This article originally appeared in International Policy Digest.
By Jamie Tronnes, February 24, 2025
With the stroke of a pen, President Donald Trump imperiled the historic friendship and powerhouse economic alliance between Canada and the United States. With the pretext of forcing Canada and Mexico to prevent migrants and fentanyl from flowing over the borders, Trump enacted, then temporarily retracted, steep tariffs on both nations.
While Americans might swallow weak border enforcement as an excuse for the Mexican tariffs, many are perplexed at Canada getting the same treatment. Government officials are tying themselves in knots trying to spin a drug war and border security rationale for the tariff-induced pain coming our way. But the truth is simple – Trump just wants tariffs. Case-in-point, on February 10, Trump imposed a global 25 percent tariff on steel and aluminum.
Trump believes that “tariffs will make our country rich” and sees them as a path to pay for an extension of his domestic tax cuts. He also believes that international companies will relocate to the United States to avoid them.
Canada, hoping to appease the bully, stepped up its border security in the months leading up to the initial February 1st deadline. The Province of Ontario launched Operation Deterrence to address their side of the border. Alberta Premier Danielle Smith invited Fox News to the Coutts Border Crossing to showcase the progress being made. Canadian cabinet ministers came to the U.S. in droves, hoping whirlwind diplomacy would prevail. Likewise, Mexico deployed 10,000 national guardsmen along the U.S. border.
Undeterred, Trump is moving ahead with tariffs. Trump’s true motive for tariffs even seeped out in his social media post announcing the 30-day reprieve. While the substance of the deal to wait 30 days was focused on further border security concessions from Canada, Trump closed his post ambiguously, referring to the need to reach “a final Economic deal with Canada” and with the exclamation “fairness for all!” Trump’s motive for tariffs is evidently the misguided belief that free trade has somehow disadvantaged America.
The border and fentanyl emergency are merely the legal and political rationale for enacting tariffs. Under the International Emergency Economic Powers Act of 1977, Trump has the power to enact tariffs in the event of a national emergency – otherwise, this power devolves to Congress.
In all fairness, Canada has its faults, and Americans have reasonable frustrations. It’s true that illegal fentanyl labs exist in Canada, but they are not a primary source of fentanyl to the United States. A case can certainly be made about Canadian banks being lackadaisical on money laundering tied to transnational narcotics gangs. Northern border migration is also an issue that has steadily grown over the past three years. But again, Canada is already working to address the issue, and the numbers have decreased in the past two months.
The Trump administration is using a political tactic as old as time – wielding an issue voters care deeply about (border security) to mask the unpopular consequences of a preferred policy experiment. While Trump said tariffs may lead to “some pain,” he is banking on his border bona fides to keep support onside.
That “pain” quickly manifested in public concern and market instability. The top issue in the 2024 election was the cost of living, ranking as the number one issue for 30 percent of respondents, with immigration coming in second at 20 percent. In a Fox News poll conducted in January, immigration/border issues tied with economy/jobs as the number one concern at 13 percent. Not too far behind was the cost of living at 11 percent.
And the fentanyl and border issues have nothing to do with other tariffs he is proposing on American allies. Trump has said tariffs with the EU are next, likely justified by a second smokescreen: bringing home American jobs.
In 2025, capital flows globally; it follows certainty and favors profit. Investors now know that they cannot import aluminum, lumber, animal feed, coffee beans, or other inputs into the U.S. without being tariffed. And no one will invest in America just to avoid tariffs on their final product in the American market because, one, most businesses sell their products globally and, two, other countries are now enacting retaliatory tariffs. Goods made in America and sold globally may avoid the direct costs of American tariffs but won’t escape the resulting retaliatory tariffs.
In fact, investors may flee the United States to bring their capital to where they can import raw materials at a consistent rate and sell to countries with reciprocal free-trade agreements. Investors like the certainty of knowing that most leaders are not going to threaten a new tariff on a whim.
In the lead-up to the announcement of a thirty-day reprieve, hedge funds were shorting positions on U.S. stocks and predicting a market collapse. 401(k)s were at risk of huge losses. The “Do-Not-Buy-American” sentiment outside of the United States is now at an all-time high.
Trump may love tariffs, but he’s bound to start feeling tariffs don’t love him back.
Jamie Tronnes is the Executive Director of the Center for North American Prosperity and Security, a project of the Macdonald-Laurier Institute.
