Trump’s zero-sum trade strategy leaves Canada with few easy options, economist says

Canada should prepare for a more protectionist U.S. trade relationship even after Donald Trump leaves office, according to University of Toronto economist Joseph Steinberg.

In an interview with Energi Media, Steinberg said Trump approaches trade as a zero-sum contest in which the United States gains by extracting concessions from its partners. He said that framing helps explain repeated U.S. tariff pressure on Canada, although he does not believe the tariff program is primarily designed around a single strategy to isolate China.

Steinberg said some officials in the Trump administration clearly favour a more closed North American economic bloc with tighter restrictions on Chinese access. But he sees Trump’s broader tariff agenda as driven mainly by the president’s preference for tariffs and his willingness to use U.S. market power to obtain better terms.

For Canada, the central constraint is the depth of continental integration. Steinberg agreed that Canadian and U.S. energy systems are deeply intertwined and that both countries would suffer severe short-term disruption if those flows were interrupted. But relative to the size of each economy, he said the overall relationship is more important to Canada.

That weakens the case for using energy exports aggressively as negotiating leverage. It also complicates Ottawa’s effort to diversify trade away from the United States.

Steinberg said new trade agreements can create incremental gains, but geography, transportation costs and existing supply chains make large-scale diversion difficult. For much of Ontario and Quebec, trading with nearby U.S. markets is technologically cheaper than trading across Canada. Similar regional patterns exist in Western Canada.

He also cautioned against assuming Canada can simply wait until Trump leaves office and then return to the pre-2025 trade relationship. A successor administration may be less adversarial, he said, but national-security tariffs on metals and autos have a strong chance of surviving in some form.

Steinberg challenged another element of Canada’s trade strategy: the limited political attention paid to domestic non-tariff barriers. He pointed to supply management and procurement rules as examples of restrictions that concern not only the United States but other potential trading partners.

Lowering those barriers, he argued, could serve two Canadian goals at once: improve the prospects for a workable economic relationship with Washington and make it easier to expand trade with Europe, Asia and other markets.

The result is a narrower set of choices than the rhetoric around economic diversification sometimes implies. Canada can broaden its trade relationships, but it cannot escape the structural advantages and vulnerabilities created by its geography.