Winning by Not Engaging: Responding to a US Trade War

History Of Canada-US Trade Relations

The trade relationship between Canada and the United States has always been complicated. We’re each other’s biggest trading partners, which sounds great on paper, but it comes with its share of headaches. The North American Free Trade Agreement, or NAFTA, was supposed to smooth out some of those bumps when it came into force in 1994. It created one of the largest free-trade zones in the world, including Mexico, and was designed to boost economic growth and make trade easier. For Canada, it opened up opportunities in sectors like manufacturing, agriculture, and energy by reducing or eliminating tariffs. At the same time, though, it came with a few catches. The US is a tough neighbour to deal with, and they’ve always been quick to flex their economic muscle when it suits them.

NAFTA worked reasonably well for a couple of decades, but it was never without its critics. Some industries in Canada felt the heat, especially manufacturing, as jobs moved to places like Mexico where labour costs were lower. There was also the softwood lumber dispute, which has been a thorn in the side of Canada-US trade for what feels like forever. Even with NAFTA in place, the US kept imposing tariffs on Canadian lumber, claiming unfair subsidies. Canada would win disputes in trade courts, but the US would find ways to drag it out or ignore the rulings. It’s a classic example of how trade agreements don’t always prevent disputes when one side decides to play dirty.

Fast forward to 2018, and NAFTA was replaced by the United States-Mexico-Canada Agreement, or USMCA. It wasn’t a complete overhaul, but it did make some changes. The US wanted to tweak the deal to protect its own interests. For example, they pushed for stricter rules on auto manufacturing and got concessions on dairy products, which put more pressure on Canadian farmers. It wasn’t a perfect deal for Canada, but with the US threatening to pull out of NAFTA altogether, there wasn’t much choice but to negotiate. The USMCA was about damage control more than anything else.

Then there are the trade disputes that keep popping up. Softwood lumber is still a sore spot, but it’s not the only one. Aluminum and steel tariffs made headlines a few years back when the US slapped duties on Canadian exports, claiming national security concerns. It was a ridiculous excuse, but it still hurt Canadian businesses. Canada retaliated with tariffs of its own, targeting everything from US steel to Kentucky bourbon. It was a messy situation, and while things eventually settled down, it left a bitter taste.

The problem with Canada-US trade is that even when we have agreements in place, they don’t guarantee smooth sailing. The US is quick to put its own interests first, and Canada often ends up in the position of having to defend itself. It’s a relationship built on necessity more than trust, and that’s why these disputes keep happening. Whether it’s softwood lumber, dairy, or aluminum, the US knows it holds most of the cards and isn’t shy about using them.

Canada, Western Nations, And Globalization

Historically, western nations, including Canada, built their economic strength on the backs of vulnerable nations. It’s an uncomfortable truth, but it’s one we have to face. Colonization and resource extraction are at the heart of that story, where wealth was funnelled from poorer regions to enrich already powerful countries. This was often done under the guise of trade or development, but the reality was exploitation. Whether it was mining in Africa, agriculture in South America, or manufacturing in Asia, the global system was designed to keep certain nations at the top while others provided the labour and resources.

That system is starting to shift. Many of the countries that were once considered easy targets for exploitation are finding ways to break free from those dynamics. They’ve invested in their own industries, built stronger economies, and are demanding a fairer share of the global wealth. Nations like China, India, and Brazil are no longer content to be treated as second-class players on the world stage. Others are following suit, and globalization is evolving in ways that are making it harder for western countries to maintain their grip.

For Canada, this presents a new challenge. As the pool of vulnerable nations shrinks, there’s a risk that the spotlight turns inward. If wealthier western countries can no longer exploit the same overseas resources and labour they once did, they might start looking for opportunities closer to home. Canada’s economy, with its resource-heavy foundation and reliance on trade, could make it a target. This is especially concerning when you consider the growing wealth disparity and income inequality within Canada itself. A nation with deep economic divides is easier to exploit because its citizens are less likely to have the collective power to resist.

We’ve seen what happens when wealth and power concentrate at the top. The average person becomes more vulnerable to policies and trade deals that benefit only a select few. In Canada, the growing gap between the rich and everyone else creates a weak spot. It means less resilience in the face of economic shocks, whether those come from external trade pressures or internal mismanagement. If the majority of Canadians are struggling to make ends meet, it’s much harder to push back against policies that could sell out the nation’s interests for short-term gains.

What makes this even more pressing is the way other western countries have shown they’re willing to exploit each other when it suits them. Trade disputes among allies have become more common, and economic alliances can crumble when self-interest takes over. Canada’s position as a middle power doesn’t offer much protection. Without strong economic safeguards and a population that’s empowered to demand better, it’s not hard to imagine a scenario where Canada becomes the next weak link in the chain.

Addressing this vulnerability starts at home. Reducing wealth disparity and giving Canadians more economic stability isn’t just a matter of fairness; it’s a matter of survival. If Canada wants to protect itself from being exploited, whether by external powers or even by its own elites, it has to make sure its citizens are in a position to stand up for their rights. An economy built on inequality is an economy built on shaky ground. And in a world where the rules are always shifting, shaky ground is the last thing Canada can afford.

Economic Impacts Of Trade Wars

Trade wars are bad news for just about everyone. When tariffs are introduced, they act as a tax on imported goods, and that cost doesn’t just vanish into thin air. It gets passed along, and it’s the businesses and consumers who end up footing the bill. The idea behind tariffs is to protect domestic industries by making foreign goods more expensive. On paper, it sounds like a way to give local businesses a competitive edge, but in reality, it creates a ripple effect that hits economies hard.

For businesses, tariffs mean higher input costs. Many industries rely on imported materials and components to produce their goods. Take aluminum and steel as an example. When tariffs were slapped on these materials, companies that depend on them for manufacturing, like carmakers or appliance producers, saw their costs go up. They either had to absorb those costs, which cuts into their profits, or pass them on to consumers, which risks driving customers away. Neither option is good for business. Small and medium-sized enterprises feel this pinch even more because they don’t have the same financial cushion or bargaining power as larger corporations.

Consumers don’t escape unscathed either. Higher costs for businesses almost always translate into higher prices at the checkout. Tariffs on everyday items, from food to electronics, mean people have to stretch their budgets further. For lower-income families, who already spend a larger share of their income on essentials, this is especially painful. It creates a situation where the very people who can least afford it bear the brunt of these trade policies.

Tariffs also disrupt supply chains. In today’s interconnected world, goods often cross multiple borders before reaching their final destination. A tariff at any point in that chain can cause delays and increase costs. Businesses are forced to find alternative suppliers or routes, which takes time and money. This kind of uncertainty makes it harder for companies to plan and invest, slowing down economic growth.

There’s also a psychological impact. When a trade war escalates, it creates instability in markets. Businesses start holding back on spending, hiring, and expansion because they don’t know what’s coming next. Investors get skittish, and consumer confidence takes a hit. People worry about rising prices, job security, and the overall economy. This fear can be just as damaging as the tariffs themselves because it leads to a pullback in economic activity.

One of the most frustrating things about trade wars is how they often fail to achieve their intended goals. Tariffs might protect a specific industry in the short term, but they do so at the expense of the broader economy. And in many cases, the industries being protected don’t become more competitive. Instead, they rely on continued government intervention to stay afloat, creating a cycle of dependency that’s hard to break.

What makes this even worse is the retaliatory nature of trade wars. When one country imposes tariffs, the other fires back with tariffs of its own. This tit-for-tat approach turns into a lose-lose situation. Businesses in both countries get caught in the crossfire, and consumers on both sides pay the price. It’s a downward spiral that hurts everyone involved. Even the sectors that tariffs are supposed to help often find themselves struggling because they face reduced demand in retaliating markets.

Trade wars create a false sense of security for domestic industries while undermining the overall health of the economy. The costs are high, the benefits are limited, and the long-term consequences can be devastating. Businesses lose their competitive edge, consumers face higher prices, and economies get stuck in a cycle of retaliation and instability.

Retaliation Is A Losing Strategy

Retaliating in a trade war might feel like the natural thing to do. When another country imposes tariffs or trade barriers, the first instinct is to hit back with equal force. It feels like standing up for yourself, showing strength, and protecting your own industries. But in reality, retaliation in a trade war is more like throwing punches in a fight where everyone ends up bloodied. It might look tough in the moment, but it almost always leaves you worse off.

One of the biggest problems with retaliation is that it escalates the conflict. Trade wars are a cycle of action and reaction, and each round makes the situation more damaging. When one country imposes tariffs, the other responds in kind, leading to a tit-for-tat exchange that spirals out of control. This kind of escalation doesn’t solve the original problem; it just amplifies it. The longer the trade war drags on, the more harm it does to both sides. Businesses are forced to deal with constant uncertainty, consumers face higher prices, and economic growth slows down.

Another issue is that retaliation often hurts your own people more than it hurts the other side. When you impose tariffs, you’re effectively increasing the cost of goods for your own consumers and businesses. Take agriculture as an example. If Canada were to retaliate against US tariffs by imposing its own on American agricultural products, Canadian consumers would end up paying more for food. At the same time, Canadian farmers who rely on exporting their goods to the US could face new barriers, making it harder for them to compete. The very people you’re trying to protect end up caught in the crossfire.

Retaliation also distracts from finding real solutions. Instead of addressing the underlying issues that make your economy vulnerable to trade disputes, you get caught up in a game of economic one-upmanship. This kind of reactive strategy doesn’t build resilience or strength. It’s a short-term fix that creates long-term problems. A more effective approach would be to focus on strengthening your own economy and protecting your people from the fallout, rather than trying to hurt the other side.

Retaliatory measures can also damage relationships with trade partners and allies. Trade wars don’t happen in isolation. Other countries are watching, and your actions can influence how they perceive you as a partner. If Canada were to retaliate aggressively, it could strain relationships with other nations that might otherwise have been supportive. This could make it harder to negotiate future trade deals or build coalitions to address global trade issues.

Another important consideration is that retaliation often doesn’t have the desired effect. The goal of imposing tariffs in response to a trade war is usually to pressure the other country into backing down. But that rarely happens. Instead, both sides dig in their heels, leading to a prolonged standoff. The other country might even double down on its own tariffs, making the situation worse. Meanwhile, the industries and consumers you’re trying to protect continue to suffer.

Retaliation can give the appearance of doing something without actually solving anything. It’s a performative move that plays well politically but doesn’t address the root causes of the conflict. People might feel a sense of satisfaction seeing their government hit back, but that feeling fades quickly when the economic consequences start to pile up. A better approach is to stay focused on long-term strategies that build economic stability and protect the most vulnerable, rather than getting caught up in the back-and-forth of a trade war.

Retaliation isn’t about winning; it’s about reacting. And reacting isn’t the same as leading. If Canada wants to navigate a trade war successfully, it needs to step back from the instinct to retaliate and focus on what really matters: protecting its people, strengthening its economy, and staying prepared for whatever comes next.

Avoid Escalation And Minimize Economic Harm

When faced with a trade war, the first instinct is often to strike back. But when you choose not to engage, you're actually protecting yourself from getting dragged deeper into the conflict. By avoiding retaliation, you prevent the situation from escalating into something more harmful. Trade wars tend to build on themselves. One tariff leads to another, and each measure adds more economic pain on both sides. When you don't engage, you stop that cycle before it takes hold. The economy is fragile, and every new round of tariffs and counter-tariffs compounds the damage. Not retaliating lets you avoid this spiral, giving your country a better chance to ride out the storm.

Another benefit of non-engagement is that it keeps the focus on protecting your own economy rather than getting involved in a damaging back-and-forth. If you don’t retaliate, you're not putting your