Unfortunately for Canada, Trump has always been—and will likely remain—a protectionist, believing the U.S. economy should be largely self-sufficient and that any nation running a trade surplus with America is taking advantage of it. As Rob Atkinson writes in a commentary piece for The Hub, while no one (not even Trump) knows what will come next, Canada must first understand Trump’s mindset to respond effectively to his threatened tariffs.

See Through the Smokescreens

When assessing Trump’s rationale for slapping across-the-board tariffs on Canada, officials must forget the notion that lax border enforcement has fueled the flow of fentanyl and illegal immigrants south. The facts don’t support it. Trump simply needed a pretext to invoke the U.S. International Emergency Economic Powers Act and impose tariffs that benefit American companies—likely his true objective.

On occasion, Trump has also pointed to the U.S. trade deficit with Canada to justify tariffs. However, the trade deficit exists almost solely because the U.S. dollar is vastly overvalued, making Canadian imports to the U.S. cheaper. That’s not Canada’s fault—it’s America’s.

What Is Really Going On?

Despite his true motives being difficult to pin down, Atkinson outlines three key factors that might explain Trump's embrace of tariffs:

1. Trump is reacting to the excesses of utopian globalists who shaped U.S. trade policy from the 1980s to 2016.
2. Trump is embracing protectionism because he has always been a national businessman.
3. Trump is hoping to return the Republican Party to its pre-New Deal roots.

How Should Canada Respond?

• Officials must remember that this is all about the “Art of the Deal”—if you can strike a deal that imposes little hardship on Canada but gives Trump a win, take it.
• Make market-opening moves. Trump has raised concerns about U.S. firms’ limited access to the Canadian banking market, Canada’s digital services taxes on U.S. tech companies, and more. Canada should make compromises on these issues.
• If Trump reimposes the tariffs, even after Canada offers some market-opening concessions, Canada should stick to imposing tariffs on specific final goods, not intermediate goods. In addition, keep the current approach of targeting items that Canadians can easily source from non-American suppliers.
• While it may not generate an immediate response, Canada should pursue a case with the USMCA tribunal and file a claim with the World Trade Organization.
• Avoid responding in ways that unnecessarily harm its economy. Don't use the heightened emotions from Trumpian tariffs to advance policies that actively discriminate against U.S. firms in Canada.
• Use this threat as a wake-up call and make the bold internal reforms needed to strengthen Canada’s economy.

Read the full commentary.