Canada–U.S. Trade War, CUSMA and What Comes Next
In this week's special edition of the MBP Intelligence Briefing, Ben Woodfinden is joined by Diamond Isinger, trade expert, policy strategist and Fellow at the UBC School of Public Policy and Global Affairs, along with Ken Boessenkool and Tyler Meredith, for an in-depth discussion of the escalating Canada–U.S. trade war following the collapse of negotiations with the Trump administration.
The panel begins with Prime Minister Carney’s decision to suspend negotiations and walk away from a potential agreement rather than accept significant last-minute U.S. demands. With new Section 338 tariffs now in effect and Canada preparing dollar-for-dollar retaliation, they examine what went wrong at the negotiating table, whether the United States remains a credible negotiating partner, and why the current trade fight could become a prolonged conflict.
The conversation then turns to the future of CUSMA and whether the agreement still offers Canada meaningful protection as the United States increasingly acts outside its existing trade commitments. They discuss how Canada should retaliate, what support affected businesses and workers may need, and why trade diversification and new international investment relationships are becoming increasingly important.
Finally, the panel considers the broader implications for Canadian sovereignty. If Washington is seeking to restrict Canada’s ability to negotiate trade agreements with other countries, they argue, the dispute is no longer simply about tariffs—it raises fundamental questions about Canada’s economic independence and its ability to pursue its own relationships around the world.
In this episode, they discuss:
- Why Prime Minister Carney walked away from the latest Canada–U.S. trade negotiations.
- Whether last-minute U.S. demands reveal a deeper problem with Washington as a negotiating partner.
- What the new Section 338 tariffs and Canada’s planned retaliation mean for the escalating trade war.
- Whether CUSMA still provides Canada with meaningful protection and preferential access to the U.S. market.
- How Canada can design targeted tariff and non-tariff retaliation that creates political and economic pressure in the United States.
- What support Canadian businesses and workers may need if the trade war becomes prolonged.
- Why trade diversification and new investment relationships are becoming increasingly important.
- What potential U.S. restrictions on Canada’s relationships with other trading partners could mean for Canadian sovereignty.
On the Collapse of Canada–U.S. Trade Talks
- Isinger: Walking away was preferable to accepting a poor agreement, particularly when the proposed terms could have created serious problems for Canadian industries operating on thin margins.
- Woodfinden: The last-minute U.S. demands involving autos, Canadian cultural policy and Canada’s ability to negotiate with other countries raise questions about what changed during the final days of negotiations.
- Boessenkool: The way new demands emerged late in the process raises a larger question about whether the United States can currently be treated as a credible negotiating partner.
- Meredith: Canada maintained an important negotiating principle throughout the process: nothing was agreed until everything was agreed, leaving it able to walk away when the final package became unacceptable.
On CUSMA and the Future of Free Trade
- Isinger: CUSMA still provides practical benefits to compliant exporters, but Canada needs to question how much political energy it should spend defending an agreement the United States increasingly appears unwilling to respect.
- Boessenkool: CUSMA continues to have value because compliant Canadian goods can still receive preferential treatment, making compliance worthwhile for businesses.
- Meredith: U.S. sectoral tariffs and unilateral changes are already undermining some of CUSMA’s core benefits and forcing Canada to reconsider how much it invests in defending the agreement.
- Isinger: If the United States ultimately abandons CUSMA in practice, Canada may need to rely more heavily on international trading mechanisms and redirect its attention elsewhere.
On Canada’s Response and Retaliation
- Isinger: Canada should respond forcefully but proportionately, with dollar-for-dollar retaliation rather than deliberately escalating beyond the value of U.S. measures.
- Meredith: Canada’s response does not necessarily need to consist entirely of matching tariffs and could combine targeted tariffs with other economic measures.
- Isinger: Strategically selected products can create localized economic and political consequences in the United States, encouraging affected businesses and communities to pressure Washington.
- Meredith: Canada’s experience with earlier retaliation shows how targeting specific American products can create direct feedback from U.S. businesses into Washington.
On Supporting Canadian Workers and Businesses
- Isinger: Governments need to distinguish between temporary support that bridges businesses through the trade war and permanent subsidies for industries already facing deeper structural challenges.
- Meredith: Businesses that have faced tariffs for an extended period may need grants, contributions or other forms of concessional capital rather than simply taking on additional government-backed debt.
- Meredith: Newly affected sectors may benefit more from liquidity support because their exposure to the trade fight is newer and potentially temporary.
- Meredith: Worker supports should focus on maintaining employment relationships where possible rather than waiting until workers become unemployed.
On Trade Diversification and Canada’s Economic Strategy
- Isinger: Trade diversification is necessarily a long-term project, but the current crisis has dramatically accelerated efforts that previously might have taken years or decades.
- Isinger: Canada also needs to consider the role of foreign direct investment as it looks for new sources of capital and economic growth outside its traditional reliance on the United States.
- Isinger: Canada should continue building relationships across the United States beyond the White House, including with governors, political leaders, businesses and other constituencies.
- Meredith: Canada needs to reconsider how much economic and political capital it devotes to maintaining the United States as its preferential trading relationship relative to opportunities in other markets.
On Trade and Canadian Sovereignty
- Woodfinden: If the United States sought the power to constrain Canada’s future trade agreements, the dispute would extend beyond tariffs into fundamental questions about Canada’s ability to conduct an independent economic and foreign policy.
- Isinger: Restrictions on Canada’s relationships with third countries should not be viewed solely through the lens of China and would conflict directly with Canada’s broader strategy of diversifying its global relationships.
- Isinger: Canada may not be able to match the United States individually, but cooperation with other middle powers can give Canada significantly greater economic and geopolitical leverage.
- Isinger: Canada must continue pushing back against American misunderstandings about the country and defending its ability to make independent decisions about its economy and international relationships.
YouTube Video Credits: CBC News, CTV News, Global News, 4K Films By Adnan, Videoscape, Pierre Poilievre, balcony et-al, Luis Vega, Shape Properties, GommeBlog, Exploring Stunning Landscapes From Above, Motion Array