Many Canadians have rightly criticized the Trump administration for its erratic and punitive approach to trade. It is difficult to accept that the American economy—which prospered enormously from global commerce—now treats international trade as a failed experiment. Tariffs have become negotiating weapons, supply chains have become political leverage, and economic integration is increasingly portrayed as a national vulnerability. Canadians have spent months attempting to understand this new reality, and it has been anything but smooth sailing.
The latest U.S. announcement adds another layer of confusion. Canada will face a new 10 per cent tariff under Section 301 of the U.S. Trade Act of 1974, although most CUSMA-compliant goods will be exempt, along with oil and gas. The immediate economic impact should therefore be limited. But the measure replaces temporary tariffs imposed after the U.S. Supreme Court rejected President Donald Trump’s previous legal rationale. Washington is now invoking forced labour—even though Canada already prohibits such imports—to preserve essentially the same protectionist architecture under another law. Prime Minister Mark Carney is right: the justification has changed, but the objective has not.
CUSMA has consequently become both a shield and a target. It protects most Canadian exports from the new 10 per cent tariff, confirming that the agreement retains considerable value. Yet Washington continues to bypass it. Section 232 tariffs apply to automobiles, steel and aluminum, including CUSMA-compliant goods. Section 338 tariffs of 50 per cent are scheduled to affect approximately US$20 billion in Canadian products beginning August 19, including alcohol, dairy products and electronics. Canadian exporters are effectively being told that CUSMA applies—until Washington decides otherwise.
Unfortunately, Ottawa’s trade strategy is simply all over the place. One day, the government emphasizes CUSMA’s importance. The next, it speaks as though Canada can quickly pivot away from the American market. It threatens retaliation, promotes diversification, creates an advisory committee and delivers speeches about middle powers, but Canadians still do not know Ottawa’s red lines, potential concessions or desired outcome. Counter-tariffs may eventually be necessary, but retaliation is a tool, not a strategy. It can increase costs for Canadian businesses and consumers without materially changing Washington’s behaviour.
The contradiction becomes even clearer when examining Ottawa’s food policies. Canada says it wants diversified and resilient supply chains, yet it recently imposed a provisional 10 per cent surtax on certain imported canned vegetables, including corn, peas, beans, chickpeas and mixed vegetables. The measure is intended to protect Canadian growers and processors while the Canadian International Trade Tribunal determines whether imports are causing serious injury. Supporting domestic food manufacturing is legitimate. Canada has lost processing capacity over several decades, and rebuilding it should be a priority. But a tariff is not an industrial strategy, and protection should never be confused with competitiveness.
For consumers, food security has four practical dimensions: safety, availability, accessibility and affordability. Canada has capable growers and processors, particularly in Ontario and Quebec, but vegetable production is seasonal, yields fluctuate and processing capacity is specialized. Domestic production cannot necessarily supply every product, in every format, throughout the year. Imports complement domestic production by stabilizing supply, moderating prices and keeping basic products available. Beans, peas and canned corn are hardly luxury goods. They are staples for households most exposed to food inflation.
A 10 per cent border surtax will not necessarily produce a 10 per cent increase at the grocery store because it applies to the import value rather than the final shelf price. Nevertheless, someone must pay it. Depending on bargaining power throughout the supply chain, the cost will be absorbed by the exporter, importer or retailer—or passed on to consumers. In a concentrated market, the probability of price transmission increases. Restricting competition can also create a price umbrella under which domestic suppliers raise prices without losing market share. Import tariffs are often consumption taxes in disguise.
The policy also weakens supply resilience. Retailers learned during the pandemic that relying on one factory, region or country is risky. Dual sourcing allows them to redirect orders when harvests fail, currencies fluctuate, transportation networks break down or geopolitical conditions change. In food economics, redundancy is not necessarily inefficiency; it is valuable insurance. Yet Ottawa’s surtax makes certain alternative suppliers—including Thailand, an important source of canned corn—less competitive while exempting products from the United States and Mexico. Canada is talking about reducing its American dependence while making some non-American suppliers more expensive. That is not diversification. It is policy incoherence.
Market concentration must also be considered. Canada’s canned-vegetable processing sector is dominated by very few companies. A safeguard may protect jobs and encourage investment, but it can also reinforce the market power of an incumbent processor. Ottawa should explain how much Canadian production will increase, how many jobs will be protected, what investments will be required and how grocery prices will be affected. Industrial policy without measurable conditions can easily become corporate protectionism, leaving consumers to pay the bill.
Ottawa should now focus on three objectives: preserve CUSMA’s preferential access, negotiate relief from the Section 232 and Section 338 tariffs, and avoid Canadian measures that undermine diversification and affordability. Geography remains undefeated. The United States will remain Canada’s largest customer and most consequential economic partner. Diversification is necessary, but it will take years. Canada needs a coherent CUSMA strategy—not another slogan, committee or retaliatory threat. Right now, Ottawa’s approach is all over the place, and Canadian businesses are navigating the consequences without a map.
Carpe diem, Mr. Carney. Negotiate.
