Prime Minister Mark Carney insists Canada is “at war” with the U.S. after trade talks between the two countries fell apart over the weekend. Fortunately, the war is a rhetorical one over commerce rather than a military conflict, for which Canadians are woefully unprepared. But the exchange of talking points instead of bullets is foolish and destructive enough, and evidence of the futility of managing trade rather than simply getting governments out of the way of people freely exchanging goods and services.
“You’re at war when you get attacked. We got attacked,” Carney insisted towards the end of his Saturday press conference after the failure of the trade talks.
For his part, U.S. President Donald Trump responded that “Canada wants the benefits of being a State, without being one.” He complained that Canadians have “charged our great farmers, for many years, massive amounts of Tariffs. No more!”
Amidst recriminations as to who caused the breakdown — Politico reports the talks “ultimately buckled under a combination of last-minute demands and political constraints on both sides” — the two national leaders are threatening new trade barriers in addition to preexisting tariffs. Pundits and policy experts are digging through such details as have leaked to figure out just where the deal went off the rails.
Strictly speaking, Carney is the more credible figure in the dispute since he’s right that “America has changed” and the U.S. government is trying to “put a series of tariffs on its closest allies and use economic integration as a weapon.” Trump has been notably belligerent in the process of reshaping trade — as he is in all things — making Carney’s “war” talk somewhat believable.
But the parsing of trade demands and personalities misses a larger point. While Donald Trump can be a bully and Carney retains his calm while sniffily complaining about insults to the sovereignty of his country, both of them, and their flunkies, have engaged in the presumptuous business of trying to negotiate the rules of exchange between millions of buyers and sellers in two countries.
We’d all be far better off if even just one of them stepped aside and let matters work themselves out.
Decades ago, economist Milton Friedman noted that protectionists constantly hand-wave away arguments in favour of free trade as “fine in theory” while insisting that trade must be “reciprocal” — precisely the argument the Trump administration makes as it reworks already rule-burdened trade deals.
At a time when Japan was the feared economic behemoth that was supposedly going to eat the world, Friedman warned that tariffs “raise prices to customers and waste our resources.” He argued that when the governments of other countries shield their markets from competition, instead of benefiting their economies they hurt their people and businesses.
“The wise course for us is precisely the opposite — to move unilaterally toward free trade. If they still choose to impose restrictions, that is too bad but at least we have not added insult to injury.”
Evidence for Friedman’s position is found in a recent New York Times article about the vulnerability of electricity grids, largely because of their dependence on expensive, hand-crafted power transformers that are difficult to replace. While U.S. companies are building manufacturing facilities and developing alternative transformer technologies, they’re hampered by tariffs on copper and aluminum. “Costs are up almost 20 percent,” an industry executive told the Times. “We need relief on all of the metals.”
The next massive blackout may happen because trade barriers raised the cost of preventing it beyond the industry’s ability to afford resilience.
Just because Trump is an economic ignoramus who thinks economic activity can be successfully managed by government, despite a long history of evidence to the contrary, doesn’t mean that Carney should follow his example and contribute to the conflict.
Quebec-born Vincent Geloso, an economics professor at Virginia’s George Mason University, argues that “Canada’s response to American tariffs should be incredibly simple: slash our own tariffs and trade barriers. And do not impose counter-tariffs.”
He makes the same argument offered by Friedman, that tariffs hurt consumers and businesses in the countries that impose them. “How exactly does making Canadians poorer punish Donald Trump? If the Trump admin wants to shoot itself in the foot, the Carney government is under no obligation to shoot Canadians in the face with a twelve gauge shotgun for the sake of ‘reciprocity.’”
Or, as the late British economist Joan Robinson wrote , “The popular view that free trade is all very well so long as all nations are free-traders, but that when other nations erect tariffs we must erect tariffs too, is countered by the argument that it would be just as sensible to drop rocks into our harbours because other nations have rocky coasts.”
In a 2025 paper , Geloso pointed out that Britain benefited from repealing “Corn Law” tariffs on imported grain. “The Corn Laws had the effect of keeping food prices in the UK 9% higher relative to world markets. Since food items were a major component of the budgets of the poor, the repeal of the tariffs was largely a ‘pro-poor’ policy.” He added that most 19th century trade liberalization was unilateral, with no expectation that other nations would necessarily reciprocate. Liberalizing nations quickly prospered.
Yes, it’s better when all governments get out of the way and let people and businesses exercise their right to engage in voluntary exchange without regard to borders. But holding trade hostage to the intelligence, decency, and economic wisdom of political leaders in multiple countries is a sucker’s bet. Inevitably, populists with neo-mercantilist ideas arise and burden their own people with tariffs while claiming to help them.
In the days to come, people will spend much time digging for and through the details of the failed U.S.-Canada trade talks. There will be much debate over what was fair and what was not.
But that’s a waste of time. The only definition of “fair” that matters is what people voluntarily agree to in their own dealings. If, under current management, the U.S. won’t embrace free trade policies that make everybody wealthier, Canada should do so on its own. Canadians would be freer and more prosperous by avoiding the American mistake of burdening commerce with tariffs and conditions.
National Post
