Commentary,  Globalization

Canada needs a new National Policy

U.S. President Trump’s imposition of 25% tariffs on most imports from Canada will cause severe economic dislocation across Canada. Hopefully, a combination of negotiations backed by counter-measures announced by Canada will succeed in removing the tariffs in coming months. However, Trump’s actions have permanently damaged the credibility of any Canadian economic strategy based on continental free trade. In this commentary, originally published in the Toronto Star, Centre for Future Work Director Jim Stanford argues Canada needs to develop a new ‘National Policy’: one focused first and foremost on developing Canadian industries and capacities, rather than relying on trade with the U.S. as the primary economic engine.

In the face of Trump’s tariff threats, Canada can emerge stronger than ever

By Jim Stanford

Forty-one million Canadians experienced collective whiplash this week.

With trepidation, we awaited Donald Trump’s inauguration and his threatened day-one 25% tariff on imports from Canada. We heaved a national sigh of relief when his initial executive orders merely instructed U.S. officials to study bilateral trade issues, reporting back by April 1.

Hours later we were back in the abyss, after Trump casually repeated his 25% tariff pledge, now for February 1.

Is there any method to Trump’s to-and-fro madness? The optimistic view is that he’s creating leverage to bargain on other issues: border security, defense spending, our Digital Services Tax (hated by the tech billionaires hogging the front row at inauguration).

The pessimistic view is that Trump has bigger, nefarious ambitions: to go down in history as the first President in 65 years to enlarge the USA.

Either way, Canada is in big trouble.

Even in the optimistic scenario, and we avoid the tariff through concessions on other issues, we’ve learned where we stand. More importantly, global businesses have also learned where we stand. The long-standing sales pitch that Canada offers low-cost guaranteed access to U.S. markets is no longer credible.

Indeed, the flight of business investment following Trump’s threat (even if he doesn’t follow through) will likely be the worst consequence of this chaos. And that is probably his main goal: to show companies if they want to sell in America, they need to be in America.

If Trump’s strategy works, he will use it again. The idea of a rules-based trading system (whether in North America, or globally) is out the window. We are back to an era in which brute force rules. And Canada needs to get ready.

Bluntly, Canada once again confronts the fundamental challenge of preserving a viable economic and democratic entity that is more than the northern hinterland of an integrated continental behemoth.

The border is not an “artificial line,” as Trump claims. And it is not just a ‘friction’ interfering with efficient trade.

Modern trade theorists understand that borders can foster investment, development, and prosperity in places where they wouldn’t have occurred otherwise. Of course, that’s on top of the even more important dimensions of sovereignty that borders facilitate.

To preserve our viability as a going concern in the face of Trump’s aggression, Canada needs an emergency national response. This should include:

  • Emergency aid for export industries while they retool and reorient marketing to both other countries and domestic consumers.
  • Expanded access to Employment Insurance and other supports to help workers survive a disruption that will likely destroy one million direct jobs (and many more spillover impacts).
  • Redirect the main thrust of our economic development strategy away from trade, and toward doing things by Canadians for Canadians. There’s lots to do in that regard. An emergency plan to build affordable housing, infrastructure, renewable energy, and domestically-oriented manufacturing could more than replace the jobs destroyed by Trump.

The content and context for this emergency strategy are both reminiscent of the original National Policy, implemented by John A. MacDonald’s Conservative government in 1878. That plan included high tariffs on manufactured imports, tariff reductions on imports of raw materials and unfinished goods, and extensive financial and other assistance to develop Canadian industry.

A modern National Policy would likely use different tools (with more focus on innovation, capital investment, and sustainability). But the overarching goal – to develop a diversified, self-reliant national economy with critical mass to exist independently from the U.S. – is identical.

Moreover, the original National Policy followed a failed attempt by Alexander Mackenzie’s Liberals to negotiate free trade with the U.S. It was fundamentally motivated to resist America’s 19th-Century expansion.

Fast forward to 2025, and it’s déjà vu all over again. Yes, we had a trade deal with the U.S., but it was useless (Trump unabashedly ignores it). And expansionism is clearly on the agenda again: Trump’s inauguration speech pledged to “expand our territory,” days after he proclaimed using “economic force” to absorb Canada.

The threat is existential, the coming debates will be fierce, and the burden of adjustment will be high. But if we stand up as we did at other defining moments in our history, Canada could emerge as a more independent country than we have recently imagined.

Jim Stanford is Economist and Director of the Centre for Future Work, based in Vancouver, Canada. Jim is one of Canada’s best-known economic commentators. He served for over 20 years as Economist and Director of Policy with Unifor, Canada’s largest private-sector trade union.