Trump has tried to fully 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.
2. Trump is almost as unpopular in the US as in Canada. 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 stand to lose seats in the November elections if this trade war gets more serious.
3. Canada's overall trade balance is better than 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 Janujary, February and March of 2025, as a direct result of Trump's failed 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 exports of crude oil via pipelines into the upper Midwest, the export of electrical energy from Quebec to New England, and the export of gold worldwide, but particularly to Britain.
Note the overall result. Canada has had periods of surplus in its balance of payments, including $3.9 billion Canadian dollars in June, In other words, despite the Trump attacks, its economy is weathering the storm nicely. Indeed, it is doing better than the US on this parameter.
4. Canada is shifting its trade away from the US to more stable partners, notably in Europe and Asia. This will take time, but the tariff war will accelerate the process. Prime Minister Carney, who previous 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 with rising prices, notably gold, oil, and electricity. Indeed, Trump's 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. 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 to the United States. However, do not focus overmuch on the specific items subjected to tariffs in this battle between Canada and the US. 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 hostility and incompetence is driving Canada away toward more reliable partners.
