“U.S. Pressure Accelerates Canada-EU Alignment” Canada Deepens Ties With Europe, Targets Midterm Voters With Retaliatory Tariffs

EU Offers Canada Associate-Member Status, Ottawa Welcomes Proposal
"From Diplomacy and Security to Trade" U.S.-Canada Rift Widens
Prospects for Renewed Talks Uncertain as U.S. Midterm Voters Feel the Pressure

Cooperation between the European Union (EU) and Canada is gathering momentum. As tensions between the United States and Canada deepen by the day, the EU has moved to expand coordination by offering Canada associate-member status. Canada, for its part, has signaled plans to strengthen ties with Europe in areas including critical minerals, defense and advanced technology while retaliating against U.S. trade pressure and reducing its dependence on Washington. Experts say this shift in Canada’s strategic orientation could place considerable pressure on the Donald Trump administration and the Republican Party ahead of the midterm elections.

Prospects for Closer EU-Canada Alignment

According to the New York Times (NYT) on the 16th (local time), European Commission President Ursula von der Leyen proposed during her annual policy address to the European Parliament that day, “We want to open the door together for Canada to become the EU’s first associate member.” Von der Leyen said, “The EU and Canada see the world through the same lens on a broad range of issues, from artificial intelligence (AI) and climate change to geopolitics,” adding, “We have stood together on Ukraine, defense, raw materials and supply chains, and above all, we believe in democracy.” She continued, “Partnership is a strategic choice for Europe, and it is also a response to the fracturing of the international rules-based order.”

Canadian Prime Minister Mark Carney responded at the European Parliament on the 17th, saying, “Polls show that an overwhelming majority of Canadians support closer relations with Europe,” and describing an alliance for the future as “a distinct and positive approach that we will define together.” Carney said, “Canada possesses more than 34 critical mineral resources,” adding, “Our alliance can help deliver the secure supplies Europe needs, the advanced processing capacity Canada seeks and our shared objective of completing value chains in the energy-transition and defense sectors.” He continued, “Our societies today are being swept up in new storms—from climate upheaval and the erosion of democratic norms to the weaponization of trade—while the multilateral institutions on which we have relied have weakened,” arguing that “sovereignty and openness are increasingly difficult to reconcile today.” He emphasized, “Economic integration is being weaponized, and tariffs are being used as instruments of coercion,” adding, “We are not proposing a third bloc to compete with the great powers; we are simply proposing a better way forward.”

Deepening U.S.-Canada Rift

Carney’s remarks were widely interpreted as an unmistakable rebuke of the United States. Canada and the United States have recently been locked in sharp disputes across multiple fronts. At a press conference on January 7 last year, shortly before the start of his second administration, President Trump said he could use “economic force” to make Canada the 51st U.S. state, prompting then-Canadian Prime Minister Justin Trudeau to respond immediately that “there isn’t a snowball’s chance in hell that Canada would become part of the United States.” Trump’s 51st-state proposal resurfaced at a U.S.-Canada summit held at the White House in May of the same year, where Carney drew a firm line by declaring that “Canada is never for sale.”

Fractures have also surfaced in the security sphere. Shortly after taking office, Carney ordered a review on March 15 last year of a $13.7 billion contract to purchase 88 F-35 fighter jets from U.S. defense contractor Lockheed Martin. On March 17, he also publicly argued that Canada’s security relationship was “overly concentrated” on the United States and that the country needed to diversify its defense partnerships and weapons procurement channels. At the time, approximately 80% of Canada’s defense spending went toward U.S.-made weapons. The Canadian government also began considering replacing all but the 16 F-35s already under firm contract with other aircraft and moved to expand defense cooperation with Europe. A prime example was its December 1 agreement last year to participate in the EU’s $170 billion joint defense procurement programme, Security Action for Europe (SAFE).

Table 1. Areas of Conflict Between the United States and Canada

Escalating Tariff War

Clashes have continued in the trade sphere as well. Since the outset of his second administration, President Trump has used steep tariffs as a negotiating instrument. On his first day in office, January 20 last year, he warned that he could impose 25% tariffs on products from Canada and Mexico, before levying a 25% tariff on Canadian goods and a 10% tariff on energy products in March of the same year. Canada responded by imposing a 25% retaliatory tariff on $21.6 billion worth of U.S. goods. Product-specific tariff pressure expanded around the same period. In March last year, the United States imposed a 25% tariff on steel and aluminum from all countries, including Canada, followed by a 25% tariff on imported automobiles in April.

Canada responded by imposing an additional 25% retaliatory tariff on $21.5 billion worth of products, including U.S.-made steel and aluminum, and applied the same rate to U.S.-made vehicles that did not comply with the United States-Mexico-Canada Agreement (USMCA). In August last year, the Trump administration raised the tariff on non-USMCA-compliant Canadian goods from 25% to 35%, arguing that Canada had failed to cooperate sufficiently in curbing fentanyl inflows and had retaliated against U.S. tariff measures. At the time, Washington also threatened to impose an additional 40% tariff on Canadian goods found to have been transshipped to evade tariffs.

Canada Chooses Retaliation Over Negotiation

The United States subsequently issued three proclamations in July under Section 338 of the Tariff Act, citing what it described as discriminatory Canadian measures targeting U.S. alcoholic beverages, dairy products and automobiles, and notified Ottawa that it would impose an additional 50% tariff on certain Canadian goods. The two countries negotiated in pursuit of a comprehensive trade agreement before the tariffs took effect, but failed to find common ground after the U.S. side introduced new conditions at the last minute that went beyond the existing scope of the talks. On the 21st of last month, the Canadian government said it had suspended negotiations after determining that Washington’s demands could harm Canadian workers, businesses, strategic industries and national interests. The United States began applying the tariffs to Canadian goods as scheduled on the 22nd of the same month.

Rather than pursue further negotiations with the United States, Canada adopted the hard-line option of imposing retaliatory tariffs and formally embraced a “dollar-for-dollar” principle. The decision is widely interpreted as reflecting Carney’s political objective of reducing Canada’s dependence on the United States. Since the 8th, the Canadian government has imposed retaliatory tariffs ranging from 15% to 50% on approximately 700 categories of U.S. products worth $19.9 billion. Existing retaliatory tariffs on steel and aluminum products have been doubled to 50%, with U.S.-made furniture and apparel subject to the same rate. Cheese, home appliances, certain seafood products and derivative steel and aluminum products face a 25% tariff, while machinery, industrial tools and agricultural equipment are subject to a 15% tariff.

Republicans on Alert Ahead of Midterms

As bilateral tensions continue to intensify, President Trump has recently voiced optimism that a trade agreement with Canada could soon be reached. Following a bilateral meeting with Irish Prime Minister Micheál Martin in Dublin on the 12th, a reporter asked whether he was considering withdrawing from the USMCA. Trump replied, “Canada is charging our farmers 400% tariffs. Once those disappear, I think we can reach a deal with Canada very soon,” adding, “Canada very much wants a deal.” It remains unclear, however, whether formal negotiations between the two countries will resume.

If the United States and Canada fail to reach an agreement, the Trump administration could suffer a significant blow ahead of the November midterm elections. Canada has designed its latest retaliatory tariffs to exert pressure on Republican voters. The Wall Street Journal (WSJ) recently cited analysts as saying that “Canada’s tariff measures are taking direct aim at products made in congressional battlegrounds, including processed cheese from Wisconsin, seafood from Maine, and washers and dryers from Kentucky.” Voters are also growing increasingly unsettled in heavily trade-dependent states near the Canadian border, including Maine, Michigan, Ohio and Alaska. The Associated Press noted, “Industries in those states export seafood, automobile parts, lumber and other products across the northern border to Canada, while residents also consume large volumes of Canadian imports.”