Where is Canada’s leverage in trade talks with Trump?

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Fen Osler Hampson is a chancellor’s professor at Carleton University and co-chair of the Expert Group on Canada-U.S. Relations.

U.S. President Donald Trump’s decision Thursday night to abruptly end trade talks with Canada –reportedly after seeing an Ontario government television ad featuring the voice of Ronald Reagan extolling the virtues of free trade – should erase any lingering illusions about how this White House negotiates. His theatrical pique reveals these are not negotiations in the traditional sense – give something and get something in return – but instead negotiation by diktat. Mr. Trump alone calls the shots, while Canada is expected to accept his terms.

His announcement is especially jarring after Prime Minister Mark Carney’s seemingly productive recent visit to the Oval Office, where the President boasted that he would give us a deal that would make us happy. For a fleeting moment, it looked like there was finally some progress and that the stalemate could break. It now appears Mr. Trump was simply setting the stage for another act in his familiar playbook – knock the other guy down to show who is boss.

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Mr. Trump’s approach to negotiations has never been about mutual benefit. It is rooted in coercion and dominance: define the field, set the terms, then punish those who resist. Canada’s current talks in Washington are advancing only in areas where the U.S. lacks domestic capacity – steel, aluminum, energy and critical minerals. In these sectors, tariff reductions will fill a gap where there are serious American shortages, and no prospect that U.S. suppliers can fill them any time soon. In sharp contrast, there is no movement on auto assembly or softwood lumber, where Mr. Trump’s advisers insist the U.S. can reshore domestic production and replace Canadian imports altogether.

It seems that Canada’s negotiating team misread the room from the outset. They have acted as if the Americans need our auto industry, when the White House made it clear that they do not. Whatever can be made, grown or mined within the United States will be walled off from trade concessions – no matter the cost to consumers or domestic industries.

To call this a negotiation is to use the wrong word. This is top-down economic policy handed to allies via ultimatums. The real question now is not whether Mr. Carney can bring Mr. Trump back to the table, but what Canada’s response will be when he does, likely with a “deal” that was written exclusively by Washington. It might contain small openings in energy and minerals, and relief on some industrial tariffs where American shortfalls lie, but it will likely also contain continued punishment for autos and lumber – industries that once symbolized the integration of our two economies.

So where, if anywhere, is Canada’s leverage? Not across the negotiation table, but within the U.S. itself. Mr. Trump’s tariffs are already biting into critical domestic interests, especially those of homebuilders and manufacturers who rely on Canadian inputs. The U.S. National Association of Home Builders has warned that Mr. Trump’s lumber tariffs could increase the price of a new home by up to 15 per cent and add billions in construction costs. Replacing roughly 25 per cent of U.S. lumber supply, which Canada has up until now provided, would require 70 new sawmills and more than a decade of investment, according to one estimate by U.S. market-research firm ResourceWise. That’s time and infrastructure the U.S. simply doesn’t have. This domestic shortfall, and the political consequences it will generate, form Canada’s most potent leverage point.

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Mr. Carney’s restraint in the face of political pressure is therefore wise. Ontario Premier Doug Ford has previously called on Ottawa to “hit back” with retaliatory tariffs, arguing that Canada needs to show toughness. But striking back would only drive up costs for Canadian consumers and producers at a time when inflation is already hurting household budgets. Tariffs are taxes by another name, and retaliation would inflict pain without delivering gain.

Instead, the smarter approach is quiet persistence – and coalition-building where it counts. The provinces, rather than venting frustration toward Ottawa, should be mobilizing directly within the U.S. Governors, state legislators, industry associations and import-dependent businesses who all share a vested interest in reversing Mr. Trump’s protectionist excesses. Forging ties with those constituencies will yield more results than expressing outrage at home.

History shows that U.S. administrations respond only when domestic industries and voters feel the costs of protectionist policy. Canadian negotiators should be constantly reminding Americans that these tariffs are hurting their own economy. Every homebuilder, every auto-parts supplier, every consumer hit by higher prices is a potential ally in Canada’s campaign for common sense. We need to be patient, persistent and avoid bravado. We are in a war of attrition where eventually rising costs to American producers and consumers from Mr. Trump’s trade wars will force him to relent.