Former Liberal Finance Minister Freeland Says Canada Must Not Back Down to Trump as Trade War Drags On

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Chrystia Freeland is no longer sitting at Canada’s cabinet table, but the former finance minister and deputy prime minister is delivering an unusually direct message about the country’s worsening trade confrontation with Donald Trump: giving ground simply to make the pressure stop would be a mistake.

Freeland, who helped steer Canada through the bruising renegotiation of NAFTA during Trump’s first presidency, has resurfaced as one of the clearest advocates of a hard line. Her argument comes at a particularly tense moment. Canada-U.S. trade negotiations have been suspended, Washington has imposed 50% tariffs on billions of dollars of Canadian goods, and Ottawa has answered with matching countermeasures. For Canadian businesses caught between the two governments, the question is no longer whether the relationship has changed, but how much more disruption it can absorb.

Freeland Is Reaching Back to Canada’s First Trump Trade Fight

Freeland’s confidence in resisting Washington comes largely from experience. As foreign affairs minister from 2017 to 2019, she played a central role in Canada’s renegotiation of the North American Free Trade Agreement during Trump’s first presidency. The talks were confrontational, and in June 2018 the United States imposed tariffs of 25% on selected Canadian steel products and 10% on selected aluminum products.

Canada retaliated on July 1, 2018, with tariffs covering C$16.6 billion worth of American steel, aluminum and other products. Ottawa deliberately described the response as dollar-for-dollar retaliation rather than an attempt to escalate the fight. Months later, Canada, the United States and Mexico signed the agreement that ultimately became CUSMA, or USMCA in the United States. It entered into force on July 1, 2020. Freeland now presents that period as evidence that a smaller economy does not necessarily have to accept every demand made by a much larger trading partner, although the eventual agreement resulted from a much broader negotiation than tariffs alone.

That distinction matters. Freeland is not arguing that Canada should refuse to negotiate with Trump. Her experience points toward something more complicated: negotiate intensely, identify areas where both sides can gain, but maintain boundaries when proposals threaten core Canadian interests.

One example came from the auto sector. The new North American agreement introduced a labour-value-content rule requiring part of a qualifying vehicle’s production to come from facilities paying workers at least US$16 an hour. For passenger vehicles, at least 40% of the value must meet the high-wage criteria, rising to 45% for light and heavy trucks. It was an attempt to answer American concerns about manufacturing jobs without simply pushing Canadian production south of the border.

Her Playbook Starts With Cooperation but Ends With Refusing to Capitulate

Freeland has recently described a three-part approach developed during the first Trump administration. The first element is to find genuine areas of common interest. The second is what she calls the “donut strategy”: instead of treating the White House as the entirety of the United States, Canada should work with governors, lawmakers, companies, unions and communities whose economic interests are tied to cross-border commerce.

The third element is the one attracting the most attention now. Freeland argues that Canada must not capitulate when Washington applies economic pressure. In recent interviews she has said that attempts to appease Trump risk inviting further demands. Her position is rooted in the belief that retaliation changes the political calculation inside the United States by ensuring that tariffs also create costs for American industries and communities.

That approach is more strategic than the phrase “never back down” might initially suggest. Freeland’s own formula includes cooperation alongside resistance. During the first Trump administration, Canadian officials repeatedly visited the United States and worked beyond Washington to make their case to businesses, elected officials and local communities.

The economic integration makes that outreach possible. North American factories often operate less like businesses in separate countries than pieces of the same production system. Automotive components, metals, agricultural goods and energy products can cross the border multiple times before reaching the final customer. A tariff placed at one stage of that system can therefore create costs far beyond the company that initially pays it.

Ottawa Has Already Adopted Much of That Harder Approach

Prime Minister Mark Carney’s government is already behaving in ways that closely resemble the strategy Freeland advocates. On August 21, Carney suspended trade negotiations with the United States after saying last-minute American proposals were unfair, uneconomic and insufficient to meet Canada’s objectives. Washington subsequently imposed 50% tariffs on C$27.6 billion of Canadian goods.

Ottawa responded with counter-tariffs covering the same C$27.6 billion in U.S. imports. Effective September 8, affected American products became subject to Canadian rates of 15%, 25% or 50%, generally matching the corresponding U.S. tariff. The measures cover areas including steel, dairy products, appliances, agricultural equipment, pulp and paper, plastics and electronics. Existing Canadian counter-tariffs on American vehicles also remain in place.

The scale of government intervention shows how far the dispute has moved beyond diplomatic rhetoric. Ottawa announced C$7.5 billion in new and enhanced assistance for tariff-affected workers and companies in August, on top of more than C$25 billion it says had already been provided since the confrontation began.

The response continued this week. On October 21, the federal and Ontario governments unveiled a C$8.7-billion package of investments and measures aimed at strategic industries facing trade pressure. Among the commitments are billions for steel production and new funding to modernize automotive factories.

Those numbers also reveal the uncomfortable side of standing firm. Retaliation can create leverage, but it is not free. Governments are spending heavily to keep affected businesses investing and workers employed while an uncertain trade environment persists. The longer the confrontation continues, the harder it becomes to separate trade policy from industrial policy.

Canadian Businesses Are Starting to Feel the Cost of Uncertainty

The economic damage is not limited to companies that receive a tariff bill at the border. The Bank of Canada’s latest business research shows how uncertainty surrounding the dispute is beginning to influence decisions about investment, pricing, exports and hiring.

Responses gathered after Canada-U.S. negotiations collapsed in August showed weaker business sentiment and lower expectations for export sales than responses collected before the breakdown. Companies also became more likely to report that trade tensions were raising their costs and affecting investment plans. Inflation expectations increased after negotiations failed and new tariffs were announced, although other forces, including elevated energy prices, were also contributing.

For factory managers, the practical response is often less dramatic than headlines about retaliation suggest. Companies are changing suppliers, reconsidering investment locations, improving efficiency and searching for customers outside the United States. The Bank of Canada found examples of aluminum producers entering European markets and steel companies looking toward Canadian procurement and defence spending.

Technology is another response. Some businesses are investing more heavily in automation and artificial intelligence to offset higher costs created by the changing trade environment. Others are reducing production capacity or delaying investments until there is greater certainty.

That creates one of the biggest risks in a prolonged trade war: decisions made to survive a supposedly temporary tariff can eventually become permanent. A supplier replaced today may never return. A factory expansion moved to another jurisdiction can represent years of lost investment. Even if tariffs eventually disappear, supply chains do not automatically snap back into their previous form.

Canada Still Has an Enormous U.S. Dependence to Overcome

Freeland’s argument for firmness runs into an unavoidable economic reality: Canada remains much more dependent on the American market than the United States is on Canada.

Global Affairs Canada estimates that roughly 70% to 75% of Canadian merchandise exports in recent years have gone to the United States. Overall trade is equivalent to about 65% of Canadian GDP, while exports support nearly one in five Canadian jobs. That concentration explains why changes in U.S. trade policy can move quickly from a Washington announcement to a concern inside factories, mines, farms and provincial governments across Canada.

The most recent monthly figures underline the point. Canada exported about C$77.9 billion in merchandise in August 2026, of which approximately C$54.3 billion went to the United States. That works out to roughly seven out of every ten export dollars for the month. Canada’s merchandise trade surplus with the United States jumped to C$11.2 billion in August, partly as shipments moved ahead of newly imposed tariffs.

Yet the same data show why diversification cannot be treated as a straight line. After reaching a record level in July, Canadian exports to destinations outside the United States fell 8.5% in August. Monthly figures can be volatile, but they illustrate how difficult replacing American demand would be.

The integration is enormous in both directions. Canada and the United States exchanged nearly C$3.5 billion in goods and services every day in 2025. Since CUSMA entered into force, bilateral goods and services trade had grown by more than C$275 billion by 2025. That is why neither retaliation nor diversification can realistically mean cutting the United States out of Canada’s economy.

Diversifying Trade Is Becoming a Security Policy, Not Just an Economic Goal

Freeland has pushed the diversification argument further than traditional trade policy. Speaking at the Council on Foreign Relations in October, she argued that relying heavily on a partner that has openly challenged Canadian sovereignty creates a national-security vulnerability, not simply an economic one.

That position overlaps increasingly with the Carney government’s strategy. Ottawa says it wants to double Canada’s non-U.S. exports over the next decade, potentially adding more than C$300 billion in trade. Canada already has 15 free-trade agreements covering 51 countries and giving Canadian companies preferential access to a potential market of roughly 1.5 billion consumers.

The government has been trying to expand that network. Canada signed a free-trade agreement with Ecuador in July 2026 and has been advancing negotiations involving India, ASEAN and the Philippines. Carney’s October trip to Türkiye, focused on trade, investment, energy and defence cooperation, offers another example of the effort to build relationships that reduce the country’s reliance on a single market.

Still, diversification is far easier to announce than accomplish. Geography gives the United States enormous advantages. Canadian and American businesses share roads, railways, pipelines, electricity networks, labour markets and deeply integrated industrial supply chains. A manufacturer in southern Ontario cannot necessarily replace a customer in Michigan with one in Southeast Asia without confronting longer shipping times, different regulations and potentially significant capital costs.

Freeland’s argument therefore amounts to reducing vulnerability rather than ending integration. Canada can remain closely connected to the American economy while building enough alternatives that access to one market cannot be used as overwhelming leverage.

Holding the Line Does Not Mean the Relationship Is Finished

For all the anger surrounding the current dispute, the institutional framework connecting the three North American economies has not disappeared. The United States declined to renew CUSMA in its current form during the agreement’s July 1, 2026 joint review, but that decision did not terminate the deal.

CUSMA remains in force. Under its review mechanism, the agreement can continue until 2036 while Canada, the United States and Mexico conduct annual reviews. All three governments can agree at any point to extend the pact for another 16-year term. The U.S. Trade Representative has already begun seeking public input ahead of the 2027 review process.

That leaves substantial room between surrender and permanent confrontation.

Freeland’s own history illustrates the distinction. Her playbook begins with finding common ground and engaging Americans whose economic interests align with Canada’s. Refusing to capitulate is only one part of the strategy. The ultimate objective remains a workable relationship in which neither country needs to accept a one-sided arrangement simply to end the uncertainty.

For Canada, that may prove to be the defining challenge of the current trade war. Retaliation carries economic costs. Diversifying away from the United States will take years. Walking away from North American integration entirely is unrealistic. But accepting demands solely because Canada is the smaller economy carries risks of its own, particularly if doing so encourages another round of pressure later.

Freeland’s message is therefore less about winning a tariff war than establishing the terms on which Canada is willing to negotiate. After nearly two years of repeated trade shocks, Ottawa increasingly appears to have reached the same conclusion: a deal remains preferable, but not every deal is worth taking.

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