President Donald Trump addresses a joint session of Congress at the Capitol in Washington, on March 4.Win McNamee/The Associated Press
Kristen Hopewell is a professor and Canada Research Chair in the School of Public Policy and Global Affairs at the University of British Columbia, where she is also the director of the Liu Institute for Global Issues.
With the tariffs imposed last week, U.S. President Donald Trump has launched an economic war on Canada. The Canadian government swiftly responded by imposing countertariffs on $155-billion worth of U.S. goods. But Canada’s response is too limited to convince Mr. Trump to scrap his levies.
We must expand the scope of our retaliation beyond traditional goods trade to target American services, intellectual property and technology – especially those tied to the so-called “tech bros” who have thrown their weight behind Mr. Trump and now form part of his inner circle. We also need to work with allies to co-ordinate our retaliation and present a united front against Mr. Trump’s trade aggression.
In addition to the 25-per-cent tariff Mr. Trump has imposed on Canadian goods, he intends to levy a barrage of other tariffs – on steel, aluminum, autos and lumber. And those tariffs will be cumulative – meaning Canadian autos and parts, for example, will face a combined 50 per cent in tariffs.
The tariffs will damage the U.S. economy. But the effects on Canada will be devastating. Exports account for a third of Canadian GDP, with 77 per cent of our exports going to the U.S. Mr. Trump’s tariffs will result in millions of job losses, widespread business failures and bankruptcies and a collapse of government budgets.
For Mr. Trump, weakness is a provocation. Canada needs to respond to his aggression forcefully and with strength. Retaliating against U.S. goods alone is not enough. Today, it is no longer manufacturing but technology, services and intellectual property that lie at the heart of the U.S. economy. Companies such as the Magnificent 7 (Alphabet Inc., Amazon.com Inc., Apple Inc., Meta Platforms Inc., Microsoft Corp., Nvidia Corp. and Tesla Inc.) – which make up 35 per cent of the S&P 500 – are the foundation of America’s current global economic dominance. The U.S. has a large services trade surplus, and knowledge-based industries that rely heavily on IP account for more than 40 per cent of U.S. GDP. This is where Canada’s retaliation needs to be targeted.
Canada should explore more innovative forms of retaliation, including a ban on American social-media platforms such as X and Facebook, digital streamers such as Netflix Inc. and online retailers such as Amazon. An alternative to an outright ban is to jack up digital-services taxes on these companies to levels equivalent to Mr. Trump’s tariffs.
Ottawa should also threaten to suspend IP protections for American companies, such as patents and copyrights. Canada is a global leader in generic pharmaceutical manufacturing, for example, with a raft of companies that could reap a windfall by producing and exporting generic copies of patented U.S. drugs.
There is precedent for such measures. Recognizing that smaller countries are inherently in a weaker position when big economies such as the U.S. break the rules, the WTO has authorized countries to suspend IP protections in previous trade disputes.
To be clear, all forms of trade retaliation impose costs on Canada. But it is one of the only tools we have to defend our economic interests.
Some may fear that juicing up our response risks inciting the Trump administration further. But he has already taken extreme measures to damage the Canadian economy; at this point, there’s little reason to pull our punches. One way to mitigate the risk is by co-ordinating with allies, which would also allow Canada – a relatively small economy if acting alone – to intensify the effects of its retaliation.
Until now, most countries have responded to Mr. Trump’s threats by negotiating bilaterally with the U.S., making a wide range of concessions to try to appease Mr. Trump. Canada, for example, vowed to ramp up border security to stem the (virtually non-existent) flow of fentanyl and irregular migration to the U.S. in an unsuccessful bid to stop Mr. Trump’s tariffs.
The problem with this strategy is that countries are weakest when they act alone. Co-operation among like-minded allies who value rules-based trade – including the European Union, the U.K., Japan, Australia, South Korea and Mexico – is the best way to counter Mr. Trump.
If these countries were to unite and co-ordinate their retaliation by targeting the same U.S. goods, services and intellectual property – if all blocked sales of Tesla cars or refused to sign new contracts with Starlink or SpaceX, for instance – the impacts would be dramatically magnified. By uniting, we can present a much stronger front, showing Mr. Trump that we will not allow ourselves to be bullied by his threats and intimidation.