Canada braces for the possible return of Donald Trump

Published by Chatham House, January 26, 2024

Following the Republican primary result in New Hampshire this week, Canada is not the only country bracing for Donald Trump’s possible return to the White House – but few have more at stake.

Three-quarters of Canada’s goods exports, accounting for more than one-quarter of the country’s gross domestic product, go to the US. Given Trump’s impulsiveness and deeply protectionist instincts, Canada’s business and political leaders are understandably nervous.

Prime Minister Justin Trudeau, who bears the scars of dealing with the first Trump administration, sought to reassure a Montreal audience earlier this month. ‘It wasn’t easy the first time,’ he said, referring to Trump’s first presidential term, ‘and if there is a second time, it won’t be easy either… [but] we’ll be ready for the decision Americans make in November.’

Canada must prepare now for a second Trump presidency

Getting ready means several things: redoubling Canada’s network of contacts throughout the US; building (or renewing) relationships with members of Trump’s inner circle; reviving the ‘Team Canada’ approach of coordinating with Canadian businesses, unions, civil society groups and political leaders in the promotion of Canada’s interests in the US; and – in the words of Canadian Foreign Minister Mélanie Joly – ‘working on scenarios’ of what might transpire in the US.

Learning from experience

The importance of a coordinated approach was a lesson Canada learned from its experience with the first Trump administration. When then-President Trump threatened to withdraw the US from the North American Free Trade Agreement in 2018, a dedicated unit in Trudeau’s office coordinated Canada’s response, working with political, business and community leaders across the country, who in turn communicated with their US counterparts.

It ultimately yielded a renegotiated trilateral deal, now called the Canada–United States–Mexico Agreement (CUSMA) in Canada, or USMCA in the US. This preserved most of the NAFTA, including the dispute settlement mechanism that Canada had insisted on retaining.

CUSMA comes up for renewal in 2026, although Ottawa’s lobbying campaign to preserve the agreement will begin much earlier, regardless of who wins the US election. Indeed, Trump may be unusually unpredictable but both he and US President Joe Biden are ‘America Firsters’ when it comes to trade.

An ongoing challenge for Ottawa will therefore be to convince policymakers in Washington that North American strategies are preferable not only for Canada, but also for the US.

This argument won the day when the US planned a protectionist tax credit for US-made electric vehicles (EVs) in 2022. Before the scheme was implemented, it was expanded to encompass North American-made vehicles. However, it remains to be seen whether such arguments will prevail in the future.

Trump’s proposed 10 per cent tariff on imports into the US has renewed discussions in Canada about reducing the country’s dependence on the US by diversifying its trade relations.

This is an old conversation that dates back to 1971, when Richard Nixon announced plans for a 10 per cent surcharge on imports into the US. That prompted Justin Trudeau’s father, Pierre, then Canada’s prime minister, to call for expanding Canadian trade with other parts of the world.

Although Nixon’s 10 per cent surcharge never became policy, the elder Trudeau continued his efforts to develop new markets, but with little success: Canada’s reliance on US trade increased over the ensuing decade.

Today, Canada’s new Indo-Pacific strategy and a series of recent trade agreements – including one with the European Union and, perhaps one day, another with the UK – offer greater promise of expanding trade outside North America.

Even so, ensuring access to the US market and participation in continental supply chains will remain paramount. Ottawa is pursuing this goal by highlighting Canada’s importance as a supplier of ‘critical minerals’ – inputs for semiconductors, EV batteries, and other strategic sectors of the US economy that Washington is increasingly protecting through subsidies and other policy tools.

Meanwhile, Canada has offered its own hefty subsidies to automakers Volkswagen and Stellantis to establish EV battery plants in the country, in an attempt to secure its place in North America’s highly integrated automotive sector.

Unique risks

These challenges will persist regardless of who wins the US presidential election. However, Trump poses unique risks. Unlike Biden, he demonstrates no sense of attachment to Canada – or any of the US’s traditional allies – that might otherwise restrain his behaviour.

Although he and Trudeau are on civil terms, there is no love lost between the two men. At a NATO summit in 2019, the Canadian prime minister was caught on camera privately mocking Trump in the company of Emanuel Macron and Boris Johnson. Trump has since called Trudeau a ‘far-left lunatic’.

Canadian politics might also complicate relations with a new Trump administration. Canada is due to hold its own national elections in 2025, and with Trudeau trailing behind Conservative Party leader Pierre Poilievre in the polls, he has begun to cast his rival as a northern version of Trump.

When Poilievre’s party recently voted against an updated Canada–Ukraine free trade agreement, for example, Trudeau invoked Trump in all but name: ‘The real story is the rise of a right-wing, American MAGA-influenced mindset that has led Canadian Conservatives – who used to be among the strongest defenders of Ukraine, I’ll admit it – to turn their backs on something that Ukraine needs in its hour of need.’ 

MAGA in Canada

Trudeau’s concern about the spread of MAGA-type thinking in Canada may be justified. Although the truckers’ protest that paralysed downtown Ottawa for nearly a month in early 2022 was a home-grown movement, reports alleged that nearly half of the crowd-funded donations to the protest came from US donors.

MAGA symbols, including the Confederate flag and the ‘Don’t Tread on Me’ Gadsden flag, which were flown at the 6 January uprising in Washington, also appeared in Ottawa. Right wing US figures like then-Fox News personality Tucker Carlson and Republican politician Marjorie Taylor Greene cheered on the protesters.

Still, Trudeau’s warnings about the spread of MAGA-type politics in Canada could complicate his relationship with Trump if the former president, who is not known to forget slights, is re-elected in November – although Trudeau would be far from the first Canadian prime minister to seek political advantage by casting himself as Canada’s defender against Americanization.

Canadian leaders quickly learn the ‘Goldilocks rule’ in their relations with the US: they can neither be too warm nor too cool towards the US president if they want to keep Canadians – a proud but pragmatic people – on their side.