Trump has tried to bully Canada since the very beginning of his second term. So far he has failed, and it appears quite likely that he cannot win this confrontation of his own making. There are many reasons why he will likely fail.
1. Carney has strong popular support and few Canadians like Trump. Even before the failure to agree on tariffs last week, millions of Canadians have stopped traveling to the US, and they are boycotting many US goods. From the Canadian perspective, Trump's recent suggestion that Lake Ontario ought to be renamed Lake America is a gratuitous insult which worsens the possibility of a resolution to the conflict. VP Vance's recent reference to Canada as a state, rather than a nation, was also an insult to Canadians. Inside the US, these insults may play well with their base, but to the rest of the world they appear undignified and puerile.
2. Trump is also unpopular in the US, and he goes into this war with little support. Only about one third of US voters approve of his presidency, and the attacks on Canada are among the least popular Trump policies. The Republicans may lose seats in the November elections if this trade war gets more serious and already high inflation rises further due to the tariffs.
3. Canada's overall trade balance is better than that of the US, which has a long-term problem, as can be seen in the following graph from the Federal Reserve Bank in St. Louis. It tracks the trade balance each month from 1995. There is not one month in the last 30 years when the US had a positive balance of trade.
Indeed, there was a huge decline in January, February and March of 2025, as a direct result of Trump's sudden violation of treaty agreements, in a one-sided attempt to coerce other nations. These initial tariffs were later judged to be illegal by the US Supreme Court.
Now, how does Canada compare on overall balance of trade? The Canadians had a trade surplus ever year from 1995 until 2008. Since then, however, it has deficits in many years. However, since 2016 it has often been back in the black. In the following chart the heavy black line shows the overall balance. The light green above that line shows the trade surplus Canada has long had with the US; the dark green below that line shows the deficit with the rest of the world.
The reason Canada has a trade surplus with the US is largely due to three kinds of exports: crude oil via pipelines into the upper Midwest, electrical energy from Quebec to New England, and gold sold worldwide, but particularly to Britain. It also sells a lot of aluminum, automobile parts, and forest products.
Note the overall result. Canada has had periods of surplus in its balance of trade, including $3.9 billion Canadian dollars in June. In short, despite Trump's attacks, its economy is weathering the storm nicely. Indeed, its trade balance is far better than the US's.
4. Canada is shifting its trade away from the US to more stable partners, notably in Europe and Asia. This takes time, but the tariff war will accelerate the process. Prime Minister Carney, who previously ran the Bank of England, is developing closer ties with China, Britain, the EU, and many of the Commonwealth nations. Canada is building a pipeline from its oil and gas fields to the Pacific coast, which will make it easier to sell to Asia. It is negotiating with the EU, with whom it already has a free trade pact. Moreover, the things that drive Canadian exports are all in high demand, and prices are rising, for gold, oil, and electricity. Ironically, Trump is helping Canada's balance of trade, because his policies and actions have driven up the cost of oil and electricity in North America, and his unpredictability has helped push up the cost of gold.
5. Canada has more intelligent leadership that the US. Trump is an expert at alienating allies and truly masterful at creating uncertainty. No ally knows if the US will support them in a crisis. In recent weeks, he has needlessly angered South Korea. He has weakened the US standing in the Middle East with his ill-conceived war against Iran. He has infuriated Europe by backing away from Ukraine and coddling up to Russia instead. He has particularly alienated Denmark and the other Nordic nations by demanding Greenland. But there is no need to extend the list. Trump has made the US unpopular around the world, as detailed in a previous posting on this blog. In contrast, Carney has excellent relations with the EU and the Commonwealth nations, and Canada deservedly enjoys a good international reputation. In a tariff war, a nation needs friends. Right now, Canada has them; the US not so much.
In conclusion. Canada is in a good position to export is oil elsewhere, to sell its gold everywhere, and to demand higher prices for its electricity, aluminum and forest products sold to the United States. However, do not focus overmuch on the specific items subjected to tariffs in this battle. Focus instead on how successfully Canada reorients its trade toward new partners. While specific Canadian industries will be harmed in the short run, in the longer perspective the nation will gain by diversification. Trump wants to force Canada to become part of the US, but this is unlikely. Rather, like his hostile behavior toward NATO, which led Finland and Sweden to join, making NATO stronger, Trump's bullying is pushing Canada away toward more reliable partners.
Of course, it does not have to end badly. Mr. Trump often reverses himself. He has created this crisis, and he can undo it. But the anger in Canada will not suddenly disappear should he seek reconciliation. Even if the tariff war ends well, the Canadians will likely push to diversify their trade relations and become less closely tied to the United States.
