Can Canada wait out the trade war with the US?

Can Canada Wait Out a Trade War With the United States?

Canada and the United States share one of the world’s largest and most integrated trading relationships. Trade tensions between the two countries can have major economic consequences, but whether Canada can “wait out” a trade war depends on several economic, political, and strategic factors.

Economic Exposure

Canada exports more than 75 percent of its goods and services to the United States. Key exports include oil, natural gas, automobiles, machinery, and agricultural products. Any tariffs or trade barriers imposed by the U.S. can directly affect Canadian industries, disrupt supply chains, and reduce exports.

While Canada has some economic flexibility, prolonged trade restrictions could hurt businesses, lead to job losses, and slow economic growth. Waiting out a trade war without actively seeking alternatives may expose Canada to prolonged economic stress.

Diversification and Alternatives

One strategy for Canada is to reduce dependency on the U.S. market by diversifying trade. Canada has free trade agreements with other countries, including the European Union through the Canada-EU Comprehensive Economic and Trade Agreement (CETA), the United Kingdom, and various Pacific nations. Expanding trade with these partners could partially offset losses from U.S. tariffs.

Canada can also promote domestic industries, encourage innovation, and invest in sectors less reliant on U.S. demand. However, building new markets and reconfiguring supply chains takes time, and immediate relief from a trade war may be limited.

Political and Diplomatic Pressure

Canada may also rely on diplomacy and international trade rules to resolve conflicts. Organizations such as the World Trade Organization provide mechanisms to challenge unfair trade practices. Coordinated action with other affected countries can increase pressure on the U.S. to reduce tariffs or reach negotiated settlements.

Domestic politics in both Canada and the U.S. will influence how long trade tensions last. A change in leadership, upcoming elections, or shifting economic priorities could alter the trajectory of the trade war.

Conclusion

While Canada has options to weather a trade war, simply waiting it out without proactive measures is risky. Diversifying trade, seeking international support, and strengthening domestic industries are essential strategies. In the short term, Canadian businesses closely tied to the U.S. market will likely feel the impact, but a combination of diplomacy, market diversification, and policy measures can help Canada reduce long-term vulnerabilities.