Mark Carney and the limits of defying Donald Trump

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But is the country's economy too exposed to break away?Author of the article:Last updated 31 minutes ago Prime Minister Mark Carney and President Donald Trump are pictured in this file photo. Photo by POSTMEDIA NEWS ARCHIVESStanding in front of lawmakers almost 4,000 miles from his own parliament, Mark Carney set out his goal of helping create “the next just, stable and prosperous world order,” even as his native Canada reels from the actions of Donald Trump.THIS CONTENT IS RESERVED FOR SUBSCRIBERS ONLYSubscribe now to read the latest news in your city and across Canada.Exclusive articles from Barbara Shecter, Joe O'Connor, Gabriel Friedman, and others.Daily content from Financial Times, the world's leading global business publication.Unlimited online access to read articles from Financial Post, National Post and 15 news sites across Canada with one account.National Post ePaper, an electronic replica of the print edition to view on any device, share and comment on.Daily puzzles, including the New York Times Crossword.SUBSCRIBE TO UNLOCK MORE ARTICLESSubscribe now to read the latest news in your city and across Canada.Exclusive articles from Barbara Shecter, Joe O'Connor, Gabriel Friedman and others.Daily content from Financial Times, the world's leading global business publication.Unlimited online access to read articles from Financial Post, National Post and 15 news sites across Canada with one account.National Post ePaper, an electronic replica of the print edition to view on any device, share and comment on.Daily puzzles, including the New York Times Crossword.REGISTER / SIGN IN TO UNLOCK MORE ARTICLESCreate an account or sign in to continue with your reading experience.Access articles from across Canada with one account.Share your thoughts and join the conversation in the comments.Enjoy additional articles per month.Get email updates from your favourite authors.THIS ARTICLE IS FREE TO READ REGISTER TO UNLOCK.Create an account or sign in to continue with your reading experience.Access articles from across Canada with one accountShare your thoughts and join the conversation in the commentsEnjoy additional articles per monthGet email updates from your favourite authorsSign In or Create an AccountThe Canadian prime minister, rapturously received by the European parliament in Strasbourg last week, called for an alliance with the EU to serve as “a beacon for other democracies” — in vivid contrast with his talk the month before of being “at war” with the U.S.Carney does nothing to hide his belief that trade and political tensions with Trump’s U.S. create the opportunity — indeed, the responsibility — to fashion a new global order to address problems such as climate change, the erosion of democratic standards and an unnamed but all-too-identifiable “hegemon.”Get the latest headlines, breaking news and columns.By signing up you consent to receive the above newsletter from Postmedia Network Inc.A welcome email is on its way. If you don't see it, please check your junk folder.The next issue of Top Stories will soon be in your inbox.We encountered an issue signing you up. Please try again“My experience in crises is that fortune favours the bold,” he tells the FT in an interview this month. “Canada has what the world wants — and particularly in a world where sovereignty is under pressure.”He adds that “we are about what we’re for, not what we’re against.”But few other western leaders have based their domestic and international appeal so clearly around their opposition to Trump.Carney based his Liberal Party‘s triumphant campaign in last year’s general election around the idea of fighting back against the U.S. president.He also electrified the World Economic Forum in Davos in January with his vision of “middle powers” co-operating in a world that superpowers would otherwise dominate. Canada is so far the only country other than China that has retaliated against Trump administration tariffs with concrete, rather than threatened, countermeasures of its own.Yet Ottawa is also almost uniquely exposed to a vengeful U.S. — because of the depth of integration between the two states’ economies, the limits of co-operation with other countries and the vulnerabilities of Canada’s own model.Trump elicited Carney’s “war” remark last month by imposing 50 per cent tariffs on $28 billion of Canadian exports to the U.S., ranging from electronics to alcohol to tulip bulbs.Since the U.S. accounts for two-thirds of all Canada’s exports, the country’s economic health is at stake as the two governments step up the trade conflict.“A trade relationship that was once a great strength has now become a serious vulnerability,” Carney himself noted this year, adding that 60 per cent of Canadian-made car parts and 90 per cent of finished vehicles were exported to the U.S., while components could cross the border “up to eight times before landing on a showroom floor.”By contrast, even as Carney and European Commission president Ursula von der Leyen speak of making Canada an “associate member” of the EU, a decade-old trade deal between the two jurisdictions has yet to be fully ratified.This advertisement has not loaded yet.This advertisement has not loaded yet, but your article continues below. Prime Minister Mark Carney greets European Commission President Ursula von der Leyen after delivering a speech in the hemicycle at the European Parliament in Strasbourg, eastern France, on Sept. 17, 2026. Photo by Jean-Christophe VERHAEGEN / AFP via Getty ImagesSome EU officials make clear their view that, despite Carney’s call for middle powers to work together, a bid to strike a new deal with Canada would be a diversion from bigger issues.“The Canadian economy exports the majority [of goods sold abroad] to the U.S., so does Canada actually have an interest in aligning with EU regulatory frameworks and the internal market?” asks an EU diplomat, who considers von der Leyen’s idea of associate membership as a “distraction” from more concrete goals. “Does Canada understand what this would entail?”In turn, Trump, who regularly posts “WE DON’T NEED CANADA, THEY NEED US” and similar sentiments, suggested the country’s putative association deal with the EU could be considered a “hostile act” provoking a wave of new tariffs.At present, Carney is pursuing his battle on two fronts.He has continued his predecessor Justin Trudeau’s tactic of imposing countermeasures to Trump administration tariffs at almost every turn, ramping up economic disruption ahead of the U.S. midterm elections in November, even as Washington seeks to use its much greater economic weight — its GDP is 13 times Canada’s — to push Ottawa into compliance.The prime minister has also sought to reduce Canada’s dependence on the U.S. as best he can — not just by seeking to deepen ties with the EU but also by holding a high-profile investment summit and by criss-crossing the world looking for new trade. Prime Minister Mark Carney looks on after conducting a press conference at the Canada Investment Summit at The Royal York Hotel in Toronto, Sept. 15, 2026. Photo by Peter J Thompson/National PostCanadians have signalled they favour his course of action. One poll this month, by Spark Insights, reported a record approval rating of 70 per cent — above any previous prime minister’s.International elites — groups in which the former central banker has long moved — have also proved appreciative.Marco Mendicino, Carney’s former chief of staff, says Carney “has developed relationships around the world that are anchored in trust.”Barclays chief executive CS Venkatakrishnan, who attended last week’s summit, described Carney’s efforts at attracting investment as “heroic,” while Deutsche Bank chief Christian Sewing said Canada was “now on the map, far more important than ever before.”Other leaders are taking pains to indicate their affinity with Carney. France’s President Emmanuel Macron met him on Sunday on French territory off the coast of Newfoundland. U.K. Prime Minister Andy Burnham hailed him as a “great progressive leader” when they saw each other in Liverpool last week.The question is whether, faced with the ire of his neighbour to the south, Carney’s attempt to set out an alternative to Trump can prosper.“He is taking the risk, because the relationship is so important, that the U.S. will not shoot itself in the foot,” says Inu Manak, at the Washington DC-based Peterson Institute for International Economics.Bilateral trade in goods and services totalled US$870 billion last year and Carney says some 80 per cent of Canadian exports remain tariff-free. But there is room for the trade war to spread, not least because Trump has opted against a long-term renewal of the Canada-U.S.-Mexico Agreement he himself renegotiated in his first term — he says it unfairly favours America’s neighbours.Manak adds: “If the United States turns its back against one of its oldest allies and trusted partners, then I think we’re in a very different place.”From banking to politicsIn some ways, Carney is an unlikely rallying figure for those seeking to break out of Trump’s influence.The 61-year-old economist is a 13-year Goldman Sachs veteran who steered the Bank of Canada through the financial crisis and led the Bank of England in the aftermath of the 2016 Brexit referendum.He has built his political identity on being more than a career politician, a background that some commentators say has given his pronouncements greater weight.Canadian historian JDM Stewart argues that the prime minister’s more combative approach to the U.S. has revived a national narrative that had been largely dropped from public discourse.For much of the 19th century, Canadians feared a U.S. land grab, as American politicians expressed their interest in taking control of their northern neighbour.“We’ve had the ups and downs of the U.S. relationship, but there’s been nothing as caustic and disrespectful and egregious as this president’s treatment of Canada,” Stewart adds, referring to Trump’s talk of U.S. annexation of what he calls the “51st state” and moves such as this month’s rebranding of Lake Ontario as “Lake America.”As for the international stage, Carney says his Davos speech “resonated because it said what a lot of people were thinking independently anyway…a number of us are thinking the same way and working together to build together.”We've had the ups and downs of the U.S. relationship, but there's been nothing as caustic and disrespectful and egregious as this president's treatment of CanadaCanadian historian JDM StewartHe adds that other countries’ trading ties with the U.S. are not what they were — even if they are not caught in the same spiral of measure and countermeasure as Canada.“Everybody’s access to the U.S. market has changed,” he says. “Everybody is having to pay, and this is, in the words of the president, a price for access to the U.S. market.”In a sign of the continuing tensions between Ottawa and Washington, Trump posted on his Truth Social network on Monday that the U.S. now planned to buy the agricultural fertiliser potash from Belarus, Russia’s ally, “for substantially less than we are currently paying to Canada.”Canada is the world’s largest producer and exporter of potash; Belarus is the target of international sanctions, including by the EU.Carney’s middle-power rhetoric has won favourable reviews from other governments that have found themselves on the receiving end of Trump’s mercantilist foreign policy. His next challenge is to convert that goodwill into more trade.The Canadian prime minister claims that the country had previously leveraged its position “into free trade agreements that access 1.5 billion consumers,” telling the FT that “we will double that in the next six months to three billion.”Everybody's access to the U.S. market has changed. Everybody is having to pay, and this is, in the words of the president, a price for access to the U.S. market.Prime Minister Mark CarneyBut trade experts warn that building an alternative economic order, in which Canada no longer depends so heavily on the U.S., could take decades.The EU is a case in point. Von der Leyen’s support for associate membership for Canada has gone down well in a country where 71 per cent of people have a “favourable” view of the bloc.But it is far from clear what associate membership would bring.Péter Balás, a former head of the Commission’s trade department who now advises law firm Covington and Burling, says the EU’s much larger population “shows who has to adjust to whom.”Canada has already paid to become the first non-EU country to enter into the bloc’s €150 billion loan scheme to fund defence. Carney also wants Ottawa to join the Erasmus+ student exchange scheme, increase its role in the next stage of Horizon Europe, a research programme, and secure a deal allowing young people to work in each other’s countries. Prime Minister Mark Carney delivers a speech in the hemicycle of the European Parliament in Strasbourg, eastern France, as part of a trip during which he welcomed a proposal by European Commission President for Canada to become the EU’s first associate member, on Sept. 17, 2026. Photo by Jean-Christophe VERHAEGEN / AFP via Getty ImagesIt would have to pay to participate in these programmes as well, says one EU diplomat. “There is no such thing as a free lunch.”The economic impact of such a deal would be minuscule. The U.K., a bigger economy located on the EU’s doorstep, is negotiating a similar youth mobility scheme, aligning its animal health and food standards with the bloc and connecting its energy markets. Yet that package would increase GDP by just 0.3 per cent by 2040, according to the British government.Most of the bloc’s governments have also shown themselves to be much less keen than von der Leyen on formal ties with Canada, with Germany calling for the term “associate member” to be “reconsidered.”Such caution is all the greater, given the EU’s failure to fully ratify the Comprehensive Economic and Trade Agreement (CETA) it signed with Canada in 2016.CETA has been provisionally in force since 2017, meaning tariff cuts, customs rules and market access for goods and services already apply. In that period bilateral trade has risen by more than 80 per cent.But France, Italy and Poland are among 10 countries holding out against full ratification, citing sovereignty concerns, environmental regulations and technical objections to CETA’s investment court mechanism.Greece and Cyprus will not ratify the deal because Canada insists on producing its own feta and halloumi, cheeses that are geographically restricted in the EU.Even with CETA provisionally in place, Canadian beef remains barred from Europe because its cattle are fed growth hormones, a practice that is permitted in the U.S.A more dangerous worldObstacles remain for Canada in other markets, such as Mercosur, the South American trade bloc that counts Argentina, Brazil, Paraguay and Uruguay as full members.Canadian beef producers raised concerns this year that Ottawa’s plan for a free trade deal with the grouping would lead to a flood of cheaper imported meat that could devastate their industry.Canada wants to double bilateral trade with India, and has talked of a deal by the end of 2026. But relations between the two countries are only just starting to normalise after a diplomatic spat in 2023, when Ottawa accused Prime Minister Narendra Modi‘s government of complicity in the killing of a Sikh activist in British Columbia.Rapprochement with China is also delicate, not least because Canadian intelligence services deem Beijing an “enduring threat” and one of the “main perpetrators of foreign interference and espionage.”“There is a legitimate role for the Chinese capital in Canada,” says Vina Nadjibulla, an Asia policy expert and founder of the Centre for Strategic Statecraft. “But pragmatism cannot mean treating all capital as strategically neutral.”Meanwhile, other supposed middle powers such as Australia and Japan have signalled interest in building coalitions and supply-chain resilience — goals Carney set out in his speeches at Davos and Strasbourg. But their direct geographic exposure to China and heavy reliance on U.S. security guarantees limit how far they can pursue strategic autonomy.Even if relations with major powers could be repaired and trade agreements concluded, the spoils would still be relatively minor compared with the scale of Canada’s trade with the U.S.The world's becoming more dangerous, divided. Everyone understands that.Prime Minister Mark CarneyCarney plans to combine his overtures to other trading blocs with an investment blitz at home, focusing on infrastructure and natural resources and taking advantage of Canada’s relatively strong public finances.“We are an energy superpower in both clean and conventional. We are going to act like one and develop that to the full potential,” he says, adding that the country is also “one of the largest critical minerals providers” and is active in AI and space technology.But the limits to Canada’s economic autonomy are clear.The Bank of Canada said this month that while the economy was in a “broadening recovery,” “uncertainty is high and new U.S. tariffs and threats of further action pose risks.”The country also suffers deeper structural problems, notably regulation and barriers to trade between Canada’s 10 provinces and three territories.Leading industrial groups complained in April that the country’s red tape cost it billions more in trade losses than Trump’s tariffs, partly because of national and provincial regulations that can overlap with each other. Productivity growth has slowed to a virtual halt over the past five years, as the gap with the U.S. has increased.Taxes as a proportion of GDP are lower than in much of western Europe but higher than the U.S. Peter Howitt, a Nobel Prize-winning Canadian economist, has argued that the country’s tax system favours small and medium-sized enterprises rather than more productive businesses.Carney says Canada has “one of the most tax-competitive environments for business investment” and will “look for ways to enhance that.” He adds: “One of the things we’ve really been working on is predictability [and the] speed with which we approve [new projects].”He emphasises that Canada has slowed growth in public spending, has often had the lowest deficit in the G7 and has relatively low core inflation. “We’re going to get the macro fundamentals right in a world that is increasingly looking at those,” he says.The political test is not whether Carney can outmanoeuvre Trump on the world stage or wow attendees at Davos, but how long Canadian voters are prepared to endure the painful process of reducing the country’s economic dependence on the U.S.For now, he is making full use of his domestic approval rating, which stands in stark contrast with Trump’s domestic unpopularity.But even as he makes his pitch for investment and international co-operation, Carney acknowledges the scale of the challenge — a challenge he sees as a call to action but which may instead unseat his ambitions. “The world’s becoming more dangerous, divided,” he says. “Everyone understands that.”© 2026 The Financial Times LtdNotice for the Postmedia NetworkThis website uses cookies to personalize your content (including ads), and allows us to analyze our traffic. 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