As an 'economic predator' snarls at Canada, decarbonizing is one path out

Prime Minister Justin Trudeau made an extraordinary claim on Tuesday as he outlined Canada’s response to U.S. tariffs: that President Donald Trump’s true aim is to wreck the Canadian economy in order to annex it.

“We have to fold back on the one thing he has said repeatedly that what he wants is to see a total collapse of the Canadian economy because that will make it easier to annex us,” Trudeau said. “We will never be the fifty-first state.”

Trudeau’s claim raises uncomfortable questions for Canada about how to best proceed. For instance, does Trudeau literally mean the U.S. intends to take over Canada, or does he mean, more figuratively, that the U.S. intends to weaken the Canadian economy to the point Ottawa caves on American demands, akin to its shakedown of Ukraine? 

Stuart Trew, trade researcher with the Canadian Centre for Policy Alternatives, said he doesn’t believe Trump taking over Canada is Trump’s ultimate goal, and he believes the U.S. approach to Ukraine is “quite different.” But Trudeau is probably right about Trump’s aim of wrecking the Canadian economy, he added.

“When you boil it down the agenda is probably quite simply stripping production out of Mexico and Canada into the United States,” he said. 

Trump’s “Art-of-the-Deal psychosis,” leads him to believe any deal should let Trump ‘get more from you than you get from him,” Trew said. 

With a trade war launched, and seemingly nothing Canada can do to satisfy Trump, Trew said the federal government should pursue two goals. The first is get the tariffs removed as soon as possible using punishing counter-tariffs and potentially blocking exports of things like potash, electricity, uranium, oil and gas. But going forward Canada must find ways to make the Canadian economy less vulnerable to aggressive trade policies from the U.S.

The problem, Trew says, is that the immediate goal of getting tariffs removed can contradict longer term goals of making the Canadian economy more resilient. That’s in large part because a major foreign policy priority for both Liberal and Conservative governments has long been increasing access to the “golden goose” of U.S. markets for Canadian companies. 

Even if tariffs come down soon, Trew said Canadian officials should try to decouple the Canadian economy from the U.S. by creating strategic reserves of Canadian resources, building east-west rapid rail using Canadian steel, aluminum and iron, and putting “buy Canadian” conditions on projects that need to happen anyway, like building homes. 

Beyond buying Canadian, Clean Energy Canada is calling for governments to establish a “buy clean” policy. In a statement, Rachel Doran, vice-president of policy and strategy, said procurement policies based on carbon intensity would benefit Canadian-made cement, steel and vehicles as the country’s relatively clean power grid means many of Canada’s heavy industries have lower emissions than international competitors. 

“As leaders across the U.S and Canada have repeatedly pointed out, a trade war between our two countries will have no winners,” she said. “But Canada does have tools at its disposal to ensure we can weather this storm and steer our country to calmer waters. The energy transition provides Canada with many opportunities, if we take them.”

Despite the two countries trading blows in what many fear could be the start of a long, bruising trade war, it’s unclear how long it will last. U.S. Commerce Secretary Howard Lutnick said tariffs could be scaled back as early as Wednesday — after the U.S. stocks fell Tuesday wiping out the market’s gains since Trump’s November election. 

Political reactions

Conservative Party Leader Pierre Poilievre laid out a different vision Tuesday. Speaking to reporters he said “counter-tariffs must not be a cash cow for the government.” No money generated should go toward new government spending — an apparent reference to calls from other parties to introduce spending packages to protect workers. 

Poilievre also promised to cut taxes, saying “the obvious place to start is by axing the Liberal carbon tax,” and to repeal the federal impact assessment in order to build more fossil fuel infrastructure. “We must greenlight LNG plants, mines, pipelines, and refineries that will bring home jobs and paycheques, make us less reliant on the Americans and help us sell more overseas,” he said. 

In a letter to other party leaders sent Tuesday, NDP Leader Jagmeet Singh called for an emergency session of Parliament to address the tariff threat. He said a package for workers should include changes to employment insurance to allow more people to qualify and for higher levels of financial support; investing in domestic manufacturing and supply chains to create good jobs; and unanimous support for retaliatory tariffs which he said “would send a powerful message.”

“I understand that we are all preparing for an election to be called soon. But these steps need to be taken immediately, prior to an election,” he wrote. “Otherwise, we are leaving Canadians vulnerable to the impacts of tariffs to suffer for months as an election is held and a new government is chosen.”

Bloc Québécois Leader Yves-François Blanchet said at a press conference it’s critical for Quebec, Canada, Mexico and Europe to work together to decide a “common strategy against their former ally.”

“We are starting to see a little more clearly into Donald Trump's strategy: cut off the air to his main trading partners; monopolize the attention of the media and public opinion; and try for as long as possible to attract businesses and head offices to the United States before inflation, stock markets or interest rates force him to back down,” he said, calling Trump an “economic predator.”

Blanchet also said the tariff threat is a good opportunity to green the economy, and that the government will have to set up a loan program for Quebec businesses to ensure they’re “not sacrificed for the benefit of Ontario’s automobile sector or Western oil companies.”

In a statement, the Green Party said Trump’s tariffs are an economic weapon and a clear message the U.S. administration wants to destabilize Canada.

“Counter-tariffs and retaliation are not enough to protect Canadian jobs, but we could better protect all regions of Canada by creating strategic reserves of Canadian raw resources — such as forest products, aluminum, potash, bitumen, and uranium — to increase our economic leverage and clout while ensuring Canadian producers can sell their products,” Green Party co-Leader Elizabeth May said. “Canadian Crown corporations operating strategic reserves will buttress our economy and allow us to better weather the storms Trump imagines will bring us down."

Trudeau met with premiers Tuesday afternoon to discuss potential responses to tariffs, and told reporters the most important thing is for Canadians to remain united and to not have some regions carry more of a burden than others. 

Inevitably, however, a trade war will pit some provinces against others. As previously reported by Canada’s National Observer, an export tax on oil and gas to make energy more expensive for Americans is one point of leverage Canada has in a trade war, but would upset the fossil fuel industry and its political allies. 

Last month, Alberta Premier Danielle Smith, who previously warned of a national unity crisis if the federal government restricted oil and gas exports, said she was calling on federal officials and other premiers to “de-escalate rhetoric, abandon any non-tariff measures for the time being, and turn our efforts entirely to advocacy and good-faith negotiation.”

Now that tariffs are in place, Smith says she fully supports Trudeau’s response and that “now is the time for us to unite as a province and a country.”

“We must do everything in our collective power to immediately tear down provincial trade barriers and fast-track the construction of dozens of resource projects, from pipelines to LNG facilities to critical minerals projects,” Smith said in a statement.

Chris Severson-Baker, executive director of the Pembina Institute, said in a statement that Canada has the ability to generate clean, low-cost electricity to decarbonize — and given the rollback of climate policies in the United States, Canada is well positioned to compete for billions of dollars in capital for low-carbon industries. 

“In recent weeks, powerful incumbent industry players in the oil and gas sector have called on the government to expand oil and gas infrastructure,” he said. “While this moment calls for decisive action, we must be strategic and responsible about which projects and industries are developed — recognizing that the global shift to low-carbon energy will simultaneously address energy security and affordability concerns.

“Canada should pursue a coordinated policy of electrification, a true nation-building endeavour that will reap rewards that endure well beyond the current dispute with our southern neighbour,” he said, adding that electrification “is the only overarching policy” that supports economic prosperity, improves people’s health, lowers emissions, and provides affordable energy. 

John Woodside / Local Journalism Initiative / Canada’s National Observer