Rising Tariffs and a Declining U.S. Mean Canada Must Diversify Its Partnerships

In terms of trade relations, the U.S. under President Donald Trump has been far more of a foe than a border friend to Canada. Other NATO allies know the feeling. America's domestic divisions, bouts of isolationism, and Trump's widespread tariffs have left allies jittery.

The U.S.-Canada trade war escalated when Canada issued retaliatory tariffs on the U.S. on Aug. 25. Trump had previously imposed 50% tariffs on Canadian goods after trade negotiations collapsed, telling Canadian leaders to "fall in line" or face new tariffs on more products. Meanwhile, the U.S.-Mexico-Canada Agreement (USMCA), proposed by Trump to replace NAFTA and signed in 2020, has not fallen apart, but this summer the U.S. declined the USMCA's optional 16-year extension. That means it will be reviewed jointly and annually, adding more uncertainty to the increasingly tense trade relationship.

Here's the bigger-picture problem for my home country of Canada. While the U.S. remains the world's top economic and military power, its global influence is lessening. Canada's next option for dependable trade partners would normally be in Europe, but despite strong economic and historical ties with Canada, Europe has not positioned itself as a true strategic alternative to the U.S. for Canada. Europe has numerous challenges to deal with: Brexit, the threat Russia poses to NATO countries, an energy crunch, and internal political fractures. All of that leaves little capacity for Europe to deepen ties with Canada.

While Canada and Europe have a robust framework for trade and cooperation in areas such as climate and digital policy, these achievements haven't translated into a broader geopolitical alliance. Europe's strategic thinking often leans toward its immediate neighborhood.

The U.S. and Europe have stood tall on the world stage since World War II, but the uncomfortable truth is that both are in relative decline. Europe will remain a vital partner for Canada culturally, economically, and diplomatically, but it cannot single-handedly replace the geopolitical anchor that the U.S. has been for Canada. This realization, coupled with the ongoing U.S-Canada trade war, leads to an inescapable conclusion: Canada must diversify its partnerships and stand more on its own in navigating the emerging multipolar order. Diversifying partners is no longer just a long-term aspiration; it's a strategic imperative for Canada's resilience.

At the same time, let's be realistic. Geography and economics decree that the U.S. will remain our primary partner for the foreseeable future. But we can recalibrate from outright dependence toward a more balanced portfolio of relationships.

Expanding Canada's Horizons

Within Canada's hemisphere, we have options. Latin America offers growth markets and like-minded democracies with whom Canada could collaborate more. In Africa, where the number of consumers is rising and great power competition is playing out, Canada has historical goodwill it could rekindle.

If the West is no longer the only show in town, Canada must court relationships with the new power centers driving the multipolar world. Two nations stand out: India and China. Their sheer scale and trajectory make them impossible to ignore.

In 2023, India surpassed China as the world's most populous country. It has a booming economy now ranking fourth in the world, a youthful demographic, a vibrant tech sector, and a strategic position in Asia. All of these factors make India a potential powerhouse of the 21st century.

As Victor Thomas, president and CEO of the Canada-India Business Council, said, "We [Canada and India] have natural complementary economies and should be drastically increasing our trade together."

India's huge market aligns with Canadian strengths. We can export food to feed India's 1.4 billion people, supply potash fertilizer, partner in tech and education, and import everything from pharmaceuticals to skilled talent.

If India is the rising "democratic superpower" of the future, China is the here-and-now superpower challenger. It is the world's second-largest economy. It is Canada's second-biggest single-country trading partner, a top consumer of our commodities, and a source of everything from affordable goods to international students in our universities. For Canadian businesses, China has meant profit; for our consumers, lower prices.

Yet, China embodies the thorniest dilemma in our foreign policy. The arbitrary detention of two Canadians (the "two Michaels") in apparent retaliation for our arrest of a Chinese tech executive brought relations to a nadir from 2018 to 2020. Allegations of Chinese interference in Canadian elections and espionage activities persist. Beijing's turn toward authoritarianism at home and assertiveness abroad clashes with Canada's values and security interests, and made it clear that naïve engagement is no longer an option.

Beyond India and China, we must broaden our view to other emerging players. Southeast Asia is a region of immense promise for Canada. The 10 ASEAN nations collectively form the world's fifth-largest economy and are growing rapidly. They sit at the nexus of Indo-Pacific trade routes and are seeking to diversify their partnerships beyond just China and the U.S. Canada belatedly recognized this by

launching formal free trade talks with ASEAN and introducing the Indo-Pacific Strategy that rightly highlights the region.

Vietnam, Indonesia, and the Philippines are all examples of where Canada's multicultural makeup, educational ties, and economic complementarity could unlock powerful new relationships. Elsewhere, the Middle East and Africa present different but equally important opportunities. These are regions rich in resources and ambition, with young populations and expanding markets. Canada has value to offer — especially in education, infrastructure, clean energy, and governance.

Using the Endurance of Indigenous Communities to Adapt

For Canada, the erosion of the old world order is both unsettling and energizing. Unsettling because our security and prosperity have long depended on the stability of U.S. hegemony and the multilateral institutions it championed. Energizing because, in a genuinely multipolar world, middle powers such as Canada have more room to maneuver if we are shrewd enough to seize the moment.

But as much as Canada must be open-minded and look far outside for better trade relationships, looking inside its borders at a historical strength is just as important. As Canada adjusts to a world where power is no longer concentrated in one or two capitals, we're being forced to shed old assumptions and relearn how to move through global uncertainty. But for some, this isn't new terrain. It's a lived experience.

Indigenous communities across this land have long known what it means to adapt when the world around them changes. They have experienced the loss of dominance, the erosion of sovereignty, and the imposition of foreign systems. And yet, they have endured. In fact, they have more than endured. They have preserved and evolved ways of thinking that remain deeply relevant and can guide the rest of us through this similarly disorienting global moment.

About Kumaran Nadesan

Kumaran Nadesan, author of The Impolite Canadian: Why Playing Nice Is Costing Us the Future, is the Group Chief Executive Officer of 369 Global, a Canada-based group of companies with business interests in skills training and workforce development, media and communications, and global market facilitation. Nadesan worked for the Government of Ontario for 15 years before joining 369 Global, holding several senior roles. His focus on innovation, program design, and values-based leadership earned him numerous public service awards. In 2024, he was named "Inspirational Leader of the Year" at the National Business Awards by CanadianSME Magazine. He has co-founded several initiatives in Canada and frequently comments on Canadian identity, civic leadership, and global issues. He holds a BA (Hons.) from the University of Toronto Scarborough and a graduate certificate in strategic public management from the Schulich School of Business, York University.