Canadian Prime Minister Mark Carney’s decision to withdraw his trade negotiating team from Washington last Friday was surprising and refreshing. Surprising because Carney clearly wanted a deal and has a record of conceding to Donald Trump again and again, to no effect, in hopes of securing one. Refreshing because the deal on offer would have been terrible for Canadian workers.
The interests of labor and capital are not the same, and Carney’s position is not the Left’s. Canadian workers care about the health of their country’s productive base but have no interest in undercutting American workers in this trade war, which is doing the latter no favors in any case. The industries in Trump’s crosshairs support millions. Their destruction would devastate communities on both sides of the border, weaken the tax base for public services, and cede decision-making to forces outside Canada. Economic sovereignty may not in itself be a democratic economic program, but it is the precondition for one.
Keeping Trump off the Ice
Prime Minister Carney, a banker with few progressive inclinations and little time for public servants, now faces a political dilemma with intriguing possibilities for the Canadian left. Unable, because of public and political opinion, to sign a bad deal with Trump but facing imminent deindustrialization in a number of sectors, Carney’s government may be forced to consider developmentalist alternatives to the market-led growth and free trade model that has shaped North America since the late 1980s.
So why was the deal impossible to accept? Prior to Canada’s walkout, media leaks pointed to a landing zone that maintained a 15 percent US tariff on finished vehicles imported from Canada. Although the value of US parts would have been deducted when calculating the tariff, even an effective rate of 7 to 9 percent, depending on the vehicle model, would have added billions to the cost of manufacturing vehicles in Canada, producing a permanent incentive to close factories.
This result was unacceptable to Unifor, which represents Canadian autoworkers, as well as to the premiers of Ontario and Quebec. Trump’s offer to reduce steel and aluminum tariffs to 25 percent from 50 percent, and lower lumber tariffs by only 10 percent, was similarly a no-go for the premiers of British Colombia and Manitoba. Together, this pressure appears to have forced Carney back from accepting Trump’s “best” terms, which also reportedly included more concessions on digital and cultural policy similar to those that other countries have agreed to in “reciprocal” deals with the United States.
Public opinion overwhelmingly backs the walkout and wants Canada to hold the line. One poll from August 23 showed 76 percent support for ending trade negotiations with Trump. Although 89 percent of people in the same poll are worried about the impacts of the ongoing trade war on the cost of goods and services, nearly two-thirds of respondents agreed “Canada will emerge stronger in the long run.” There is broad awareness that a 15 percent automotive tariff would spell the end of the sector within the span of a product life cycle. There is a broadly held understanding that a bad deal would both lock in economic insecurity and be forever subject to change and reinterpretation by Washington.
Rallying Around the Technocrat
The Conservative Party is in disarray over these developments. Jason Kenney, a former soldier of the Stephen Harper–led government who went on to serve as premier of Alberta from 2019 to 2022, suggested this week that at least half of Conservative voters belong to a MAGA-lite category and are “inclined to believe that Canada is more to blame for this conflict than the Trump Administration.” Yet even Conservative leader Pierre Poilievre, who rose to the top with support from this highly vocal but nonrepresentative grouping, and media mogul Conrad Black are urging the prime minister to hold the line.
The conservative columnist Andrew Coyne went further, saying Canada probably shouldn’t be negotiating with this administration at all. “The Carney government frames the issue in terms of last-minute additions to the American position,” he wrote on August 24. “But the agreement that was being talked about publicly before then was already unacceptable in its own right. . . . Walking out of the negotiations was the easy part. Staying out is the test.”
Conservative and liberal commentators alike claim Trump doesn’t want a deal; he wants vassalage from Canada. This is a position more commonly held on the Left but with roots in the anti-free-trade stance of the Liberal Party and many so-called Red Tories of the 1980s. It is not anti-Americanism but the resurfacing of a dormant national developmentalism — a preference for domestic upgrading of resources and a democratic industrial strategy benefiting all parts of this vast country.
Business groups, right-wing think tanks, and large Canadian firms, on the other hand, remain panicked about saving the United States–Mexico–Canada Agreement and are proposing a new grand bargain with Trump involving first rights to “critical” minerals and energy, significantly expanded military procurement, and fealty to the Donroe Doctrine. This is, paradoxically, Premier Doug Ford’s preference, but he’s not about to pay for it by sacrificing Ontario’s automotive sector. Ford’s high-profile attacks on Trump help the premier politically, but his ultimate goal is to lock US investment into dubious, environmentally harmful mining and fossil fuel infrastructure projects.
Carney is inclined to listen almost exclusively to business lobbyists. He has made a number of CEOs and money managers key gatekeepers of his new government, making his rejection of Trump’s latest offer doubly surprising. Canadian banks, however, have shrugged off the failed negotiations because of how much money they are earning from rising oil and gold prices, and how much growth they see on the horizon. This may all end in tears if the US artificial intelligence boom goes bust, but for now the financial world is on cloud nine.
Setting the Stage for Democratic Industrial Strategy
The Canadian left, long opposed to free trade and closer integration with the United States, now finds common ground with a broad, multipartisan consensus that Canada must move on from the economic relationship it has known for the past forty years: one of ever-deepening integration. The Justin Trudeau government initially pitched integration as a strength even as it tried to haggle with Trump for special treatment. When it became clear that Trump’s goal was economic immiseration of his northern and southern neighbors, Trudeau wisely adopted a firmer stance.
Then came Carney — and a wasted year of appeasement and economic stress. We are back to square one but in a potentially more fruitful environment for economic experimentation. Carney is not progressive. His democratic credentials are open to question. He governs his cabinet and government from the top down, is supremely confident in his own intelligence and strategic hunches, and is dismissive of Indigenous, labor and environmental criticism of his major projects agenda.
For all his talk of a rupture in the rules-based international order, the prime minister would eagerly jump back into “Fortress North America” under the right terms. “Let’s be absolutely clear. Canada Strong will help make America great again,” Carney told an Economic Club of New York audience in May. He continues to claim that a good deal with Trump is possible.
At least for now, the country is united in the view that this is not true. Despite opposition from the premiers of the two major oil-producing western provinces, calls are growing across party lines for Canada to start taxing energy exports to the United States rather than offer them up as a solution to US energy dominance. The conditions are ripe, in other words, for democratic industrial strategy and other economic alternatives to free trade.