Canada's trade leverage against the U.S. faces steep economic trade-offs

Canada’s dominance in U.S. oil, electricity, natural gas and potash imports provides a lever that policymakers are considering as the Trump administration threatens higher tariffs. Economists like Christopher Ragan describe negotiations with the volatile U.S. leadership as unpredictable, while former TD Bank chief economist Don Drummond lists possible retaliatory tools ranging from export taxes to visa restrictions and even canceling F-35 purchases.

However, scholars such as Trevor Tombe and Wolfgang Alschner argue that many of these non-tariff measures would inflict greater damage on Canada’s own GDP and long-term trade ties than on the United States. They recommend focusing on export diversification, new trade agreements, and internal market reforms instead. The discussion underscores the tension between short-term political pressure and the broader economic costs of a trade war.