In the marble-floored corridors of power where trade negotiations happen, Canadian officials are making a critical strategic error in their approach to the United States—and everyday citizens are paying the price.
“We’ve become tangled in a perpetual game of defense,” explains Dr. Amrita Deshpande, Senior Fellow at the Carleton University Centre for Trade Policy. “Canada keeps trying to defend specific industries against American protectionism when we should be liberalizing trade unilaterally.”
This perspective challenges the conventional wisdom that has guided Canada-U.S. trade relations since the original FTA negotiations of the 1980s. But evidence suggests Canada’s reflexive tit-for-tat approach may be undermining its own economic future.
The most recent trade tensions began with President Biden’s Inflation Reduction Act, offering massive subsidies to American-made electric vehicles and clean energy products. Canada’s response was predictable: secure exemptions for Canadian companies and threaten countermeasures. The playbook hasn’t substantially changed since the lumber disputes of the 1980s.
I’ve spent the past three weeks speaking with manufacturers, farmers, and economists across both countries. The consensus challenge to conventional thinking is striking: What if Canada simply stopped fighting?
“When your neighbor builds a wall, the worst thing you can do is build your own wall in response,” says Robert Wolfe, Professor Emeritus at Queen’s University and former Canadian trade negotiator. “That just traps your own citizens between two walls.”
The economic data supports this counterintuitive approach. Studies from the C.D. Howe Institute show that roughly 60 percent of Canada’s tariffs primarily harm Canadian businesses and consumers. When Canadian companies import machinery, parts, or materials, these tariffs function essentially as a tax on domestic production.
“I’m paying 6.5% more for crucial aluminum components from the U.S. because of retaliatory tariffs our government imposed,” explains Jennifer Korecki, who runs a medium-sized manufacturing firm in Mississauga. “That’s money I can’t invest in hiring or upgrading equipment.”
The protectionist reflex ignores basic economic reality. Canada’s economy is approximately one-tenth the size of the United States. In any symmetrical trade confrontation, the math simply doesn’t favor Canada.
Standing in a Fraser Valley dairy farm last week, I met Marcel Boisvert, a third-generation farmer whose operations are constrained by Canada’s supply management system—the classic example of Canadian protectionism. “I understand the stability it provides,” he told me, “but we’re paying a massive price in terms of innovation. American dairy has had to become more efficient while we’ve been sheltered.”
Historical examples suggest the benefits of unilateral liberalization. New Zealand’s radical agricultural reforms in the 1980s eliminated most subsidies and protections. The short-term pain was considerable, but today New Zealand’s agriculture sector is among the world’s most competitive and innovative.
The Fraser Institute estimates that Canada’s protectionist policies, particularly supply management for dairy, eggs, and poultry, cost Canadian households an average of $CAD 585 annually. This burden falls disproportionately on lower-income families for whom food represents a larger portion of their budget.
“It’s effectively a regressive tax,” notes Dr. William Watson of McGill University, who has studied the distributional impacts of trade restrictions. “We’re making necessities more expensive for those least able to afford it.”
Canadian policymakers face significant political constraints, of course. Supply management is particularly entrenched because dairy farmers are concentrated in electorally crucial regions
