Canada shouldn’t hurt itself just to spite Trump

0:00Welcome to Hub Headlines. Today's program features the best commentary and analysis published in the Hub for September 9. Up first is Sean Speer, writing on why Canada's retaliatory tariffs against the US are a losing strategy despite justified grievances. Canada's new retaliatory tariffs have taken effect. They'll predictably invite another American response, which will in turn produce demands for further Canadian retaliation. Each government will explain that its actions were necessitated by the others. Canadians will be encouraged to see the resulting escalation as evidence of our resolve. We should spend more time thinking about where it leads. An open-ended trade war with the US is a losing proposition for Canada. That remains true, however justified our grievances, however offensive the president's rhetoric, and however satisfying it feels to answer American tariffs with our own.

1:00The economic imbalance between the two countries will ultimately matter more than the strength of our convictions. Consider the scale. The American economy is about $30 trillion USD. Canada's new counter tariffs cover $27.6 billion CAD, or approximately $20 billion USD, in American imports. The entire value of the affected trade amounts to roughly 600 of 1% of American GDP. We may be able to hurt particular American exporters on the margins. It's a much bigger leap to assume that we can inflict sufficient economic pain to force the White House to change course. Canada's exposure is considerably more concentrated. The US purchased 71.7% of our merchandise exports in 2025. Access to the American market is fundamental to Canadian investment, production, and employment. Washington has much greater capacity to absorb a prolonged confrontation. Retaliation may nevertheless command considerable public support here.

2:00Canadians understandably want their government to respond to the president's threats and economic coercion. But domestic approval and bargaining effectiveness are different things. A policy can satisfy the Canadian public without changing the calculation inside the White House. Those expecting our counter tariffs to produce an American reversal are placing considerable faith in limited leverage. Perhaps the greatest cost of this latest escalation is that it takes us further away from the agreement being negotiated little more than two weeks ago. Although the proposed terms were imperfect, they nevertheless offered Canada a considerably better prospect than the confrontation now gathering momentum. The reported framework would have preserved tariff free access to the US market for the vast majority of Canadian exports while lowering American tariffs on Canadian aluminum, steel, and autos. As importantly, the agreement offered a route to containing the dispute before new tariffs extended its reach. I supported the proposed deal because those gains mattered. Its merits depended on the alternatives

3:02actually available to Canada under circumstances that no Canadian government would have chosen. Instead, much of the debate measured it against the trading relationship we wished we still had. Continuing tariffs were characterized as evidence of failure, even though it was obvious long ago that that outcome was improbable. The idea that the absence of an agreement would doubtless be worse received too little attention. As the tariffs go into effect, we'll now have to confront that possibility. None of this requires sympathy for Donald Trump. His administration has chosen to impose damaging trade barriers on a close ally. His threats and provocations have made an already difficult negotiation harder. Responsibility for those choices rests in Washington. Yet the Canadian government still has to decide how to respond. The president's culpability cannot settle the separate question of which Canadian policies will best protect Canadian interests. Maybe there were legitimate objections to the proposed agreement. The two governments offer conflicting accounts

4:03of why negotiations collapsed. Mark Carney has said that Washington failed to provide sufficient assurances that negotiated tariff levels would remain stable. The reliability of any commitment from Trump is an obvious concern. But that concern applies to continued confrontation too. An unpredictable president willing to inflict economic damage is a serious risk under either course. Rejecting an imperfect agreement doesn't remove that risk. It can leave Canada more exposed to it. The deeper problem is that public policy offers no opportunity to run both scenarios and compare the results. We cannot spend six months pursuing a trade war, inspect the damage, and then return to August to conclude the agreement with US trade representative, Jameson Greer. Decisions build on one another. New tariffs create new disputes. Governments acquire political commitments that make compromise harder. Terms that seemed unacceptable before the latest confrontation may become attractive just as the other side loses interest

5:04in offering them. The economy moves on as well. A manufacturer that places its next investment in the US may not reconsider because Ottawa and Washington eventually reconcile. A Canadian supplier that loses a customer may struggle to win it back. Workers and businesses can suffer permanent losses during what politicians describe as temporary bargaining pressure. Waiting is itself a consequential choice. There's little appetite for this discussion right now. Canadians are rightly angry. Arguments about economic asymmetry can sound defeatist when people want their government to stand up for them. Yet protecting Canadians requires a dispassionate assessment of what's realistic and what's ultimately in the country's interests. Some months from now, there's a good chance that the public debate will change. The question may become what Canada's economy would have looked like had Ottawa concluded the proposed agreement with Greer. We'll never be able to answer precisely. There will be no parallel scenario in which the deal was signed,

6:07investment proceeded, and the next round of tariffs never arrived. That uncertainty should admittedly make us careful about claiming what the agreement would have delivered. But it should also make us careful about discarding it. Canada may yet discover that the agreement that it considered too costly was considerably cheaper than the decision to let it slip away. That was a commentary by Sean Speer. He is the hub's editor at large. You can read the full text of his article on our website, the hub.ca. Our second essay is by Rudyard Griffiths, writing on how Canada should follow China's trade war playbook in responding to Trump's tariffs. At 12.01 Tuesday morning, Canada's dollar for dollar counter tariffs on $27.6 billion of American goods came into force. Steel and aluminum duties doubled to 50%. Dairy, appliances, farm equipment, and electronics joined the list. Ottawa calls it matching Washington rate for rate. As Sean Speer and I have written,

7:08this was not our preferred outcome. We thought the prime minister should have taken the August 21st deal, barring the known unknown of some sovereignty-breaking demand. But here we are, September 8th, in a tit for tat trade war with the world's superpower. As I like to tell my kids, actions have consequences, and Canadians will soon find out exactly what these are. As we gird our collective loins for the battle to come, it is instructive to think on the recent US experience with trade wars, and particularly how its opponents have responded to President Trump's particular blend of maximal threats, escalations, climbs downs, and more than a few outright take-os along the way. No better or more instructive example can surely be found than how the Chinese handled their trade war with the Trump administration. In the first days of April 2025, China answered Donald Trump's 34% reciprocal tariff with a 34% tariff of its own. Washington went to 84% a week later.

8:09Beijing matched it the next day. Washington went to 125% a few days later. Beijing matched again after 48 hours, and then did something instructive. It announced it would ignore any further American increases because they had become meaningless. China stopped playing the tariff game because it had figured out the game could not be one on those terms. The US imports roughly three times as much from China as it sells there. US tariffs were poised to crush the Chinese economy in the short term with US consumers picking up the tab months later. How Beijing pivoted at this moment of crisis is the part Ottawa has no doubt been studying carefully. Buried in that same early April announcement was a licensing regime on seven medium and heavy rare earths and the magnets made from them. Within weeks, Ford idled a plant. European suppliers warned of shutdowns and the Pentagon found its contractors had months of inventory, not years. Mid-May in Geneva, the Trump administration

9:11cut its 125% tariff to 10. China cut its own to 10. The truth was extended in August. While the tariff war was over, the export control war had barely begun. Beijing played the card a second time in October 2025 with sweeping extra territorial controls on anything containing Chinese rare earths. Trump threatened an additional 100% tariff within 24 hours. Three weeks later in Busan, he folded, having the fentanyl tariff to 10% and extending the truth to November 20th, 26 in exchange for a one-year suspension, not a cancellation of the controls. May's Beijing summit added Boeing orders, soybean purchases, and a board of trade to Whittle Tariffs further. China's base tariff is now around 12.5%. The 145% maximalist strategy is a memory, and she still holds the leverage that ended it.

10:11The lesson is not that tariffs are useless. It is that retaliation with a like instrument against a larger economy invites escalation rather than deterring it. Trump escalated against China three times in nine days because he believed he could. He climbed down only when China touched something the American economy could not replace at any price. Canada is now where China was in early April 2025. Section 338 duties of 50% on some $20 billion of Canadian goods took effect August 22nd after talks collapsed. Trump has already announced the next rung, 50% on autos and steel on January 1st. Expect more before then. The administration's incentive between now and the Novimer III midterms is to be seen winning a fight with a difficult trading partner and Canada's counter tariffs, which by design hit American exporters in swing district industries. Supply the pretext. The China pattern says the Trump administration's response to auto was latest move will be to double down, go maximal,

11:15and most certainly not return to the bargaining table. Why China ultimately won its trade war with America was its willingness to fight asymmetrically and explicitly use its Trump card or rare earths to expose an immediate and perilous cost to the US for continuing its trade fight with the middle kingdom, which brings us to the most revealing sentence in the American proclamations of July 20th. The section 338 tariffs carve out energy, potash, and critical minerals. Washington has told Canada in the text of its own escalation, which Canadian exports it cannot do without. Canada sends roughly four million barrels of crude a day, south to US refineries. Much of it to midwestern plants built for heavy Canadian oil and not easily retooled for lighter grades. Canadian potash underpins American corn and soybean yields in the very states where Trump's coalition lives. Canadian uranium, nickel, and aluminum sit inside the US defense and energy supply chains

12:16in ways the rare earth scare of 2025 made vivid. These are not tariffs Ottawa could impose. They are dependencies Ottawa could start pricing. To be clear, I am not proposing an oil embargo. Beijing never outright embargoed rare earths either. It imposed licensing, created uncertainty, and let American industry make the case to the White House. Canada's smarter escalation in the weeks to come is to begin legislative drafting of an export licensing framework for crude, potash, and designated critical minerals. Not a tax, not a ban, but a regime that makes the continued flow of these goods a matter of Canadian discretion rather than American assumption. The objections to such a course of action are real and should be taken seriously. Alberta and Saskatchewan will understandably resist any direct federal role in their exports. The memory of the national energy program remains a scar on our body politic.

13:16Any actual disruption would hurt Canada too. But those objections apply to Beijing as well. China accepted the cost because the alternative, matching tariffs against a larger economy indefinitely was self-evidently a mugs game and won their economy was destined to lose. Prime Minister Carney's evident wager is that the midterms will do the work for him that a chasened Republican Congress will force a deal in 2027. Perhaps, but the China precedent says the next phase of the trade war will be escalatory with a fast march toward 100% duties or more. The tactic that can diffuse such a spiral is making the US economy plead our case in real, direct, and urgent terms. Canada holds these cards, yet today we choose to continue to fight the tariff war on Trump's terms. It won't work. We need to get asymmetrical in this conflict and fast. Preventing lasting damage to the entire Canadian economy depends on a speedy resolution that preserves our red lines.

14:20China has given us a game plan to achieve such an outcome. If indeed, the August 21st deal is unsalvageable. We just need the nerve to see it through. That was a commentary by Rudyard Griffiths. You can read the full text of his article on our website, the hub.ca. That's it for today's edition of Hub Headlines. We hope you enjoyed the program. Hub headlines is produced by Alicia Rao. This program was narrated by automated voices. Thanks for listening.