Canada Turns Up Heat on Trump Trade War with Dollar-For-Dollar Retaliation

Canada's response to US tariffs has taken a dramatic turn under the Trump administration. The country, which once hesitated to retaliate against US trade threats, is now embracing open defiance.

Former Bank of England governor Mark Carney was among those who called for dollar-for-dollar retaliation against US tariff hikes. His pivot from caution to assertiveness reflects a growing willingness among Canadians and their global allies to push back against the Trump administration's aggressive trade policies.

The US is widely seen as having an economic advantage over Canada, but Nobel-prize winning economist Paul Krugman argues that this view underestimates Canada's leverage. The country imports vital goods from Canada like oil, lumber, electricity and aluminum, for which there is no cheap substitute. Tariffs on these goods would increase costs for American consumers and businesses in an already inflationary environment.

This creates opportunities for countries to use time as a weapon against the US. Foreign governments can calibrate tariffs to target areas with vulnerable Republican House and Senate seats, making a trade war politically costly for Trump's administration.