Trump’s impact on U.S.-Canada relations
The out-of-the-blue demands on Canada from the American president have stirred the world of politics, but both countries have much to lose by drifting apart.
In a nutshell
- Canadians value their differences from the U.S.
- The two countries’ ties are immense, with converging security interests
- Canadian conservatives are more likely to cooperate with Washington
- For comprehensive insights, tune into our AI-powered podcast here
The United States-Canada relationship has recently become uncertain, influenced by significant political transformations and economic challenges in both countries, as well as an unsettling global situation. Statements by U.S. President Donald Trump about Canada joining the U.S. as its 51st state have alarmed many Canadians, leading to confusion and curiosity about how to interpret his proposals and assertions. However, aligning American and Canadian vital interests is crucial for both nations. Ultimately, these shared interests are likely to keep relations steady, though future national elections in Canada could impact cooperation prospects.
Storm before the calm
Two disruptive dynamics have simultaneously upended relations between the two countries. On January 6, 2025, Canadian Prime Minister Justin Trudeau announced his intent to resign as head of government and leader of the Liberal Party after almost 10 years in power. The party will select a new leader in March, with national elections currently set for October 20, 2025, although this date may change if the government loses a confidence vote.
The popularity of the Trudeau cabinet collapsed due to multiple economic and political factors. The conservative Canadian think tank, the Macdonald-Laurier Institute, concludes in its analysis that the country “is beset by incompetent governance, runaway ideology, social malaise and a national identity crisis.” In contrast, polls show the Conservative Party opposition led by Pierre Poilievre gaining a wide advantage, though the gap is narrowing.
Frustration over Mr. Trump’s demands is not only emotional. There are enormous practical challenges as well.
At the same time, President Trump has made numerous demands and threats regarding a range of issues from trade imbalances, border security and cross-border drug trafficking to inadequate Canadian defense spending.
Canada’s identity crisis
The most significant outcome of this double challenge is the dilemma it presents to everyday Canadians. While they broadly view the U.S. as the country’s most important economic and security partner, a strain of anti-Americanism has always existed in the country, varying in intensity depending on the region or current events. For example, anger over President Trump’s statements on Canada is far more expressed in the predominantly center-left cities of Toronto and Montreal than in more conservative provinces of Saskatchewan and Alberta.
Frustration over Mr. Trump’s demands, such as the U.S. president’s controversial suggestion that Canada should just merge with the U.S., is not only emotional. There are enormous practical challenges as well. In March 2024, Canada’s debt-to-GDP ratio was 69.4 percent and growing fast; it was projected to reach 76.2 percent by the end of the 2023/2024 fiscal year.
According to the Government’s Expenditure Plan and Main Estimates for 2024-2025, transfer payments account for 63 percent ($283.0 billion) of total budgetary authorities. The sustained higher defense spending and border security demanded by President Trump would aggravate that structural deficit. Moreover, Canadians have increasingly less discretionary spending power compared to Americans. As of the third quarter 2023, per capita consumer spending in the U.S. was trending higher and was almost 2 percent above year-ago levels, while Canadian consumers had begun to pull back. Further, with a poor rate of personal savings and massive government quantitative easing, Canada cannot afford a trade war with the U.S. nor carry the economic burdens to address the trade imbalance.
Alignment of interests
Despite the challenges and animosities, there are several critical areas where U.S. and Canadian interests align, and cooperation is not only possible but would be salutary for both countries.
Security. The primary area where Canadian investment in security would benefit both countries, not to mention NATO, is in Canada’s northern territories. Chinese and Russian activity in the Arctic region is increasingly recognized in Washington and Ottawa as necessitating greater cooperation among the High North NATO countries. Canadian security investment should focus primarily on the defense of Canadian territory, sovereignty and infrastructure. Major Canadian outlays in defense, while difficult to fund, are justified as they would mostly benefit Canadians.
Read more from James Jay Carafano
- A possible Saudi Arabia-Israel-United States triangle
- U.S. congressional infighting is more than meets the eye
- The role of domestic consensus in U.S. foreign policy
- America’s response to the Global South
Prime areas of cooperation with the U.S. could include facilitating ballistic missile defense, such as radar facilities on Vancouver Island, and integrating missile defense operations within the North American Aerospace Defense Command. Additional areas of focus could be air and maritime situational awareness and expanding staging areas in locations like Edmonton to enhance rapid response capabilities in the Arctic.
Arctic Leadership. The U.S. and Canada could effectively collaborate with the Nordic and Baltic countries in Europe to establish a Free North, addressing key security, economic and geopolitical issues within a common framework.
A synchronized American and Canadian effort to address the challenge posed by China would enhance Canada’s global relevance.
Energy. The American and Canadian energy industries have an unprecedented opportunity to grow together, particularly if Ottawa aligns its policies with Washington’s shift from an energy and environmental strategy that prioritized green transition and NetZero goals to policies aimed at maximizing the availability of reliable, affordable and abundant energy.
Mining and processing. Both countries would benefit from breaking China’s near-monopoly on the extraction and processing of critical minerals. Together, Canadian resources and U.S. foreign direct investment could effectively respond to Beijing’s strategy of subsidizing the environmentally burdensome production of rare earth elements to undercut global competition. The U.S. and Canada could lead in establishing a consortium that provides a reliable and affordable alternative.
Systemic competition with China. Beijing has conducted numerous malicious actions in both countries. A synchronized American and Canadian effort to address the challenge posed by China would not only make Canada a better partner for the U.S. but also enhance its global relevance.
Scenarios
Most likely: Conservatives in Ottawa cooperate under the U.S. pressure
Under any scenario, Canada is likely to align more closely with U.S. demands in the future. The asymmetry of power, the immense benefits of the bilateral relationship and President Trump’s incessant pressure will prove decisive. Ottawa has no other realistic option.
That said, expect significantly different outcomes based on the results of Canadian elections. A Conservative government is more likely to deliver a pro-growth agenda that includes lower taxes, fewer regulations and more supply-side economic policies. The Conservatives are also more committed to increased defense investments, cracking down on transnational crime, adopting a more proactive stance on border security and taking tougher positions on China.
Possible: Liberals manage to hold on to power, riding on anti-Trump sentiment
The wild card here is President Trump. The significant Conservative lead in the Canadian polls has declined in response to his constant criticisms of Canada. All parties are weighing how to address Mr. Trump as part of their political campaigns. Fighting back against the U.S. president gives Canadian politicians an illusion of strength in the eyes of the electorate. Meanwhile, there is little likelihood that the occupant of the White House will moderate his rhetoric.
Further, since several months likely remain before the Canadian elections take place, it is unclear how the friction between Washington and Ottawa will play out over time. The current Canadian government hopes to delay the election as long as possible, banking on negative sentiments toward President Trump to keep voters aligned with them. However, if Washington demonstrates success in driving the U.S. economy and exercising global leadership, Canadians might grow increasingly concerned about falling behind. Ultimately, the success or failure of President Trump’s governance in the next six months may prove more influential on Canadian voters than his fiery rhetoric.
Contact us today for tailored geopolitical insights and industry-specific advisory services.
Sign up for our newsletter
Receive insights from our experts every week in your inbox.
