He has no good options.
He has no good options.
T hursday’s U.K.-U.S. trade deal may give hope to Canadian Prime Minister Mark Carney that his nation could score a similarly rapid pact. He should think again.
President Trump’s deal with Great Britain likely came so quickly because so little was truly at stake. The U.S. had an $11.9 billion trade surplus in goods with Britain in 2024. Add in the trade in services, and the U.S. surplus grew to $78 billion.
That meant the main impetus for the deal was Britain’s desire not to see the deficit widen even further as tariffs priced British goods out of the American market.
The result was a deal that clearly favors the U.S. America gets unprecedented access for many agricultural goods, and Britain mainly receives a reprieve from the tariffs that would otherwise have been imposed. Even then, U.S. tariffs on autos and other goods will still nearly triple from Biden-era levels to Trump’s preferred 10 percent floor.
America, on the other hand, ran a combined $31.6 billion goods and services trade deficit with Canada in 2023. Trump wildly overstates the true amount when he says the U.S. subsidizes Canada to the tune of $200 billion a year, but it’s clear he intends to turn that into a surplus.
Turning that around means either Canada would have to export less to the U.S. or, the more likely path, purchase more from it. Either approach would cause Carney significant economic and political headaches.
Canada could cut the trade deficit a lot by purchasing U.S. weaponry as part of a military spending increase. Canada has long been one of NATO’s laggards. It has never met the alliance’s target of spending at least 2 percent of GDP on defense and shelled out a mere 1.37 percent of GDP in 2024.
It would make sense for Carney to launch a rapid and dramatic increase in that amount given that other NATO laggards have pledged to increase their budgets by 50 percent or more this year so they can hit the 2 percent target immediately. But Carney has stated that he plans to purchase much of that new equipment from Europe rather than the United States, even going so far as to state he was considering canceling the country’s expected purchase of American-made F-35 fighter jets.
That’s not going to go down well with Trump.
Other possible ways to increase spending on U.S. goods and services are similarly fraught. Canada could increase what it pays for U.S. pharmaceuticals. The government uses its power to negotiate substantially lower prices than what Americans pay for the same drugs, and presumably Trump would be happy if that gap were reduced.
But Canadians already are paying a lot for drugs compared with other nations, and prescription drugs are taking up a larger share of its single-payer health care program’s budget. Making Trump happy would make many Canadians unhappy.
Canada’s extensive trade barriers to importation of many agricultural goods could also be on the chopping block if Trump has his way. U.S. dairy, poultry, and egg producers find it nearly impossible to export large quantities of their products to Canada because of its supply management laws.
Carney would likely not want to change those laws because dairy production is located in provinces that are key to his party’s power. Members of Parliament from rural Atlantic provinces and Quebec will not want to see their farms collapse under pressure from cheap American imports.
Then there’s culture. Canada requires radio and television stations to broadcast a minimum amount of “Canadian content” — songs or programs with significant Canadian talent involvement. That clearly limits the amount of American-produced music or television that can be sold to Canadian broadcasters.
Doing away with that could lead to increased sales from U.S. studios or record labels. It would be viewed, however, as a direct assault on Canadian identity, making it a very hard lift for Carney.
These considerations will likely mean that Carney tries to hold out against U.S. pressure and hope that affected American consumers and businesses weaken the president’s resolve. That’s likely to be a pipe dream.
It’s just a fact that Canada’s economy depends much more on sales to the United States than vice versa. Fully 19 percent of Canada’s GDP consists of exports to the U.S.; only 1.5 percent of U.S. GDP comes from exports to Canada. No wonder Canadians say that when America sneezes, Canada catches a cold.
Carney, then, has a choice. Do what British Prime Minister Keir Starmer did and strike a quick deal on America’s terms and take the heat or play to the domestic audience and hope to wait Trump out. Having just won an election by playing on Canadians’ historic fear of their much larger neighbor, Carney will likely take the second path — and pay a much higher price when he eventually must bow to reality.