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Navigating Canada-U.S. Relations Under President Trump's Second Term

Policy Brief

Image Credit: Office of the Prime Minister

Overview

President Donald Trump's return to the White House introduces a challenging and potentially transformative era for Canada-U.S. relations. The administration's aggressive economic policies, including proposed 25% tariffs on Canadian imports and rhetoric about annexing Canada as the 51st state, reflect a broader strategy to consolidate U.S. economic dominance in North America and beyond. Concurrently, Canada faces internal political fragmentation, economic vulnerabilities, and strategic dilemmas in its international partnerships, complicating its ability to respond effectively in both the short and long term.
The following brief is part of ‘Safeguarding Sovereignty: Canada’s Strategic Responses to Trump’s America‘, a symposium from IPD’s Strategic Foresight Brief.

Key Considerations

Economic Pressures

Proposed Tariffs and Economic Realignment

President Trump's proposed 25% tariffs target critical Canadian industries, such as aluminum, lumber, and automotive manufacturing, aiming to protect and support American industry workers by raising the price of Canadian imported goods and redirecting foreign direct investment from Canada to the U.S. This approach positions Canada primarily as a supplier of raw materials, reserving high-value manufacturing for U.S. industries to become key global suppliers.

Economic Dependence

With approximately 75% of Canadian exports destined for the U.S., Canada's economy is highly vulnerable to U.S. restrictive trade practices. Diversifying trade partnerships is essential but requires substantial political and diplomatic capital through a unified national strategy involving all levels of government in Canada.

Political Dynamics

Federal Fragmentation

Prime Minister Trudeau's resignation has left a political vacuum, further complicated by Alberta Premier Danielle Smith's increasingly independent stance. Smith's policies, particularly on energy exports and U.S. engagement, diverge from federal strategies and undermine the government’s response while bolstering the Conservative Party ahead of upcoming federal elections this year.

Trump's Preference

While not prioritizing Canada's internal politics, President Trump and his inner circle, including figures like Elon Musk, have close ties to Canadian public figures such as Kevin O'Leary and Jordan Peterson, who favour a Conservative-led government in Canada. This preference adds complexity to an already complicated federal-provincial dynamics in Canada.

Security Concerns

Border Security Investments

In response to Trump’s concerns about illegal migration and drug trafficking through the Canadian border, Ottawa has announced a C$1.3 billion Border Plan. This initiative includes enhanced surveillance technologies, joint U.S.-Canada operations, and increased border personnel, aiming to address shared security concerns and mitigate justifications for further U.S. economic actions.

Canada-Mexico Relations

Shared Challenges

Despite major differences, President Trump often presents Canada and Mexico as a singular economic bloc in North America, applying similar policies such as proposed tariffs. This perspective underscores the importance of strategic coordination between Canada and Mexico to present a unified front in trade negotiations and policy responses.

Canada-China Relations

Balancing Act

As Canada's second-largest trading partner, China presents opportunities for diversification. However, strengthening economic ties with China could provoke further economic pressures from the U.S., placing Canada in a delicate position. Further investing in trade partnerships with the European Union and ASEAN countries will be prioritized over China.

Likely Scenarios

Economic Retaliation

Reciprocal Tariffs

Canada could impose dollar-for-dollar tariffs on U.S. goods in response to Trump's aggressive economic policies. While this approach signals strength and resolve, it risks escalating tensions without yielding meaningful policy changes in Washington. Canadian industries reliant on cross-border trade may also face collateral damage, complicating economic recovery efforts.

Energy Supply Adjustments

As a retaliatory measure, Canada might consider halting energy exports to the U.S., leveraging its position as a major supplier. However, such action risks triggering significant economic repercussions, particularly for Alberta, which could escalate internal tensions. Alberta Premier Danielle Smith has already warned of a potential "national unity crisis" should energy policies further strain federal-provincial relations.

Canada-Mexico Coordination

Strategic Collaboration

Canada and Mexico may invest further in strengthening bilateral ties to present a united front against U.S. pressures. Joint efforts to preserve the integrity of the Canada-United States-Mexico Agreement (CUSMA) and explore new trade partnerships in Asia and Europe would enhance their collective negotiating power. While this strategy will strengthen their bargaining power against Trump in trade talks, aligning priorities between the two nations, however, may prove challenging, particularly given Mexico's unique vulnerabilities to U.S. immigration and trade policies, in comparison to Canada.

Security Cooperation

Border and Military Commitments

Canada’s recent $1.3 billion investment in border security, aimed at addressing migration and drug trafficking concerns, could serve as a platform for further investment and contributions from the Canadian side, strengthening collaboration with U.S. agencies. Success hinges on demonstrating shared goals, potentially reducing justifications for U.S. tariffs and punitive measures in the name of security concerns. In addition, the U.S. is likely to pressure Canada to meet its NATO commitment of spending 2% of GDP on defence and to further invest in the Canada-US military partnership, particularly through NORAD modernization. While these steps could enhance bilateral trust, they require significant fiscal commitments and public support, both of which remain contentious domestically.

Implications and Forward Outlook

1

Economic Resilience

Diversifying trade partnerships remains crucial to reducing Canada’s reliance on the U.S. market. Strategic framing of these efforts is essential to avoid antagonizing the U.S., particularly regarding sensitive areas like trade with China.
2

Diplomatic Strategy

Canada must strengthen global engagement to diversify partnerships and enhance its economic relations through bilateral and multilateral trade agreements. Deepening ties with Europe via CETA and NATO, expanding trade with Brazil in Latin America, investing and offering services in the Middle Eastern emerging markets, and leveraging the Indo-Pacific Strategy to engage ASEAN nations and key economies like Japan and India will collectively bolster Canada’s economic resilience in the face of U.S. pressure.
3

Trade Strategy

Expanding LNG exports offers a major opportunity for trade diversification. Western Canada’s proximity to northeast Asia and energy-efficient liquefaction processes provide competitive advantages over the United States for such markets. However, overcoming challenges related to infrastructure, Indigenous land rights, and development costs is essential to realizing this potential.
4

Political Unity

Federal-provincial cohesion is vital for Canada to maintain a unified response to U.S. pressures. Alberta’s increasingly independent policies pose both challenges and opportunities; fostering collaboration among provinces will be key to ensuring a strong national strategy.
5

Integrated Security Framework and Further Investment in Canadian Military

Meeting NATO defence spending commitments and modernizing NORAD can address some of the U.S. security concerns while enhancing Canada’s role in collective defence. Balancing these obligations with domestic fiscal priorities is crucial to sustaining public and political support.

Conclusion

Under President Trump’s second term, Canada faces a complex geopolitical landscape that requires a unified national response and a transformation in its national and foreign policy strategy grounded in pragmatism and national interests. Strategic clarity — through economic diversification, strengthened security collaboration, and cohesive federal-provincial efforts — is essential to safeguarding Canadian sovereignty and economic resilience. These actions are critical to navigating the challenges posed by the United States under Trump administration 2.0.
Panel 4: Pathways to Manage Non-Proliferation in the Middle East (4:30 PM - 5:45 PM ET)

The Western powers have failed to effectively manage the increasing threat of proliferation in the Middle East. While the international community is concerned with Iran’s nuclear program, Saudi Arabia has moved forward with developing its own nuclear program, and independent studies show that Israel has longed possessed dozens of nuclear warheads. The former is a member of the treaty on the Non-Proliferation of Nuclear Weapons (NPT), while the latter has refused to sign the international agreement. 

On Middle East policy, the Biden campaign had staunchly criticized the Trump administration’s unilateral withdrawal from the Joint Comprehensive Plan of Action (JCPOA), more commonly known as the Iran Nuclear Deal and it has begun re-engaging Iran on the nuclear dossier since assuming office in January 2021. However, serious obstacles remain for responsible actors in expanding non-proliferation efforts toward a nuclear-free zone in the Middle East. 

This panel will discuss how Western powers and multilateral institutions, such as the IAEA, can play a more effective role in managing non-proliferation efforts in the Middle East.  

Panelists:

– Peggy Mason: Canada’s former Ambassador to the UN for Disarmament

– Mark Fitzpatrick: Associate Fellow & Former Executive Director, International Institute for Strategic Studies (IISS)

– Ali Vaez: Iran Project Director, International Crisis Group

– Negar Mortazavi: Journalist and Political Analyst, Host of Iran Podcast

– David Albright: Founder and President of the Institute for Science and International Security

 

Closing (5:45 PM – 6:00 PM ET)

Panel 3: Trade and Business Diplomacy in the Middle East (3:00 PM - 4:15 PM ET)

What is the current economic landscape in the Middle East? While global foreign direct investment is expected to fall drastically in the post-COVID era, the World Bank reported a 5% contraction in the economic output of the Middle East and North African (MENA) countries in 2020 due to the pandemic. While oil prices are expected to rebound with normalization in demand, political instability, regional and geopolitical tensions, domestic corruption, and a volatile regulatory and legal environment all threaten economic recovery in the Middle East. What is the prospect for economic growth and development in the region post-pandemic, and how could MENA nations promote sustainable growth and regional trade moving forward?

At the same time, Middle Eastern diaspora communities have become financially successful and can help promote trade between North America and the region. In this respect, the diaspora can become vital intermediaries for advancing U.S. and Canada’s business interests abroad. Promoting business diplomacy can both benefit the MENA region and be an effective and positive way to advance engagement and achieve foreign policy goals of the North Atlantic.

This panel will investigate the trade and investment opportunities in the Middle East, discuss how facilitating economic engagement with the region can benefit Canadian and American national interests, and explore relevant policy prescriptions.

Panelists:

– Hon. Sergio Marchi: Canada’s Former Minister of International Trade

– Scott Jolliffe: Chairperson, Canada Arab Business Council

– Esfandyar Batmanghelidj: Founder and Publisher of Bourse & Bazaar

– Nizar Ghanem: Director of Research and Co-founder at Triangle

– Nicki Siamaki: Researcher at Control Risks

Panel 2: Arms Race and Terrorism in the Middle East (12:00 PM - 1:15 PM ET)

The Middle East continues to grapple with violence and instability, particularly in Yemen, Syria and Iraq. Fueled by government incompetence and foreign interventions, terrorist insurgencies have imposed severe humanitarian and economic costs on the region. Meanwhile, regional actors have engaged in an unprecedented pursuit of arms accumulation. Saudi Arabia and the United Arab Emirates have imported billions of both Western and Russian-made weapons and funded militant groups across the region, intending to contain their regional adversaries, particularly Iran. Tehran has also provided sophisticated weaponry to various militia groups across the region to strengthen its geopolitical position against Saudi Arabia, UAE, and Israel. 

On the other hand, with international terrorist networks and intense regional rivalry in the Middle East, it is impractical to discuss peace and security without addressing terrorism and the arms race in the region. This panel will primarily discuss the implications of the ongoing arms race in the region and the role of Western powers and multilateral organizations in facilitating trust-building security arrangements among regional stakeholders to limit the proliferation of arms across the Middle East.

 

Panelists:

Luciano Zaccara: Assistant Professor, Qatar University

Dania Thafer: Executive Director, Gulf International Forum

Kayhan Barzegar: Professor and Chair of the Department of Political Science and International Relations at the Science and Research Branch of Azad University

Barbara Slavin: Director of Iran Initiative, Atlantic Council

Sanam Shantyaei: Senior Journalist at France24 & host of Middle East Matters

Panel 1: Future of Diplomacy and Engagement in the Middle East (10:30 AM-11:45 AM ET)

The emerging regional order in West Asia will have wide-ranging implications for global security. The Biden administration has begun re-engaging Iran on the nuclear dossier, an initiative staunchly opposed by Israel, while also taking a harder line on Saudi Arabia’s intervention in Yemen. Meanwhile, key regional actors, including Qatar, Iraq, and Oman, have engaged in backchannel efforts to bring Iran and Saudi Arabia to the negotiating table. From a broader geopolitical perspective, with the need to secure its energy imports, China is also expected to increase its footprint in the region and influence the mentioned challenges. 

In this evolving landscape, Western powers will be compelled to redefine their strategic priorities and adjust their policies with the new realities in the region. In this panel, we will discuss how the West, including the United States and its allies, can utilize multilateral diplomacy with its adversaries to prevent military escalation in the region. Most importantly, the panel will discuss if a multilateral security dialogue in the Persian Gulf region, proposed by some regional actors, can help reduce tensions among regional foes and produce sustainable peace and development for the region. 

Panelists:

– Abdullah Baabood: Academic Researcher and Former Director of the Centre for Gulf Studies, Qatar University

– Trita Parsi: Executive Vice-President, Quincy Institute for Responsible Statecraft

– Ebtesam Al-Ketbi: President, Emirates Policy Centre​

– Jon Allen: Canada’s Former Ambassador to Israel

– Elizabeth Hagedorn: Washington correspondent for Al-Monitor

Panel 4: Humanitarian Diplomacy: An Underused Foreign Policy Tool in the Middle East (4:30 PM - 5:30 PM ET)

Military interventions, political and economic instabilities, and civil unrest in the Middle East have led to a global refugee crisis with an increasing wave of refugees and asylum seekers to Europe and Canada. Moreover, the COVID-19 pandemic has, in myriad ways, exacerbated and contributed to the ongoing security threats and destabilization of the region.

While these challenges pose serious risks to Canadian security, Ottawa will also have the opportunity to limit such risks and prevent a spillover effect vis-à-vis effective humanitarian initiatives in the region. In this panel, we will primarily investigate Canada’s Middle East Strategy’s degree of success in providing humanitarian aid to the region. Secondly, the panel will discuss what programs and initiatives Canada can introduce to further build on the renewed strategy. and more specifically, how Canada can utilize its policy instruments to more effectively deal with the increasing influx of refugees from the Middle East. 

 

Panelists:

Erica Di Ruggiero: Director of Centre for Global Health, University of Toronto

Reyhana Patel: Head of Communications & Government Relations, Islamic Relief Canada

Amir Barmaki: Former Head of UN OCHA in Iran

Catherine Gribbin: Senior Legal Advisor for International and Humanitarian Law, Canadian Red Cross

Panel 3: A Review of Canada’s Middle East Engagement and Defense Strategy (3:00 PM - 4:15 PM ET)

In 2016, Canada launched an ambitious five-year “Middle East Engagement Strategy” (2016-2021), committing to investing CA$3.5 billion over five years to help establish the necessary conditions for security and stability, alleviate human suffering and enable stabilization programs in the region. In the latest development, during the meeting of the Global Coalition against ISIS, Minister of Foreign Affairs Marc Garneau announced more than $43.6 million in Peace and Stabilization Operations Program funding for 11 projects in Syria and Iraq.

With Canada’s Middle East Engagement Strategy expiring this year, it is time to examine and evaluate this massive investment in the Middle East region in the past five years. More importantly, the panel will discuss a principled and strategic roadmap for the future of Canada’s short-term and long-term engagement in the Middle East.

Panelists:

– Ferry de Kerckhove: Canada’s Former Ambassador to Egypt

– Dennis Horak: Canada’s Former Ambassador to Saudi Arabia

– Chris Kilford: Former Canadian Defence Attaché in Turkey, member of the national board of the Canadian International Council (CIC)

– David Dewitt: University Professor Emeritus, York University

Panel 2: The Great Power Competition in the Middle East (12:00 PM - 1:15 PM ET)

While the United States continues to pull back from certain regional conflicts, reflected by the Biden administration’s decision to halt American backing for Saudi Arabia’s intervention in Yemen and the expected withdrawal from Afghanistan, US troops continue to be stationed across the region. Meanwhile, Russia and China have significantly maintained and even expanded their regional activities. On one hand, the Kremlin has maintained its military presence in Syria, and on the other hand, China has signed an unprecedented 25-year strategic agreement with Iran.

As the global power structure continues to shift, it is essential to analyze the future of the US regional presence under the Biden administration, explore the emerging global rivalry with Russia and China, and at last, investigate the implications of such competition for peace and security in the Middle East.

Panelists:

– Dmitri Trenin: Director of Carnegie Moscow Center

– Joost R. Hiltermann: Director of MENA Programme, International Crisis Group

– Roxane Farmanfarmaian: Affiliated Lecturer in International Relations of the Middle East and North Africa, University of Cambridge

– Andrew A. Michta: Dean of the College of International and Security Studies at Marshall Center

– Kelley Vlahos: Senior Advisor, Quincy Institute

Panel 1: A New Middle East Security Architecture in the Making (10:30 AM -11:45 AM ET)

The security architecture of the Middle East has undergone rapid transformations in an exceptionally short period. Notable developments include the United States gradual withdrawal from the region, rapprochement between Israel and some GCC states through the Abraham Accords and the rise of Chinese and Russian regional engagement.

With these new trends in the Middle East, it is timely to investigate the security implications of the Biden administration’s Middle East policy. In this respect, we will discuss the Biden team’s new approach vis-à-vis Iran, Yemen, Saudi Arabia, and Israel. The panel will also discuss the role of other major powers, including China and Russia in shaping this new security environment in the region, and how the Biden administration will respond to these powers’ increasing regional presence.

 

Panelists:

– Sanam Vakil: Deputy Director of MENA Programme at Chatham House

– Denise Natali: Acting Director, Institute for National Strategic Studies & Director of the Center for Strategic Research, National Defense University

– Hassan Ahmadian: Professor of the Middle East and North Africa Studies, University of Tehran

– Abdulaziz Sagar: Chairman, Gulf Research Center

– Andrew Parasiliti: President, Al-Monitor