To say that our trade war with Canada is stupid is being unkind to the word “stupid.”

Why are we doing this? 

That is an excellent question without an excellent answer.

It seems to be mostly to give Donald Trump the chance to embarrass and bully a neighbor. Trump has, of course, long wanted Canada to become the “51st” state (a Constitutional impossibility) in part (I read recently) so that the United States would “look bigger” on a map. With Canada, the United States would be the second biggest country after Russia.

I can’t prove that that’s true.

But it feels like it’s true.

Regardless, let’s set up the context. The United States–Mexico–Canada Agreement, which was Trump’s replacement for the North American Free Trade Agreement, requires among other things that the agreement be renegotiated six years after its July 1, 2020 signing. That would have been July 1 of 2026. Canada and Mexico were willing to extend USMCA; the United States was not. 

Separately, Trump threatened to impose 50% tariffs on Canada because (he claimed) Canada had discriminated against the United States with respect to autos, alcohol and dairy. Canada has imposed some tariffs on the United States mostly in retaliation for tariffs that the United States earlier earlier in the Trump administration. So, the two countries’ representatives had been increasingly intensifying negotiations since July to work this stuff out.

It looked like it was worked out until the United States, in last minute maneuvers, added a bunch of new items to the equation.

• First, we essentially demanded veto power over the kind of trade agreements Canada could make with other countries.
• Second, we demanded changes in French-language & cultural protections, and specifically Canada’s Online Streaming Act and Canadian-content regime which can require streaming services like Netflix and Amazon to contribute money toward Canadian content.
• Finally, the United States refused to include medium- and heavy-duty trucks as part of he tariff relief.

The first two items here (especially the first) really have to do with questions of Canadian sovereignty. I don’t know what genius on the American team really thought that the Canadians were going to give them a veto power over agreements they might make with other countries.

The Canadians also objected to the United States team bringing these other issues in at the last minute when most everything had already been decided.

And now here we are, in the stupidest trade war of all time. Just remember that (using 2024, which is a good pre-trade-war baseline) total two-way trade was about $917.4 billion. The U.S. exported nearly $441 billion in goods and services to Canada and imported roughly $477 billion from Canada.

Canada is going to turn more and more to other trading partners. They are already turning to the European Union, and the EU in turn is turning towards Canada. The EU is, of course, the second largest economy after the USA. Canada is also going to turn to the United Kingdom and China. And also a bunch of other countries.

And we’re going to find ourselves more and more isolated. Thanks, Great American Dealmaker.