No two countries trade more, or trust each other more, than Canada and the United States. A tariff war is testing whether that was ever more than geography.
Published 14 October 2026 · 06:00 GMT
In March 2025, Canada acquired a new prime minister in extraordinary circumstances. Justin Trudeau, who had led the country for nearly a decade, resigned. Mark Carney, a former governor of the Bank of Canada and the Bank of England who had never held elected office, won the Liberal leadership, became prime minister, and then led the party to victory in the federal election of April 2025. The issue that made his career in politics was not a domestic programme or a scandal. It was a foreign government. The United States, Canada's closest ally, largest trading partner and neighbour of 8,891 kilometres of shared border, had launched a tariff war against it. Carney's pitch to voters was simple: the old relationship with Washington was over, and Canada needed a leader who understood markets, power and how to stand up to both.
The scale of what is at stake is difficult to exaggerate. Roughly three quarters of Canadian exports go to the United States. Canada is the largest buyer of American exports. The two economies are not merely trading partners; they are a single industrial machine, built over decades, with auto parts crossing the border several times before a finished car rolls off a line, with Canadian oil feeding American refineries, Canadian electricity lighting American cities, and Canadian uranium, potash and critical minerals underpinning American farms, grids and weapons systems. The border between them is the longest undefended border in the world, and for most of the post-war era it was also one of the most boring, which was the point. Boring meant stable, stable meant investment, and investment meant prosperity on both sides.
The tariff war changed that. The Trump administration imposed tariffs on Canadian goods in 2025, citing fentanyl trafficking, migration and long-standing trade imbalances, and later raised sectoral tariffs on steel, aluminium, autos and lumber. The fentanyl justification was widely disputed in Canada: American government data showed that only a small share of fentanyl seized at US borders came through Canada, and Canadian officials argued the tariffs were really about leverage. Whatever the justification, the effect was the same. The most integrated trading relationship in the world was subjected to a weapon designed for adversaries. Canada answered with counter-tariffs on American goods, targeted at politically sensitive products, and with a new vocabulary: elbows up, a hockey phrase that became the slogan of a country discovering that its closest friend could also be its biggest threat.
The roots of the crisis run deeper than one administration. The North American Free Trade Agreement, which came into force in 1994, and its successor, the Canada-United States-Mexico Agreement, which replaced it in 2020, were built on a premise: that the United States wanted a rules-based trading system with its neighbours. The Trump administration's first term already challenged that premise, with steel and aluminium tariffs and a renegotiation of NAFTA that produced CUSMA. The second term has gone further, treating tariffs not as a negotiating tool but as a permanent instrument of industrial policy. For Canada, which built its entire economic model on access to the American market, the shift is existential. The question is no longer whether the old relationship can be restored. It is whether Canada can build an economy that is less dependent on a single customer.
CUSMA itself is now at the centre of the story. The agreement, negotiated in 2018 and in force since 2020, includes a clause requiring a joint review in 2026. The review was designed as a routine health check. The tariff war has turned it into a high-stakes negotiation over the future of North American trade. Washington has signalled it wants major changes, above all on dairy supply management, digital services and rules of origin. Ottawa has signalled it will not accept a deal that leaves Canada exposed. Mexico, the third partner, watches from the side, with its own tariff exposure and its own interests. The review will be the test of whether the rules-based system survives in North America, or whether it is replaced by something closer to managed trade between three governments that no longer trust each other's commitments.
The tariff war has also been a lesson in how much the United States needs Canada. Canada is the world's largest supplier of oil to the United States, and American refineries, particularly in the Midwest, are built to process heavy Canadian crude. Canada supplies a large share of American electricity imports, uranium for nuclear plants, potash for fertiliser, and a long list of critical minerals, including nickel, cobalt and rare earths, that Washington has declared essential to its energy transition and its defence industry. Tariffs on these inputs raise costs for American consumers, farmers and manufacturers. The American economy, in other words, is not tariffing a rival. It is tariffing its own supply chain.
At the same time, Ottawa has pushed to diversify. The government has courted Europe and Asia, signed and promoted trade agreements, and tried to turn Canada's critical minerals into a strategic asset courted by every major economy. The results are real but limited. No market can replace the United States in the short term: geography is destiny, and the American market is next door, rich, and enormous. Diversification is a decade-long project, not a tariff-season fix. The more immediate question is whether Canada can use the crisis to build what it has long talked about: an economy that adds value at home, processes its own minerals, builds its own infrastructure, and sells to the world rather than to one customer.
The tariff war has transformed Canadian politics. The April 2025 election, which the Liberals had been expected to lose, turned on a single question: who could stand up to Washington. Carney, a central banker with a reputation for calm competence, won it. The Conservative opposition, under Pierre Poilievre, struggled to find a message that was both pro-Canadian and credible on Trump, a leader many of its own voters admired. The Bloc Quebecois and the New Democrats found their space squeezed by a national-unity campaign. The result was a Liberal government with a mandate defined by the crisis, and a country that discovered, to its own surprise, a fierce new nationalism.
The longer-term question is what the tariff war means for the idea of North America. For seventy years, the continent's story was integration: first a defence partnership, then a free-trade area, then a shared industrial platform. The tariff war has raised a different possibility: that the United States, under its current leadership, no longer believes in the integration it built, and that Canada and Mexico must plan accordingly. That does not mean the end of the relationship. The border will still be there, the trade will still flow, and the two countries will still be each other's largest partners. But the assumption that the relationship is permanent, automatic and safe is gone, and it will not come back. Canada's new task is to build a country that can thrive in a world where its best friend is also a risk to be managed.
Western coverage, from Reuters, the Associated Press and the Canadian and American press, frames the tariff war as a self-inflicted wound on the world's most successful trade relationship: American protectionism, Canadian retaliation, and a CUSMA review that will decide whether the rules survive. The emphasis is on the economics, on supply chains, and on Carney's transformation from central banker to wartime premier.
Eastern coverage, from Chinese and Russian state media, frames the tariff war as proof that American alliances are conditional and that American power is unreliable: a neighbour and ally tariffed like an adversary, a rules-based order discarded when it suits Washington. Canada is presented as a cautionary tale for any country that builds its economy on American goodwill.
Global South coverage, from Latin American, African and Asian outlets, reads the tariff war as a small taste of what the rest of the world has long experienced: American tariffs, American pressure, American unpredictability. The sympathy for Canada is real, but so is the irony: the country that preached free trade to the developing world for decades is now discovering what it feels like to be on the receiving end.
