Why Trump's Trade War Could Permanently Reshape North American Business - And What Canada Must Do Now

Nearly 1.5 million Canadian jobs are at risk as we face potentially the most significant change in North American trade relations since NAFTA. With $3.6 billion in daily cross-border trade between the US and Canada, also nearly 9 million US jobs depend on this relationship. Over 30 US states count Canada as their primary export destination. We're not just facing a trade dispute—we're confronting a potentially fundamental reshaping of our continental economy.

A Long History of Trade Tensions

Canada has weathered multiple waves of American protectionism since the 1860s, each reflecting its era's political dynamics, but in the end, with striking similarities. The 1890s and early 1900s saw nationalist tariffs to build local American economies. The Smoot-Hawley tariffs of the 1930s forced Canada to seek preferential trade deals with Britain as a counter-measure. Yet perhaps the most telling historical parallel comes from the 1971 "Nixon shocks." When Canada couldn't secure exemption from Nixon's 10% import surcharge, his Treasury Secretary declared, "foreigners are out to screw us. Our job is to screw them first." Sounds familiar? The administration even threatened to cancel the Auto Pact, convinced Canada had cheated the US out of jobs. Yet even during these tense times, policy decisions were guided by economic experts and established diplomatic channels – a stark contrast to today's environment where aggressive political messaging often trumps economic reasoning (pun intended).

Why This Time Around Is Different

Today's scenario represents a fundamental break from historical patterns due to three critical factors. First, our supply chain integration has reached unprecedented levels, with the automotive sector's 20% cross-border input ratio highlighting our deep interdependence. Second, we're operating in a new political reality where decisions are driven by domestic messaging rather than economic strategy or diplomatic considerations. Third, unlike previous eras where Canada could pivot to alternative markets like Britain in the 1930s or Europe and Japan in the 1970s, today's global competitive landscape makes such shifts far more complex and costly. And given that we are hinged together with the US at the “economic hip,” China seems out for us.

The Economic Stakes

The numbers are stark. A 10% tariff scenario would trigger an estimated 2.4 percentage point contraction in the Canadian GDP over two years, putting approximately 500,000 jobs across sectors at risk. The US would face a one percentage point GDP reduction and a $3.5-4.0 trillion deficit increase. More alarming is the 25% scenario, which could triple the job losses to 1.5 million positions for Canada, also causing severe supply chain disruption, permanent structural changes, and a GDP contraction significantly exceeding 2.4%, requiring aggressive monetary policy intervention, which in turn will put again higher inflation on Canadians.

?Critical Actions Required Now

For business leaders, the immediate priorities must include:

- Comprehensive supply chain vulnerability assessment

- Dual-scenario contingency planning for both 10% and 25% tariffs

- Building minimum 6-month cash reserves

- Accelerating automation and productivity improvements

- Existing contract reviews and renegotiations for tariff provisions?

Beyond these defensive measures, companies must focus on strategic transformation:

- Vertical integration to reduce cross-border dependencies

- Digital transformation for improved competitiveness

- Strategic partnerships or mergers for scale

- Development of domestic supplier networks

- Investment in advanced inventory management technology and AI?

From Paper to Practice: Making Trade Agreements Work

While Canada has impressive trade agreements in CETA and CPTPP, they remain largely underutilized. The stark reality is that only 47% of eligible Canadian exports to the EU use CETA's benefits, with CPTPP utilization even lower. This must change! Business leaders need to transform these agreements from diplomatic achievements into commercial realities by establishing a physical presence in key markets, investing in understanding complex origin requirements, and building real relationships with local partners.

Policy Imperatives

Canadian policymakers must move beyond incremental approaches to embrace bold, transformative policies. This includes launching a $5B+ Strategic Industries Fund, fast-tracking approvals for critical manufacturing projects, and reforming the Competition Act to allow strategic domestic consolidation, and explicitly creating incentives for—what we call “zero-weight exports”—essentially doubling down on non-physical digital and service exports. Additionally, a dedicated Trade Agreement Implementation Task Force that includes private sector leadership must be established to make existing trade agreements more accessible and practical for businesses of all sizes. Finally, allowing more access to education and allowing educational institutions to innovate in stackable degree programs, dual-degrees, and hybrid “while you work.?

Looking Ahead

The window for preparation is narrow—perhaps 12-18 months before potential tariffs permanently reshape the landscape. Companies that recognize this isn't just another trade dispute, but a fundamental continental economic shift will be best positioned to survive and thrive. Over-preparation costs pale compared to the potential costs of being caught unprepared.?

For Canadian businesses, this means immediate action on both defensive measures to protect existing operations and offensive strategies to capture new opportunities. For policymakers, it requires moving from traditional approaches to bold, transformative policies that can reshape our economic landscape.?

The decisions made in the next months may well determine the future of Canadian business. This isn't about weathering the storm; it's about emerging stronger in a fundamentally changed North American and ultimately ‘global’ economic landscape. With 1.5 million jobs potentially at stake, the time for action is now.?

How is your organization preparing for these potential changes? What support do you need from policymakers to build resilience? Share your experiences below. _