Canada Fighting Different Wars on Two Fronts
Canadian Prime Minister Mark Carney’s historic reappraisal of the global political and economic order at the World Economic Forum had persuaded Europeans and other middle-power leaders that they had someone willing to stand up to the pugilistic global hegemon that he didn’t need to name.
But less than two months later, after the United States and Israel started pummeling Tehran, Carney punctured that triumph with a show of support for the attack that dragged the world into yet another Middle East war. In Australia, the second stop on his Indo-Pacific trade mission, he compounded that shock by declaring that the decision had been taken “with regret,” followed by a “hypothetical” response about participating in military actions.
Back in Ottawa early last week and under pressure to make plain the government’s intentions, Carney told Parliament that Canada “will never participate in it.” (He reiterated this on Sunday.) That somewhat sufficed until La Presse, a Montreal digital news outlet, reported that Iran had attacked a Kuwait air base where American and Canadian troops were stationed on the second day of fighting. The Carney government did not issue any public statements about the incident at the time of the attack, and the prime minister is now wading in multiple contradictions.
What’s apparent is that Canada is fighting very different wars on two fronts. On a parallel track, the U.S.-Mexico-Canada Agreement review talks are slowly coming back to life, after being snuffed out by a TV ad. Could backing this shooting war, however ill-advised, deliver some leverage for Canada in the nasty trade imbroglio?
Mexico and the U.S. have launched their formal review, but Ottawa and Washington continue to negotiate about negotiations. U.S. Trade Representative Jamieson Greer met with Dominic LeBlanc, his Canadian counterpart, in Washington on March 6 for talks only described as “constructive and substantive.”
July 1, 2026—Canada Day, coincidentally—is D-Day for the formal USMCA joint review. The countries can renew the pact, exit it, or operate without renewing it until the pact expires in 2036.
Although President Trump has threatened to dismantle his own agreement in favor of bilateral accords, Prime Minister Carney has new, Middle East war–driven options.
Could backing this shooting war, however ill-advised, deliver some leverage for Canada in the nasty trade imbroglio?
The list of American grievances is long. One major debate involves dairy products. American dairy producers have penetrated the Canadian market, but Canada’s protectionist barriers are high. The country operates a unique supply management system based on set prices, provincial quotas, and high import tariffs that make those products more expensive for Canadian consumers, but they help sustain the domestic production industry. (Supply management was a key element of New Deal farm policy.)
The Trump administration wants to lower barriers facing American dairy farmers, in part to deal with an oversupply of milk stateside. But dairy protections are a third rail in Canadian politics. Supply management works for Ontario and Quebec farmers, who are critical consistencies in the country’s top two vote-rich provinces.
Digital policies are another irritant for the White House. Canada’s Online Streaming Act requires major American streaming companies to turn over 5 percent of their revenues to help fund Canadian programming. The Online News Act requires platforms to pay publishers for access to content through links or republishing. Then there are the prospects of new social media regulation, which may include bans for some teens and young children, similar to Australia’s restrictions.
Carney had already rescinded a 3 percent digital services tax on domestic and international companies like Amazon and Google, after Trump threats last year. But Trump, Big Tech’s water carrier, wants more. The tariff war has also produced other unexpected consequences that have rattled the White House, like provincial bans on American beer, wine, and spirits.
Overall, the deal that President Trump keeps hyping isn’t poised to do much for working Americans. That the agreement carved out in 2020 hasn’t created more manufacturing jobs or leveled out trade imbalances is notable.
Canada’s agenda includes seeing the 50 percent tariffs on steel and aluminum and certain copper products lifted along with punishing taxes on vehicles and lumber. Those tariffs were not affected by the recent Supreme Court decision.
The Iranian war and the midterms might force the administration to think differently about the aluminum tariff, given surging aluminum prices. The Gulf region, a key aluminum smelting center, is now offline, but there’s a ready supply available above the 49th parallel. Along with the sharp spikes in oil and gas prices, American manufacturers will suffer even more without some accommodations.
Fertilizer is another disrupted commodity, with about a third of the total product that typically passes through the Strait of Hormuz now blocked. Canada is the largest exporter of potash, a vital fertilizer ingredient. Fertilizer prices are bound to skyrocket—Canada’s largest customer is the U.S.—which will anger American farmers and affect crop prices just as the growing season gets under way in the eastern states and provinces.
Canada is a major oil and gas exporter and plans to contribute to the International Energy Agency’s release of emergency oil reserves to tame price shocks, and the Canadian federal government as well as Alberta, Newfoundland, and Saskatchewan stand to reel in billions, especially if the war drags on. (The contractions in demand as prices soar will pose their own pressures for Canadian producers.)
Another possible lever is Trump’s fervent wish to restart the Keystone XL pipeline project. President Biden shut down the original plan in 2021. However, South Bow, an Alberta-based energy infrastructure company, wants to partner with Wyoming’s Bridger Pipeline to open new segments along a 645-mile pipeline from Alberta to eastern Montana and Wyoming, using a new route.
Carney probably wouldn’t mind a lower-key ribbon-cutting to open the Gordie Howe International Bridge between Windsor, Ontario, and Detroit. The bridge suddenly turned into yet another infrastructure controversy thanks to the president’s threat to block its opening. Commerce Secretary Howard Lutnick met with Matthew Moroun, a prominent billionaire Trump campaign donor and owner of the Ambassador Bridge, a competing span several miles away, prior to Trump’s threat. The new bridge’s opening date has not been announced, but its toll rates (lower than the Ambassador’s) have been posted.
Above all, Carney’s globe-trotting—his latest trip to Norway involves energy and trade discussions and observing NATO’s Arctic war games—shores up new alliances that help Canada get out from under its former dependence on the U.S. Maclean’s, the Canadian news magazine, has noted that the country “is inching its way to superpower status.”
I talked to Fen Osler Hampson, a Carleton University international affairs professor, for a postmortem on Carney’s perfect storm of crises. Trump was predictably not happy about being upstaged in Switzerland and made his displeasure known. “He got quite burned after his Davos speech,” Hampson says. “There was also some criticism here in Canada, including by members of the business community and some of the leading associations like the Business Council of Canada who are very worried about what’s going to happen to the Canada-U.S.-Mexico agreement.”
Then came Iran. After backing the U.S.-Israeli offensive, Carney failed to show up for a debate in Parliament on Iran, was called out about his absence, and turned up the next day to repeat that he did not intend to involve Canada in the war. “There’s been a huge amount of criticism from all sides,” says Hampson of the prime minister’s Iran positioning. “He doesn’t want to throw the economy under the bus because you have a president who makes decisions on the basis of a whim,” he says, adding that “Trump has enough on his hands right now, and so the best strategy is to say as little as possible, stay out of the way, and hope that we don’t get leaned on as this thing starts to go sideways.”
There is some good news for Carney. Three by-elections (special elections) coming up in mid-April—two in Toronto and one in Quebec near Montreal—may deliver a parliamentary majority to the prime minister’s Liberal Party, albeit a very slim one. The Liberals are just two seats short of the magic number of 172. Carney has also benefited from three Conservatives and one New Democrat “crossing the floor” to join the Liberals.
The Angus Reid Institute, a Canadian public opinion research foundation, found that nearly 48 percent of Canadians oppose or strongly oppose the attacks. Carney is personally popular—and if Canada doesn’t get dragged into the Middle East conflagration, he may stay that way, at least in the short term. But the fog of war has its own way of blanketing the canniest political steps.
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