Canada Watch: Trade Negotiations Abruptly Halted

In this context, dragging a familiar trade adversary back onto the stage carries minimal political cost—at least from Trump’s perspective. Canada is wealthy enough to be framed as a country that ‘takes advantage of the U.S.’, yet unlike China or Iran, it poses no major security risks. Waging a trade war that can be escalated at will, declared victorious at any moment, or reopened for renegotiation holds obvious appeal for a president facing looming midterm elections. But this does not mean Carney has no choice but to acquiesce to U.S. demands. Last night’s rejection underscores precisely that point. Carney is a highly rational, bureaucratic-style politician. He places little value on ideological purity and is unhesitant to expend political capital for outcomes he deems worthwhile. If scrapping several retaliatory tariffs and reinstating U.S. liquor sales could secure substantial reductions in auto, steel, and aluminum tariffs—and further catalyze CUSMA negotiations—he would clearly be willing to make that trade-off. Yet rationality does not equate to unlimited concession. Once the price of an agreement begins encroaching upon Canada’s trade policy toward third countries, its linguistic and cultural sovereignty, and even its national autonomy, the very calculus of benefits fundamentally shifts. This is a frequently overlooked dimension in observing these negotiations. Many instinctively frame them as a contest between two abstract national entities—‘the United States’ and ‘Canada’. Judged purely by GDP, market size, or military strength, Canada indeed holds little leverage. But real-world negotiations are never a mechanical collision of aggregate national resources. More accurately, Canada is negotiating not with ‘the United States’ as a monolith, but with the Trump administration—and the Republican Party and MAGA political coalition that sustains it. National power sets the upper bound of negotiation; domestic politics determines how close either side actually gets to that ceiling. On this front, Carney’s current position is, paradoxically, far more comfortable than Trump’s. There is no powerful domestic constituency in Canada clamoring for capitulation to Trump. An Angus Reid poll conducted in late July found only 7% of Canadians believed the government should accept U.S. demands solely to avoid tariffs; 62% supported retaliatory tariffs at varying levels—including 34% who advocated dollar-for-dollar retaliation. By August, Carney’s national approval rating remained steady at 52%. More importantly, over the past year and a half, Trump himself has effectively forged an exceptionally rare degree of unity across the Canadian political spectrum. Following today’s breakdown in negotiations, the Conservative Party, the Bloc Québécois, and the NDP have all voiced support for Carney’s decision to reject the deal. Pierre Poilievre explicitly stated Canada must not accept a bad agreement; the Bloc backed proportional countermeasures; and the NDP directly endorsed Carney’s walkout. The situation in Quebec is especially ironic. Far from amplifying Quebec separatism, Trump’s threats against Canada have driven support for independence down to roughly 30%—a historic low—and even the Parti Québécois, which currently leads provincial polls, has pledged not to hold a sovereignty referendum during Trump’s term. For today’s Quebec, pressure from Washington has temporarily eclipsed decades of grievances with Ottawa. Alberta, of course, remains the province most reluctant to engage in a full-scale trade war. Danielle Smith today also expressed being ‘deeply disappointed’ by the collapse of negotiations.

Canada Watch: A Reoriented Environmental Policy and Carney’s Political Balancing Act

To be sure, Carney still retains some lofty yet vague clean-energy terminology. But he has reordered his priorities: in the short term, economic resilience and national unity outweigh emissions trajectories; in the long term, emissions reduction must align with Canada’s reality as an energy exporter and resource-based nation. From a pragmatic standpoint, this pivot is virtually inevitable. Canada’s 2024 greenhouse gas emissions stood at 685 Mt CO₂e, while global emissions totaled approximately 53.2 Gt CO₂e—meaning Canada accounts for roughly 1.3% of the global total. No matter how severely Canada sacrifices its domestic energy interests, it cannot single-handedly alter the global trajectory of fossil fuel consumption. Should Canada curtail oil and gas production to reduce supply marginally, the resulting market gap would swiftly be filled by lower-cost, lower-environmental-standard, and politically less stable producers—depriving Canada of fiscal revenue and jobs it could otherwise capture during high-price cycles. Canada’s environmental policies are only meaningfully enforceable—given practical concerns like market access—when major global economies adhere to comparable standards. Yet that prerequisite has evaporated in the wake of the populist wave Trump has unleashed. Even Europe—the region most committed to climate action—has undergone a dramatic transformation: far-right parties now lead national polls or even govern outright, whether it’s Farage in the UK, Le Pen in France, Weidel in Germany, or Meloni in Italy. None exhibit the pre-Trump-era enthusiasm for environmental protection. Under such conditions, clinging to previous climate policies serves no purpose beyond satisfying moral self-satisfaction. Moreover, among major oil and gas exporters, Canada possesses the most distorted export structure—long having pinned its most critical customer almost exclusively on the United States. In 2024, Canada exported an average of 4.2 million barrels of crude oil per day, with 93% flowing to the U.S. In 2023, Canada’s hydrocarbon energy exports to the U.S. reached CA$163 billion—accounting for 21% of Canada’s total merchandise exports worldwide. With Trump once again wielding tariffs, border controls, and security commitments as bargaining chips, continuing to entrust Canada’s energy export lifeline solely to the U.S. market has shifted from economic inefficiency to strategic folly. This is the core backdrop to Carney’s push for a new West Coast pipeline. On July 2, Carney and Smith jointly announced submission of Alberta’s proposed 1-million-barrel-per-day pipeline to the Pacific Coast to the Major Projects Office. The route largely follows the existing Trans Mountain corridor and abandons efforts to overturn the Northern Gateway tanker ban. This pipeline would enable Canadian crude to reach Asian markets, thereby reducing dependence on the U.S. and mitigating the discount applied to Canadian oil exports destined for America. Even more crucial is British Columbia’s shift in stance. Premier David Eby certainly cannot suddenly abandon NDP principles to become a petroleum nationalist—but he has acknowledged BC lacks constitutional authority to block a new interprovincial pipeline, and affirmed that BC will not use the courts to obstruct the project so long as the North Coast tanker ban remains intact. This is where Carney differs most sharply from Trudeau. Trudeau-era federalism was steeped in moral lecturing—ultimately driving Alberta into anger and BC into resistance. Carney, by contrast, deploys targeted financial compensation and separate bilateral negotiations to embed each provincial premier within a tailored, mutually exchangeable political arrangement.

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