A recent report from the Eurasia Group warns that growing political instability in the U.S. is increasing economic and security risks concerning Canada’s economy, as tariffs and trade threats are used more in American politics.
The Eurasia Top Risk Assessment is an annual report that assesses the current geopolitical risks that would impact major countries for the year ahead. This group is the world’s leading global political risk research company.
Asa McKercher, a specialist in Canada-U.S. relations at St. Francis University in Nova Scotia, explains that the tensions between the two countries have never reached this level.
“With a single tweet or statement of the press, Donald Trump can impose or unimpose and reimpose tariffs on his country’s greatest trading partners and allies, that’s not something we’ve seen American presidents do for the last 80 or 90 years,” he said.
The report released on Jan 5. suggests Canadian companies could become collateral damage in the U.S. domestic politics.
“We don’t have a vote in America. American politicians are going to prioritize what’s best for Americans,” McKercher said.
The U.S. tariffs have affected Ontario and Quebec the most and both provinces face high tariffs on items that involve vehicle products.
“American tariffs are affecting, not necessarily Western Canada, but certainly in terms of manufacturing, particularly with automotive, they’re just importantly disproportionately affecting Ontario and Quebec,” McKercher said.
Western Canada is less exposed currently, as exports such as oil and potash remain in high demand. But the report raises flags of potential long-term challenges.
“As a long-term prospect, yes, the oil infrastructure in Venezuela is in terrible shape. It looks like very few American companies actually want to invest there. the long term is very hard to predict,” McKercher said.
Experts say that the uncertainty goes beyond trade.
“Predictably is the quiet foundation of alliances, it allows countries to plan, invest and trust that commitments will hold beyond electoral cycles,” said Ann Fitz-Gerald, a professor of international security at Wilfrid Laurier University.
With predictability slowly starting to fade, allies have been reassessing and adapting to new strategies, she said.
“The danger isn’t in disagreement, it’s in volatility, when personal dynamics begin to override institutional norms, the smaller partners usually lose leverage,” she said.
Fitz-Gerald said Canadian institutions were built for a rules-based partner, not the current state.
“Canada is partially prepared, but not fully. We have a strong diplomacy, intelligence and alliance networks, but we’ve underestimated strategic foresight and contingency planning, the moment calls for less assumption and more scenario-based thinking across trade,” she said.
Canada’s reliance on raw resources exports is insufficient for long-term growth.
“Energy exports and natural raw materials alone are not going to make Canada prosperous," Fitz-Gerald said. "We need to be producing high volume, high value exports. We stand behind Canadian firms, and we don’t let our country be hoovered up by large multinationals that are U.S.-owned.”
In the short term, support for Canadian products over the past year may cushion some effects, said Sandra Davidson, a retired marketing professional.
“Over the last year, Canadians have probably become more patriotic than ever. We have been supporting Canadian products made in Canada, anything that has our beautiful maple leaf on it, we’re very happy to buy,” she said.
Experts, including McKercher, argue that long-term security and Canada’s prosperity depend on diversifying its trade partners, developing better products and reducing reliance on the American market.
“America is becoming a much more risky trade partner. That’s the reason Canada needs to diversify. We’re never going to totally replace the United States as our major trading partner, just geographically is what it is,” McKercher said.
The Eurasia report shows Canada must plan for a future where its relationship with America, as its closest ally, is no longer guaranteed.
