Donald Trump has restarted his trade war with Canada, and it is likely that it will blow back on the US economy.
This August, Washington and Ottawa participated in talks to negotiate a new trade deal, but Canadian Prime Minister Mark Carney revealed that the US government made last-minute demands for control over Canada’s trade deals, critical minerals, and French language policies.
“The US introduced at the last hours, in the last hours, efforts to restrict our ability to have other trade deals”, Carney explained in a press conference. “We’re the partner of choice in many respects for countries around the world and the Americans wanted to restrict that. They had language that what they wanted to restrict that. Unacceptable”.
Moreover, Carney noted that Washington demanded that Ottawa terminate its “subsidies, the support for our culture and the French language, and even the information [in French] that is on Canadian products”.
There are also reports that the US government insisted on the right of first refusal over the sale of Canada’s critical minerals.
Carney said these US demands were completely “unacceptable” and violated Canada’s sovereignty. He called it a US “power play”.
Top officials in multiple Canadian provinces agreed, warning that Washington was attacking their country’s sovereignty and using coercion to try to “reduce us to the economic equivalent of the 51st [US] state”.
The Trump administration has repeatedly floated the idea of annexing and colonizing Canada.
A poll in 2025 found that nearly 60% of Canadians agree that the US is the “greatest threat” to their country.
On 22 August, Ottawa rejected the US ultimatum. So Trump immediately announced that he would put 50% tariffs on major Canadian goods.
Trump has threatened high tariffs against many countries. Most (especially the European Union and Japan) simply took the blows, fearing a fight with Washington (China was a rare exception). However, what was unique about Canada’s response is that it defended itself.
Ottawa hit back. Carney vowed to match US tariffs “dollar for dollar”.
“We were attacked”, the Canadian leader said. “You’re at war when you get attacked. We got attacked”.
The US thinks it can push Canada around
The United States already had a trade deal with Canada. It was called the USMCA, and it was negotiated in 2018 by none other than Donald Trump, during his first term as president.
Trump had initially called the USMCA “the best and most important trade deal ever”. But when he returned for his second term in 2025, he decided it wasn’t enough.
This July, the US government informed Canada and Mexico that it would refuse to renew the USMCA. Trump demanded new trade deals, and threatened to hit his country’s neighbors (and top two trading partners) with sky-high tariffs if they didn’t give in to aggressive US demands.
Prime Minister Carney alluded to the unreliability of the US, when he stated in a press conference this August:
Our government understood, before many, that America would transform all its commercial relationships, that it would put a series of tariffs on its closest allies and use economic integration as a weapon, that its signature was written in pencil.
Washington is overconfident. It believes it can coerce Canada without suffering significant consequences.
Trump declared on social media, “WE DON’T NEED CANADA, THEY NEED US! They do 95% of their business with the U.S.”
It is true that Canada is dependent on the US market, but Trump greatly exaggerated.
64% of Canada’s exports go to the US, as of the first quarter of 2026. This figure is indeed high, but it also represents a marked drop from the early 2000s, when roughly 80% of its exports went to its southern neighbor.
The reality is that Canada has been gradually diversifying its trade relations.
This is why Carney took a historic trip this January to Beijing, where he announced that “Canada and China are forging a new strategic partnership”. It was the first visit by a Canadian prime minister since 2017.
Canada has leverage: the US needs its crude oil
There is no doubt that this trade war will hurt the Canadian economy, but it will also likely backfire and harm the US economy as well.
The reality is that Ottawa has some significant leverage it can use in its hardball with Washington.
First and foremost is the fact that the United States is dependent on some crucial Canadian commodities.
Trump often complains that Canada runs a chronic trade surplus with the US. What he never mentions is that this is because Canada is the number one exporter of crude oil to the US.
If oil is excluded from Canada’s trade, it is actually the US that runs a chronic surplus.
The majority (60%) of US crude imports came from Canada, as of 2023.
The Canadian government is well aware that this represents a US vulnerability.
In his speech announcing his retaliation to the US economic attacks, Prime Minister Carney stated:
Canada fuels American growth: supplying 99% of their natural gas imports, 85% of electricity imports, and 60% of crude oil imports. I don’t think they want us to stop sending it.
The United States is NOT “energy independent”
It is sometimes claimed that the United States is “energy independent”. This is a myth.
It is true that the US is the top oil producer on Earth, by far. And it is a net exporter of petroleum products. But it is not energy independent.
The US still imports roughly 8 million barrels of oil per day. Much of that consists of crude oil, which US refineries process into other petroleum products like gasoline, diesel, jet fuel, chemicals, lubricants, and asphalt.
In the 1990s and early 2000s, the largest regional provider of oil to the US was the Persian Gulf. However, since then, Canada has massively increased its exports to its southern neighbor, to approximately 4 million barrels per day.
The US primarily produces light crude. But many US refineries were built to process heavy crude. So the US must import it.
The majority (more than 60%) of US imports of crude oil consist of heavy crude.
There is a complex web of pipelines integrating North America, bringing crude oil from Canada to US refineries.
Trump’s trade war with Canada is already hurting US refineries.
On 21 August — a day before Canada announced that it would not surrender to the US demands and would retaliate with reciprocal tariffs of its own — Bloomberg reported that “US refiners are facing a looming supply drop from their biggest foreign crude supplier [ie, Canada] at a time when they need the oil the most”.
US refineries are currently the most active they have been in eight years, Bloomberg noted.
“Particularly vulnerable to a Canadian supply squeeze are refineries in the US Midwest, which rely on the country’s oil for about 70% of their supply”, the media outlet added.
Trump’s trade war with Canada will exacerbate the global energy crisis
Trump’s trade war with Canada comes at the worst possible time for global energy security. It is only exacerbating an already existing oil crisis.
The unprovoked war of aggression that the United States launched against Iran in late February unleashed what the International Energy Agency (IEA) called the largest oil disruption in history.
Before Trump started this war of choice, roughly 20% of globally traded oil passed through the Strait of Hormuz on a daily basis.
In self-defense, Iran shut down the Strait of Hormuz, destabilizing world energy markets.
Canada’s oil industry had helped to make up for the loss of output from the Persian Gulf.
But Canada could now restrict crude exports to the US, in response to Trump’s trade war.
This also comes at a moment when US oil reserves are at the lowest level in four decades.
Americans have already felt the impact of this energy crisis at the pump.
Gasoline prices have soared in response to the US war against Iran.
This is also taking place just a few months before US midterm elections will be held in early November.
This is precisely why some major US media outlets have warned that Trump’s trade war with Canada will likely backfire.
Semafor noted that the trade war could fuel further inflation, angering voters just before the midterms.
Fortune magazine, a business publication that is often sympathetic to Trump’s pro-corporate policies, pilloried his economic attack on Canada as a “dumb trade war”.
The executive editorial director of Fortune, Diane Brady, cautioned that Trump will likely lose the trade war.
“The Iran war has increased demand for Canada’s oil, aluminum and fertilizer; Saskatchewan is known as the Saudi Arabia of potash, with more than a third of global supply”, she wrote.
Fortune added that Prime Minister Mark Carney’s defense of his country’s sovereignty has caused his approval rating to rise, to roughly 60%. Meanwhile, Trump’s approval rating has hit a new low of 33%.
Trump already lost his trade war with China. Canada may surprise him as well.
Canada needs to start dumping its $459 billion in treasuries. Or, how about introducing a new tax on mail-order prescription drugs like insulin. Based on my research, many Americans buy prescription drugs through mail-order or online pharmacies from Canada to access more affordable medications since they have no price controls in the US.
It’s time to think-outside-the-box and consider different forms of retaliation
All of this pressure and money woes only ends up effecting the consumer, working class.
This is all magic tricks to keep pushing the agenda of increased costs for the daily and then crushing the middle class, or what remains.
Canada really has nothing much to stand on.
American oil companies run the show in Canada.
American corporations run the show on most levels.
Plantir is running the show for most law enforcement.
Canada is the 51st state, the people just have not woken up yet and maybe never will.
Canada has no gold to back its currency.
Canada is a resource colony.
Canada is saturated with American corporations harvesting said resources. Carney relies on those American corporations to run his country and steal from the people.