Canada is grappling with how best to manage its relationship with the United States, especially as the potential for revisiting or fully renegotiating the Canada-United States-Mexico Agreement (CUSMA) looms closer.
Emerging signals suggest a possible path for Canada that may help avoid the most dire outcomes, which are still anticipated in the near future.
The critical question remains: how does Canada make potentially irreversible concessions on vital issues in exchange for promises that may lack substance and durability?
This dilemma is particularly problematic if the deal ultimately proves worse than having no agreement at all, leading to public humiliation and significant domestic political repercussions.
Finding a straightforward solution is challenging.
Despite the precarious situation, the options of walking away or seeking alternative markets have not yielded the desired results historically.
Fifty years ago, when the U.S. imposed blanket tariffs that caught Canada off guard, the country attempted a well-funded campaign to diversify its markets.
Now, facing a similar quandary but with a heightened level of trade dependence, this historical failure highlights the ineffectiveness of past strategies.
Increasing trade within Canada might offer some relief, but likely only marginal benefits in the grand scheme of things.
Engaging in a trade agreement with the U.S. has come to resemble a stay at the Hotel California: exiting is possible, but truly leaving is not a practical option.
Consequently, Canada must carve out a more viable path to navigate a relationship with a U.S. it cannot abandon.
To achieve this, confidence must be restored, which leads to the need for a version of Ronald Reagan’s doctrine dealing with untrustworthy partners—“Trust, but verify.”
This change is within reach, requiring two key shifts within U.S. policy and perspective.
Encouragingly, early indications suggest that both shifts might be in motion.
The first necessary shift lies in the American public’s comprehension of the consequences associated with flawed economic and trade policies.
This realization was catalyzed following Donald Trump’s election, evidenced by an astonishing 1,650 percent surge in Google searches for “what is a tariff.”
Since that pivotal moment, the realities of detrimental trade policies have unfolded in real-time, bolstered by media narratives and personal experiences.
At a certain point, the relentless portrayal of the MAGA trade narrative as a success becomes untenable.
However, that critical shift in perspective has not yet occurred.
The economic pain inflicted by poor policies has not been sharp, widespread, or personal enough to alter entrenched beliefs among the public.
Supporters of the MAGA movement are heavily invested in both the ideology and the figure of Trump, making any reversal a difficult and uncomfortable process.
The MAGA ideology embodies a sense of “no retreat, no surrender,” capable of holding multiple contradictory notions but unable to reconcile a misjudgment.
Moreover, it will require more than just a plummet in the stock market or a decline in 401(k) values to instigate a change of heart.
Many millennials and Gen-Z members in the U.S. are not financially secure, evidenced by fewer than half of millennials and less than ten percent of Gen-Z lacking substantial retirement savings.
In this context, the loss of funds may not resonate strongly, as many young people struggle to feel the ramifications of wealth they never had or anticipated having in the first place.
Indeed, witnessing the affluent suffer financial loss might even provoke a sense of schadenfreude among certain demographics.
As Canada prepares for what might be a turbulent trade negotiation year ahead, understanding these dynamics will be crucial in crafting an effective strategy for its place within North America.
The emphasis must be on restoring confidence while carefully navigating the uncertainties of trade relations with a volatile partner to ensure a mutually beneficial outcome for both countries.
image source from：https://financialpost.com/news/economy/a-canadian-path-forward-with-the-u-s-on-trade
