celebrity to American liberals in recent years.) Trudeau cannot kowtow to Trump any more than Trump can abandon the promises he made to his base. Trump scores points with his base by insulting Trudeau just as Trudeau scores points with his base by insulting Trump. Meanwhile, the U.S. needs Canada, and Canada needs the U.S., and the two go on cooperating on the issues that really matter – like co-hosting the World Cup in 2026. These realities may be overshadowed by politics at times, but that does not make them mutually exclusive.
Understanding geopolitics starts here.