No deal is better than a bad deal. Ottawa must stop chasing tariff relief at the expense of Canadian workers, resources and sovereignty
By Marc Lee
and Stuart Trew
Canada must resist striking a bad deal to end U.S. President Donald Trump’s tariffs, even if it means more short-term pain, because surrendering key industries and sovereignty will cost far more in the long run.
Canadian concessions to the Trump agenda—including cancelling a multibillion-dollar digital services tax, introducing worrying border and immigration reforms, and potential participation in a costly continental missile defence scheme—have clearly gone unnoticed in Washington. And the federal government walked back most of the retaliatory tariffs on U.S. goods introduced earlier this year.
Eyes have now shifted to the mandatory six-year review of the Canada-U.S.-Mexico Agreement (CUSMA), the updated North American trade deal that replaced NAFTA in 2020, with public consultations underway in all three countries. Prime Minister Mark Carney appears to be coordinating a joint response to the review with Mexico, whose economy is also buckling under stress from Trump’s tariffs.
Thus far, a large share of Canadian and Mexican exports to the U.S. receives tariff-free treatment under CUSMA.
The challenge has been sectoral tariffs hitting steel, aluminum, automobiles, pharmaceuticals and lumber that anchor employment in Ontario, Quebec, Manitoba and British Columbia, with more on the way. Most recently, Trump announced new tariffs on furniture, trucks and medical and personal protective equipment.
Canada’s trade balance swung sharply negative through 2025, meaning Canada is now importing more than it exports. Trump’s tariff strategy, draining jobs from trade partners to boost U.S. manufacturing, is basically working against Canada. Whether it is successful in inducing new investments in the U.S. remains to be seen.
Other countries, jolted by tariff whiplash, have scrambled to cut narrow deals with Washington. For the most part, these deals have been limited, focused on transactional arrangements that accept a lower tariff in exchange for commitments on investment in the U.S. and market access for U.S. corporations.
Canada has gone the other direction by seeking to roll security into a broader deal that may prove expensive but without guarantees of market access. For example, Trump has said Canada could participate in the latest iteration of the U.S. missile defence scheme (previously called “Star Wars” now referred to as the “golden dome”), the long-controversial U.S. missile shield project, if it is willing to pony up $100 billion.
No deal is better than a bad deal, and this is especially true of a bad deal that further locks Canada into the orbit of a deeply troubling administration that views acquiescence as weakness, a sign to demand more and more. In terms of economic concessions, two major areas may be on the table to secure a deal: critical minerals and agricultural supply management programs. Critical minerals like lithium are key to electric vehicles.
Even with such concessions, Canada may still face only reduced tariffs on important industrial exports to the U.S. Moreover, it is not clear what any new trade and security deal is worth with such a volatile U.S. president who will clearly resort to tariffs to exert leverage in any future situation that displeases him.
Canada needs to regain its “elbows up” vibe, with the chance to strengthen, not just defend, our economy from U.S. economic imperialism. This includes deepening investment in Canadian public services, expanding key infrastructure using Canadian resources, and being prepared to step in, through national ownership if necessary, to preserve industrial assets.
At this pivotal moment, reverting to the 2024 status quo, however much businesses want it, is a fantasy. It’s time for Canada to raise its elbows to reassert its sovereignty, not bend the knee.
Marc Lee and Stuart Trew are researchers with the Canadian Centre for Policy Alternatives.
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