Carney's Brexit Lesson: Trade Is All About Geography
Mark Carney's response to US President Donald Trump's tariffs is guided by a key lesson from Britain's Brexit saga. The Canadian prime minister has grasped that trade is largely a function of geography, despite all the chatter about globalization. This understanding was reinforced during his time as Bank of England governor, where he witnessed the UK's biggest trading partner remain the EU even after 10 years of Brexit turmoil.
The gravity model of international trade holds that countries tend to trade most with their nearest and largest neighbors. In Canada's case, the US economy is 13 times its size, and the majority of Canadian exports are sold to the US. This underscores the importance of maintaining good relations with its largest trading partner.
Carney's approach to the current trade spat between Canada and the US is cautious, seeking to limit the fallout on bilateral trade rather than engaging in a full-blown trade war. His approval ratings have soared to 66% as he takes a firm stance against Trump's tariffs.