For years, Canadian policymakers warned about economic threats from Beijing and Moscow. Chinese hackers targeted our research institutions. Russian cyberattacks probed our energy infrastructure. State-sponsored theft drained billions from our intellectual property reserves. We knew the threats, catalogued them, and largely continued business as usual.
Then came the sucker punch from Washington.
When the Trump administration slapped 25 percent tariffs on Canadian goods this March, it exposed a vulnerability far more dangerous than any foreign adversary could exploit: Canada has no coherent economic statecraft strategy, and worse, our federal government lacks the consolidated power to execute one even if it did.
The crisis is now. Canada sends 76 percent of its exports to a single country that just declared economic war on us. We ship 97 percent of our crude oil south of the border. Our automotive sector, our second-largest export category, now faces crippling duties on components that cross the border up to eight times before final assembly. Meanwhile, China waits in the wings, ready to deepen trade ties the moment we’re desperate enough to accept Beijing’s terms.
This isn’t just bad economics—it’s a national security emergency masquerading as a trade dispute.
The bitter irony is that Canada possesses formidable economic tools. Our sanctions regimes, export controls, investment screening mechanisms, and tariff authorities mirror those of the United States and European Union. Through the Special Economic Measures Act, Global Affairs Canada can designate entities for asset freezes. Our Financial Intelligence Unit coordinates with allies to track sanctions evasion. We participate in every major multilateral export control regime. On paper, we’re a serious player.
In practice, we’re hamstrung by a constitutional structure that fragments economic power across ten provinces, each jealously guarding its jurisdiction over natural resources. When Ottawa needed to present a united front against American tariffs, Alberta’s premier immediately announced her province wouldn’t leverage oil exports as retaliation. One premier, speaking for one province, kneecapped the federal government’s strongest negotiating card. The Americans couldn’t have scripted it better.
This regional factionalism isn’t just embarrassing—it’s existential. U.S. Midwest refineries run exclusively on Canadian heavy crude, having retrofitted their facilities specifically for our oil. That dependence should give Canada enormous leverage. Instead, provincial premiers prioritize local interests over national strategy, and our leverage evaporates before we can deploy it.
The 2020 USMCA trade agreement compounds the problem. Its Article 32.10 effectively gives Washington veto power over Canadian trade negotiations with “non-market economies”—read: China. If Ottawa pursues a free trade agreement with Beijing, Washington and Mexico City can withdraw from USMCA with six months’ notice. Critics warned this clause would reduce Canada to a vassal state. Five years later, we’re watching that prediction materialize in real time.
So where does Canada go from here? The path forward requires uncomfortable choices, but the alternative—continued drift toward economic irrelevance—is worse.
First, the federal government and provincial premiers must forge a unity pact on economic security. Provincial autonomy matters, but not when it paralyzes national responses to existential threats. Alberta’s oil, Ontario’s manufacturing, and Quebec’s aerospace sector are individual assets but collective leverage. We need mechanisms—whether through interprovincial agreements or constitutional amendments—that allow Canada to speak with one economic voice during crises.
Second, we must accelerate trade diversification with ruthless urgency. The Trans Mountain pipeline expansion was a start, opening Asian markets to Canadian crude. But pipeline projects take decades. We need immediate action: aggressive pursuit of trade agreements with Europe, deeper economic integration with allied Indo-Pacific democracies, and strategic deployment of our development assistance to build lasting commercial partnerships in Africa and Latin America.
The recent Global Africa Strategy is promising, but it arrives years late. Canada provides substantial development assistance to Nigeria, Ethiopia, and the Democratic Republic of Congo. That generosity should translate into preferential trade relationships and supply chain partnerships. As the Trump administration slashes foreign aid, Canada has an opening to position itself as the reliable Western partner in the developing world—good policy that also serves our commercial interests.
Third, Ottawa must wield its economic statecraft tools more aggressively. We’ve imposed sanctions on thousands of Russian entities, yet Russian cyberattacks on our infrastructure continue. We’ve identified over one hundred foreign institutions that threaten our research security, yet enforcement remains spotty. We have investment screening powers to block predatory foreign capital, but until recently lacked the political will to use them consistently.
Canada can’t match American economic coercion—the U.S. dollar’s dominance gives Washington unparalleled financial reach. But coordinated action with European and Pacific allies multiplies our impact. Joint sanctions, shared intelligence on export control evasion, and multilateral investment screening can isolate adversaries effectively. Canada excels at coalition-building; we should lead it.
The current moment is clarifying. Beijing’s intellectual property theft, Moscow’s infrastructure attacks, and Washington’s tariff assault all expose the same underlying weakness: Canada treats economic policy as a domestic issue when it’s fundamentally a national security imperative. We need economic statecraft—the deliberate use of economic tools to advance security objectives—and we need it backed by consolidated federal authority to deploy those tools decisively.
The threats aren’t hypothetical anymore. They’re here, they’re multiplying, and our current approach isn’t working. Canada either consolidates its economic power and develops a real statecraft strategy, or we accept permanent vulnerability to coercion from allies and adversaries alike.
The choice, mercifully, remains ours. For now.
