CNAS Insights | A Better Way to Deal with Canada

These days, Canada and the United States sound more like adversaries than the closest of allies. President Donald Trump imposed 50 percent tariffs over the weekend on a range of Canadian imports, saying that Canada was “among the worst nations in the world to deal with” and that it “will be treated like a state no longer.” Canadian Prime Minister Mark Carney said the countries are “at war” and that Ottawa will match U.S. tariffs “dollar for dollar.” Sometimes, Carney said, America’s signature “is written in pencil.”

If Canada matches U.S. tariffs and Washington responds with further escalation, the two will enter a costly and damaging tit-for-tat spiral. America’s northern neighbor is its second-largest overall trade partner; for Canada, the United States is number one. Both economies will suffer from a trade war. Even if the sides cobble together a deal soon, much of the damage has already been done.

Yet, the current dispute is simply the latest in a relationship that has deteriorated badly over the past 20 months. Washington has needlessly and counterproductively antagonized its northern ally, and in the process made it harder for Canadian leaders to accommodate U.S. desires. Further compounding the damage will produce economic harms and foreign policy losses on both sides of the border. There is a better way.

Arrows Pointing North

Since January 2025, the second Trump administration has been nearly unremitting in its rhetorical hostility. Questioning Canadian sovereignty and independence, the president has repeatedly called for Canada to become the “51st state.” In an Oval Office meeting, Carney observed that Canada is “never for sale.” Trump replied: “Never say never.”

The president has referred to Carney as “governor” and invited his predecessor, former Canadian Prime Minister Justin Trudeau, to a gathering of the Republican Governors Association. Describing the U.S.-Canada border as an “artificially drawn line,” Trump pledged that the country could keep its anthem “O Canada” after joining the United States. After Carney gave a widely cited speech at the World Economic Forum annual meeting in Davos, Switzerland, Trump said, “They should be grateful but they’re not.” Canada, he added, “lives because of the United States.”

Trump’s comments are seen by many American observers as funny, somewhat amusing, and largely unserious. Canada is not going to become the 51st state, and its prime minister is not a U.S. governor. North of the border, however, the insults have produced understandable anger. And Washington has gone beyond harsh words to actions.

Last year, the Trump administration declared Canada’s alleged failure to stop drug trafficking an “unusual and extraordinary threat” to U.S. national security and imposed tariffs. It put 25 percent duties on a portion of Canadian imports in 2025, later increased the figure to 50 percent, and then threatened rates of 100 percent. Trump said that Canada could participate in the Golden Dome missile shield if it paid $61 billion, but that he would waive the fee if it joined as the 51st state. “Canada has no army,” a U.S. cabinet official added over the weekend, accusing it of taking advantage of Americans while enjoying U.S. protection.

The combination of hostile rhetoric and economic harm has changed sentiment in Ottawa. Canadian leaders have concluded that the lesson of past negotiations is to stand up to the United States. Caving to the Trump administration, they have concluded, only invites future demands. China and Brazil have fared better in dealings with Washington than have Japan and Europe.

Standing up to Washington is also domestically popular. Astonishingly, a majority of Canadians say that the United States poses the greatest threat to their country’s security and put China and Russia far behind on the list of threats. Canadians have boycotted American goods and travel to the United States. While polls show that less than a third of Americans believe the bilateral relationship is negative, four out of five Canadians think that it is. More than half think Canada should make no more trade concessions to the United States. All this makes it harder for Washington to get what it wants.

It also encourages Canada to “derisk” from the United States, albeit within serious limits. This year Ottawa issued a defense industrial strategy aimed at reducing dependence on U.S. manufacturers. At Davos, Carney called for middle powers to unify, protect themselves in a new world, and defend a rules-based order. All this was a direct reaction to Canada’s perceived treatment by Washington.

Ottawa has made its own stumbles in the process. Carney flew from Davos to China, where he and Chinese Communist Party General Secretary Xi Jinping announced a “new strategic partnership.” It is hard to square a partnership with Beijing with defending the liberal international order, parts of which Beijing wishes to upend. For all of Washington’s current lurching, its economy remains far more open to Canada than does China’s. It does not, unlike Beijing, aid Russian aggression in Ukraine. The reality is that the United States and Canada are natural allies and economic partners. That should guide them toward an economic ceasefire.

The Big Picture

For the United States, it is a blessing of history and geography to enjoy a large, friendly, and democratic northern neighbor, allowing for the world’s longest undefended border. The two countries will always have disagreements, but the prominence of softwood lumber among them suggests that disputes are not exactly existential. In the bigger picture, cooperation rather than conflict has been the watchword.

The North American Aerospace Defense Command (NORAD), for example, protects both countries’ airspace. NORAD is a binational military structure, headed by a U.S. commander with a Canadian deputy, with troops from both serving in one integrated command. NORAD operates across national borders as well; Canadian military aircraft fly in U.S. airspace and vice versa. In March, two Canadian CF-18s and a tanker accompanied U.S. F-35s and F-22s to intercept Russian warplanes in Alaska’s air defense identification zone.

That kind of cooperation is not new. After 9/11, more than 40,000 Canadian troops served in Afghanistan over 13 years, fighting a war that started with attacks on New York and Washington, not Toronto and Ottawa. For years, Canadian troops engaged in combat operations in and around Kandahar, and some 158 Canadians lost their lives. Thousands were wounded. The country paid a dear price to serve in a war that was not originally its own.

More recently it paid a different price. In 2018, Canada arrested Huawei’s chief financial officer pursuant to a U.S. extradition request. Beijing responded harshly, including by unjustly imprisoning two Canadians for almost three years. Then–Canadian Foreign Minister Chrystia Freeland said, “Canada respects its international legal commitments, including by honoring its extradition treaty with the United States.” The country held firm.

Today, Canada and the United States cooperate closely to collect and disseminate intelligence under the Five Eyes framework. Canadian naval vessels participate in Operation NEON, the effort to enforce sanctions on North Korea in the western Pacific. Canadian warships and aircraft take part in the U.S.-led counternarcotics mission in the Caribbean under Operation CARIBBE. Under U.S. law, Canada is considered part of the national technology and industrial base, and Pentagon regulations say that “Canada is part of the defense industrial base” for the purposes of production planning.

Administration officials might object by saying that Canada significantly benefits from its relationship with America. It enjoys access to the world’s biggest market and defense by the world’s most powerful military. That is true. It also illustrates the point: Both countries are better off as partners than as estranged neighbors.

A Better Way

Former U.S. Vice President Mike Pence observed over the weekend that “the last thing we need right now . . . is a trade war with Canada.” Instead, he said, the United States should “pursue free trade with free nations.” That’s good advice. Free trade is deeply unpopular these days, of course, and the administration’s love of tariffs is legion. Yet even if it wishes to push Canada into yet another trade agreement, there is a better way to do it. Washington might usefully draw a lesson from history.

In the late 1980s, the United States found itself in a major trade dispute with another close ally. President Ronald Reagan imposed 100 percent tariffs on Japanese semiconductors, accusing Tokyo of dumping in third-party markets while protecting its own market. Yet Reagan kept up good and productive relations with then–Japanese Prime Minister Yasuhiro Nakasone and emphasized the nontrade elements of their countries’ ties. “Japan is a major economic partner,” he said, “as well as a staunch friend and ally.” In 1987, before Nakasone visited the White House for discussion, Reagan expected to “take up our relations with our good friend Japan, which overall remain excellent.” The United States was, he added, “just trying to deal with a particular problem, not begin a trade war.”

Other administration officials worked to insulate trade disputes from the rest of the relationship. Clayton Yeutter, then the U.S. trade representative, described Japan as “an ally and a friend.” “No one in this administration,” he added, “is happy with putting sanctions on that country.” Former Secretary of State George Shultz, observing that trade imbalances were bad for both countries, nevertheless reaffirmed the alliance. The United States should make common cause with Japan, he told the president, and avoid public rebukes. He worked both to compartmentalize the trade frictions and expand the alliance to take on global issues like arms control.

Keep Calm and Carry On

U.S.-Canada relations are arguably at their lowest ebb in modern times. The recipe for improving them is obvious. The two countries should have the freest possible trade with each other. They should harmonize their approaches to third countries like China. They should act as allies, invest in their defense, and work together against common adversaries.

The trade war should end, and it almost certainly will. Bringing the current spat to closure in a way that preserves supply chains, reduces barriers, and improves sentiment north of the border is possible. For the sake of our economies and our security: The sooner this ends, the better.

Richard Fontaine is chief executive officer of the Center for a New American Security.