How to win a trade war: Canada, Trump and a delicate dance in asymmetric warfare

On Wednesday, the U.S Court of International Trade struck down President Donald Trump’s most sweeping tariffs. But the decision, while favourable to Canada, has already been stayed pending an appeal, and it does not cover all such duties. And even if Mr. Trump ultimately loses in the courts, he can simply find other ways to impose tariffs.

Canada continues to stare down the barrel of the American trade war. The United States-Mexico-Canada Agreement faces its first big review in 2026. This country remains in a uniquely high-stakes moment.

Prime Minister Mark Carney came to power on a promise to rewrite the playbook and a declaration that the old, cozy Canada-U.S. relations are “over.” Tuesday’s Throne Speech, delivered by King Charles III, outlined an economic strategy focused on fostering domestic innovation, enhancing productivity and reducing reliance on U.S. trade.

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But make no mistake: This will, and will always be, an uneven fight. Canada is 40 million people and only the world’s ninth largest economy. A middle power is going up against the world’s richest and most powerful country, on whose dynamism it is unusually dependent. How exactly is it even possible for Canada to win in this asymmetric trade war?

Crucially, this conflict isn’t just about steel, soybeans or softwood lumber – it’s about narrative and power. This time, a tariff isn’t just a tax; it’s a message. U.S. President Donald Trump frames trade deficits as proof that the United States is “losing” – a zero-sum narrative in which he casts himself as the country’s saviour. What was once a rules-bound negotiation now feels more like a bizarre reality show starring the global economy.

For Canada, winning will require strategic creativity and a dash of against-the-grain thinking. The Globe and Mail asked experts on how, in a conflict fought as much on stage as in the marketplace, Canada can craft a savvy new script.

Give Trump some face-saving concessions that look like a win for himOpen this photo in gallery:

Andreas Schotter, professor of international business at the Ivey Business School at Western University.

Paradoxically, Canada’s path to winning the next trade war lies in giving the U.S. administration what it wants – publicly. But only when the substance still works in our favour.

The 2026 USMCA review will not be a legal negotiation; it will be a political performance. The Trump administration will seek loud, symbolic victories. Canada must prepare now to offer performative wins that cost little – or even buy us leverage in return.

We‘ve seen this strategy succeed. In 2018, when Mr. Trump threatened auto tariffs on Europe, the European Union defused the crisis with performative concessions, agreeing to buy more American soybeans and liquefied natural gas, both of which it was already importing. Mr. Trump got a press-conference win. Europe kept its industrial base untouched.

Canada must now apply the same choreography – but do it better. Start with dairy. Rather than stonewall, Canada should offer a reasonable quota expansion for U.S. milk protein concentrate – surplus supply with limited market threat. It feeds the U.S. narrative of “cracking supply management,” while the system itself remains intact.

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In automotive, we can accept a modest increase in U.S. content thresholds, but only if tied to a binding trilateral electric vehicle and critical parts supply chain agreement that includes Mexico. This would lock in U.S. reliance on Canadian battery minerals and processing, a real strategic gain wrapped in a symbolic concession.

Border security? Codify existing controls in a bilateral framework. It lets Mr. Trump claim he “hardened the border,” even if Canada is already acting. Appearances win the press conference; substance shapes the future.

But in one domain, the concession is real and should be used as leverage: defence. Canada will increase procurement in coming years regardless, to meet NATO and NORAD commitments. By announcing strategic defence buys from U.S. firms early, we give Mr. Trump a concrete “Made in America” win – and gain negotiating space elsewhere. This is where optics align with long-term need.

The point is not to win louder. It’s to win smarter. Performative concessions – if scripted early and sequenced well – can neutralize trade aggression while embedding Canadian advantage across sectors. The art is to give headlines in exchange for leverage. And in trade wars, that’s the only kind of winning that lasts.

Use oil, Canada’s unique economic hard powerOpen this photo in gallery:

Adam Waterous is executive chair of Strathcona Resources Ltd.

Despite Mr. Trump’s “drill baby drill” ethos, the U.S. is desperately short of oil. It produces 13 million barrels a day (which is likely to start to fall in the next few years owing to its aging fields) but consumes 20 million barrels a day.

Canada supplies the U.S. with four million barrels a day – that’s more than 90 per cent of this country’s oil exports. But this dependence cuts both ways: Canada’s oil represents fully 60 per cent of the U.S.’s shortfall. It’s difficult for the U.S. to replace Canada’s oil on the international market, as American refineries are specifically configured to process Canadian heavy crude.

The U.S.’s large dependence on Canadian crude and lack of substitutes provides Canada with something to bring to the negotiating table. In fact, oil is Canada’s unique economic hard power.

How? Canada can provide Mr. Trump with the only thing he‘s asked for (aside from strengthening the border): an agreement to build the Keystone XL pipeline, which was killed by Democrats in the U.S., but supported by both Conservatives and Liberals in Canada.

While the original proponent has moved on, renewed political will can surely spark renewed interest. This new pipeline would provide the U.S. with more of what Mr. Trump wants: Canadian oil at a discount. In exchange, Canada must require that all tariffs are eliminated on all Canadian industries. In doing so, Canada would use oil as the tentpole under which all other sectors are sheltered.

Simultaneously with the resurrection of Keystone XL, Canada must start construction on two more pipelines to tidewater – ones Ottawa blocked some eight years ago. The Northern Gateway pipeline, which takes oil west, was previously approved, and construction could start almost immediately.

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At the same time, a pipeline heading to Eastern Canada, such as the cancelled Energy East, needs to be urgently advanced.

This dual-pronged strategy – give the U.S. the pipeline that it wants, while at the same time building new energy infrastructure – will protect Canada’s future trade relationship in all sectors.

Similarly, Canadian energy sold internationally can be used as the sharp end of the spear to help Canada negotiate favourable trade terms for all sectors with other countries. Let’s not forget that oil has long been a cornerstone of Canada’s economy and will be one for a long time, despite shifts toward renewable energy.

When Ronald Reagan discussed nuclear disarmament treaties with Soviet leader Mikhail Gorbachev in the 1980s, the U.S. president had a backup plan, describing his philosophy as “trust but verify.” In negotiating tariffs with Mr. Trump, Canada should think: “trade but diversify.”

Play defence: Reform our corporate tax regimeOpen this photo in gallery:

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Jack Mintz, President’s Fellow, University of Calgary’s school of public policy; and Munir Sheikh, research professor, Carleton University, and former chief statistician of Canada.

The best offence is a good defence. We have a tool to give us some protection from the main damage of the trade war, which is the hit to businesses in Canada. That tool is the tax system.

Contrary to popular perception that corporate taxes hit the rich, the reality is that they pass them on to consumers through higher prices, workers through lower wages or layoffs, and shareholders through lower investment returns. This means less investment by businesses in this country and depressed living standards.

The U.S. tariff threat is already encouraging Canadian businesses to move south. Our own tax policy provides little advantage to stay here. For example, the top corporate tax rate in Ontario and Quebec is now 26.5 per cent, compared with 21 per cent in Ohio and Texas. Mr. Trump has promised to reduce the federal manufacturing tax rate to 15 per cent.

Data on foreign direct investment flows tells the sad story of Canadian tax policy discouraging investment in Canada: FDI abroad by Canadian companies in 2023, the last data point we have, was $2.1-trillion. That compares with international companies’ FDI in Canada of $1.3-trillion.

Canada needs serious reform to its corporate tax regime, a simplification of the system, and the scaling-down of inappropriate and ineffective taxes. This takes time to complete, but it can begin right now.

We propose that the government exempt small and large company profits from taxation if they’re reinvested in Canada. The revenue cost would be roughly about a tenth of current corporate tax receipts, since companies no longer need many tax preferences that would be redundant.

Such an announcement is sorely needed to send a powerful signal to the world that we are dead serious in protecting our economy and are open for business. Whatever incentives bad Trump tariffs create for businesses to move to the U.S., we‘ll counter them using economically defensible economic tools such as the corporate tax.

A natural question follows if we substantially lower the corporate tax burden: whether there would be lower revenues to the government and a potential negative impact on our fiscal position.

That may well be so, but a lower corporate tax burden would result in more business activity, which would result in more taxes paid that should provide an offsetting revenue source. Over time, overall tax revenues will ramp up again. Any deterioration in our fiscal situation is temporary and should be accepted as the price we need to pay to protect us.

Northern gambit: Arctic crisis for trade leverageOpen this photo in gallery:

Ian Robertson, partner with The Jefferson Hawthorne Group.

This isn’t a trade war. It’s a narrative war with tariffs as proxy.

The real fight is for sovereignty. Mr. Trump has said this much out loud. The U.S. is winning because Canada has not been listening and still treats it like a conventional trade dispute.

Mr. Trump doesn’t seek resolution. He seeks narrative dominance through strategic chaos: disruption that traps opponents in constant instability and reactive decision-making. Control of the story means you define the debate, dictate choices and assign meaning to actions.

The longer Canada remains reactive – rushing to boost border security when Mr. Trump uses it as a pretext to impose tariffs, for example – the more we lose, not just in trade but across all leverage points. Traditional diplomacy has been exposed as obsolete, a slow weapon in an asymmetric information war.

To win, Canada must create its own controlled chaos by engineering an Arctic crisis. The move: Canada quietly proposes limited Arctic access and dual-use infrastructure rights – minerals, icebreaker basing, ports, satellite relays – to non-U.S. actors such as China, India and the EU.

The announcement is low-key and bureaucratic. Then global headlines erupt, surrogates weigh in, analysts speculate and Washington scrambles, because it, too, has an Arctic presence and deems the region important.

Canada eventually walks it back – calmly, diplomatically – while extracting concessions in the process. By then, the strategic terrain has shifted, the narrative altered and Canada reframed as a mature nation capable of asserting agency.

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Yes, there is a risk to this approach. Mr. Trump’s obsession with territorial dominance and need to control the chaos means he will threaten serious retaliation. And the U.S. is the stronger country and is capable of hurting Canada much more than we can hurt it.

But despite Mr. Trump’s bluster, he has no stomach for a real fight. Over-broad retaliation fractures his coalition. “America First” populists don’t want more international entanglements. Already wobbly pro-business Republicans loathe further instability. Defence hawks demand U.S. dominance. If he stays silent, he looks weak on China.

No reaction works cleanly – and every reaction repositions Canada from passive rule-follower to strategic actor. Either way, Mr. Trump loses control of the narrative, and once lost, it’s nearly impossible to recover.

It feels taboo, which is why it will work. The cost of remaining reactive is greater than the risk of the brief use of strategic ambiguity. Conventional wisdom, which Mr. Trump counts on, says small nations will stay predictable, de-escalate and wait for multilateral consensus.

As Sun Tzu taught, “If your enemy is temperamental, seek to irritate him.” Canada has the unique advantage of being underestimated, and we should exploit that perception.

In today’s world, you don’t win by being reasonable. You win by being unconventional, prepared and unafraid. Control the story, and you control the choices. It’s time Canada does both.

Use Canada’s large auto market as leverageOpen this photo in gallery:

Tom MacDonald, former director for automotive policy in the Department of Industry and member of Canada’s negotiating team for the North American free-trade agreement.

On autos, Canada is among the top 10 global markets, with more than 1.8 million vehicle sales in 2024. I’ve seen first-hand the power of using our market as leverage.

Under the 1965 Canada-U.S. Auto Pact, we gave tariff-free access to Canada for the U.S. Big Three (GM, Ford, Chrysler – now Stellantis). But, in exchange, they had to maintain Canadian vehicle production equal to their sales, plus meet specific Canadian value-added levels.

We no longer have such production agreements. But let’s not forget that our auto industry was built on that trade-off: access to our large and lucrative market in exchange for investment commitments.

When Japanese auto imports soared in the 1980s, we again used our market leverage. Both Canada and the U.S. got the Japanese to accept “voluntary” export restraints, inducing them to build cars in North America in order to avoid potentially more draconian restrictions.

I went to Toyota City to help land the first Japanese automotive investment in Canada, an aluminum wheel plant in Delta, B.C. Now Toyota is Canada’s largest vehicle producer, and the combined Canadian production of Toyota and Honda has surpassed that of the Big Three.

Now we should similarly put the Big Three on notice. Mr. Carney has already said that they will face our 25-per-cent retaliatory tariffs if they wind down their Canadian production. But that needs more teeth – specific production and Canadian value-added requirements like we had in the Auto Pact.

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We should then go further and globalize our 25-per-cent tariff so we‘re on an equal footing with the U.S. Mr. Trump’s tariffs are global, and he‘ll use them to pressure the Japanese, Korean and European auto companies for U.S. investment in exchange for tariff relief. We need to do the same and fight again for our fair share.

We should initiate urgent discussions on the investment plans of all players in the Canadian market, not only those with current assembly facilities but also those, such as Hyundai or Kia, that might consider investing to avoid the tariff.

If others balk, we can consider China. They produce the most economical and arguably most advanced EVs. We have imposed a 100-per-cent tariff on them, mostly to please the U.S. Might BYD be interested in making vehicles in Canada if it gave them some duty-free access?

While much of the above is against World Trade Organization rules, so are the Trump tariffs, our own retaliation and our EV duties against China. Mr. Trump has pushed us all through the looking glass on trade policy, into a topsy-turvy world where old rules and norms no longer apply. We need to adapt to win in the new world disorder.