For decades, Canada’s economic fortunes have been tied to its southern neighbour — but what happens when that relationship falters? As a new wave of tariffs rattles global markets, professor Dimitry Anastakis joins The Executive Summary to trace Canada’s long history of trade wars with the U.S., the hard lessons they’ve taught us, and why this time, the old playbook may no longer work.
For decades, Canada’s economic fortunes have been tied to its southern neighbour — but what happens when that relationship falters? As a new wave of tariffs rattles global markets, professor Dimitry Anastakis joins The Executive Summary to trace Canada’s long history of trade wars with the U.S., the hard lessons they’ve taught us, and why this time, the old playbook may no longer work.
Show Notes
[0:00] Meet Dimitry Anastakis - a University of Toronto professor and expert on Canadian business and economic history, who says Donald Trump’s views on tariffs were really cemented in the ‘80s, putting him at odds with the Republican Party at the time.
[1:03] Canada’s economy is enmeshed with that of the U.S., which doesn’t bode well for us as we face a new trade war.
[2:07] A quick recap of the 2025 trade war between Canada and the U.S. to date.
[3:43] Lessons from the past — we’ve been in this type of situation with the U.S. before.
[3:59] We’ve faced familiar trade disputes in the 1890s, 1920s to ‘30s and the ‘70s to 80s.
[5:57] Reagan-era trade disputes — The trade war of the ‘80s was different from the earlier spats – with the U.S. using it as a tool to convince Canada to join the North American Free Trade Agreement.
[7:10] Canada’s historical options in trade disputes — historically, trade wars are an opportunity for Canadians to reflect on their best path forward. And we usually face three choices.
[8:01] Why have we eschewed the “third option” of diversifying our trading partners and instead increasingly turned into partnerships with the U.S.?
[9:01] And how has closer ties to the U.S. helped us through post-trade war recessions?
[10:18] Why this trade war is different.
[10:38] How are tariffs actually supposed to work, and why is that incongruent with how Donald Trump is wielding them?
[11:22] What role do previous trade agreements play if a key player just decides to ignore them entirely?
[12:09] Canadians are feeling betrayed.
[12:37] And if these tariffs remain in place long term, it does not bode well for the Canadian economy.
[13:40] Resilience in the face of disruption — perhaps now is a time for us to reflect and move towards a new economic path, less dependent on the U.S.
[15:29] “We do need to expect that there's going to be a rough ride. But most importantly, we need to rise to the challenge. We need entrepreneurs and governments and firms to start thinking about how Canadians can exploit the advantages that they have in a new kind of economy in the 21st century. Canadians should recognize that this provides an opportunity for us to start building on our strengths. And, you know, the great thing is that history shows us that the Canadian people have been pretty resilient in these situations.”
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Dimitry Anastakis: I used to teach a course called “Trump, Trudeau, Trees, Trade and Other Stuff.” And one of the slides I put up when we were talking about Trump and his approach to trade is that he took out a full-page ad in The New York Times in the 1980s, where he attacked Japanese auto trade and said, “We need tariffs.” He’s been spouting that rhetoric since the 1980s, and now he’s finally gotten his chance. And no economist would say that the policy initiatives that he has imposed are good for the American economy.
Megan Haynes: That’s Dimitry Anastakis, a professor of business history at the University of Toronto, with a cross-appointment to the Rotman School of Management.
He points out that Trump’s anti-trade views were really cemented in the ’80s, putting him at odds with the Republican Party’s pro–free trade push at the time.
DA: This was part of a broader shift towards a neoliberal philosophy — a political philosophy — which was, hey, we're going to move a little bit away from protectionism, we're going to embrace markets, we're going to embrace free trade, we're going to have deregulation. And Canadians needed to respond to this because this was an opportunity.
MH: Today, Canada’s economy is deeply enmeshed with the U.S. It’s our biggest trading partner by a wide margin, which doesn’t bode well for us as we watch the U.S. turn inward and protectionist.
DA: Seventy per cent of our imports come from the United States, and 75 per cent of our exports go to the United States. And that's a problem, because if you get a crazy man in the White House, you are really in trouble if you’ve got one trade relationship.
MH: But here’s the thing: Canada has been through trade wars before and usually comes out stronger, forging tighter economic bonds with the U.S. in the process. But this time, the stakes look different.
The world is more interconnected, supply chains more fragile, and political alliances less predictable. Which raises the question: What, if anything, can history teach us about navigating a trade war today?
Welcome to The Executive Summary. I’m Megan Haynes, editor of the Rotman Insights Hub.
Musical interlude
MH: OK, a quick recap of where we are today — recording in early October 2025. After taking office in January earlier this year, Donald Trump announced a series of tariffs against the U.S.’s once-close trading partners. Not only was there a new “across-the-board” tariff placed on all imported goods, but there were also country-specific tariffs, which were determined based on a formula supposedly measured against a country’s trade deficits with the U.S.
And despite a trade agreement — signed by Trump himself in 2018 — Canada wasn’t spared, with individual industries like cars and aluminum being slapped with tariffs of upwards of 50 per cent.
Trump justified the move as punishment against so-called “out-of-control” drug problems flowing across our border, all the while demanding that Canada become the 51st state.
Canada and other countries retaliated, imposing their own tariffs, and a flurry of country-by-country negotiations was set off. As of early October, Canada hasn’t officially signed any new agreement with the U.S. — though things do seem to move pretty quickly, so that might change between when we recorded this episode and when it comes out.
What’s more, at least two separate U.S. courts have ruled that Trump’s tariffs are illegal — a decision the U.S. government has said it will bring to the Supreme Court.
In Canada, we’re feeling it — our GDP declined for the first time since 2020 in the second quarter of the year. Inflation ticked up slightly, something economists pretty universally believe will continue the longer the trade war goes on — and we saw some significant trade war–related job losses and unemployment towards the end of the summer.
So, let’s start with the good-ish news. We’ve actually been in this type of situation before—several times. Trade wars, in particular, have been a pretty consistent part of our economic history.
And we usually come out the other side with stronger economic growth. Looking back on some of the most significant trade spats, you might even catch some similarities to today.
DA: So, in the 1890s, you had a president in the United States, William McKinley, who was very kind of jingoistic. He was very pro-America, and one of the tools that he used to try to assert American power was to raise tariff rates — and he did so with an explicit view of trying to make Canada join the United States.
MH: Canadians didn’t much appreciate the annexation threats, and after the U.S. Congress raised tariffs to near-record highs of 50 per cent on all imported goods, we followed suit. That dispute ended when McKinley was voted out — largely because of the increased cost of living in the U.S. as a direct result of the trade war. And Canada took that opportunity to deepen its ties to the U.S. and remove a number of trade barriers so the same issue wouldn’t happen again.
Fast forward 40 years or so, and in the 1920s and ’30s, there was a new trade war, launched around the time of the Great Depression to protect American markets.
That trade dispute ended with the outbreak of the Second World War and the subsequent opening of trade borders.
DA: In the 1940s especially, government people — trade officials — all believed very strongly that one of the reasons the war had happened in 1939 was because of the trade wars that had preceded it in the 1930s. And the mantra was: we’ve got to stop sending up barriers to trade, because it ends up leading to war.
MH: After the war, countries around the world signed the General Agreement on Tariffs and Trade, creating smoother access to different economies around the globe—marking an era of global trade stability, sometimes called “the capitalist peace.”
DA: And the United States is the chief beneficiary.
MH: Again, Canada deepened its ties to the U.S., and we enjoyed a period of prosperity relative to the one our neighbours to the south experienced. Jump ahead to the ’60s and ’70s, and you have a steady rise in protectionist policies coming out of the U.S., culminating in a 1980s trade war under the Ronald Reagan government. This trade spat, however, was a bit different.
DA: In 1980, Ronald Reagan was elected president, and one of the key things that he wanted to do was to create a free trade regime from the North Pole all the way down to the bottom of South America. He wanted to have a Western Hemisphere that was basically tariff-free.
MH: So, perhaps counterintuitively, Reagan used tariffs to pressure the Canadian government, then under Prime Minister Brian Mulroney, to open up borders — ultimately resulting in the North American Free Trade Agreement, which was signed in 1992.
So, you can see, trade wars have been, historically, used as blunt instruments — either to protect American interests or to pressure other countries (often the U.S. pressuring Canada) to do something they might not want to do — such as joining the U.S. republic or opening our borders to smoother trade.
If this all sounds a bit familiar today, we do have some bad news: most U.S.–Canada trade disputes ultimately result in some sort of recession — and how we got ourselves out of those recessions probably won’t be much comfort either.
Musical interlude.
MH: With each trade war comes an opportunity for Canada — its people and its government — to reflect on our path forward.
And when faced with a trade dispute, we usually have three options, and the 1970s trade dispute gave us an explicit framework:
DA: The first option is to continue going on as they're going.
MH: Basically, we’re going with the status quo and existing agreements — we’re going to change nothing and hope the trade dispute blows over and never happens again.
Option two:
DA: The Canadian government considers even closer ties with the United States, to say, hey, you know, we clearly have this situation where our economies are so closely tied. Maybe we should become even closer.
MH: And the third option…
DA: The third option became a shorthand of moving away from a dependence upon the United States and trying to build relations with other countries, other trading nations. It didn't work.
MH: Despite efforts over the years, we’ve never meaningfully diversified our trading partners beyond the U.S.
DA: We're right beside the United States, they're the largest economy in the world. They have a voracious appetite for a lot of the stuff that we produce — wood, oil, minerals, all kinds of staple goods. We have this huge, 3,000-kilometre undefended border. We share the same language outside of Quebec and the French fact in Canada. So it's really easy, convenient and lucrative to trade with the United States. I mean, it's so much easier if you're an exporter or importer, a businessperson, to do business across the border in Detroit if you can overcome tariff barriers than it is to do business in Japan or Europe. You don't have the transaction costs, you don't have the long-term shipping costs, you don't have language barriers, you don't have all these kinds of other factors that make it really easy. Now, making it really easy means sometimes that you can get pretty lazy.
MH: As a result, over our history, we’ve traditionally embraced the second option — closer ties to the U.S. Freer trade meant that when the American economy grew, ours did too. And Dimitry says that freer trade between our two countries was a key reason Canada was able to get out of the recessions that followed trade disputes.
DA: We managed to get through the early 1890s recession, and that led to a period of prosperity, which was pretty good right up until the First World War. After the war, where there was a period of disruption in the 1920s there was good times. In the 1930s, which was a terrible period for the Great Depression, we responded with efforts to try to revitalize trade, and we had a prosperous era from the 1940s right into the 1970s. In the 1970s and 1980s, when there was a recessionary period, we bounced back. It was tough. There was a pretty sharp recession in the early 1980s, there was a pretty sharp recession in the early 1990s but…
DA: Lo and behold, in the 1990s and early 2000s the economy is going along pretty good. It's a period of relative prosperity.
MH: And here’s the catch: that same strategy that saved us before — closer ties to the U.S. — might not work this time because this time really is different.
[Musical interlude]
DA: One of the key differences is this trade war is not rooted in economic reasoning at all. They're rooted in Trump's irrationality around bilateral relations between Canada and the United States, or Trump's ignorance of how trade works, and especially how tariffs work.
MH: Dimitry points out that most tariffs are meant to protect nascent industries.
DA: One of the reasons that you have a tariff is to say, hey, I've got a small but growing auto industry, why don't we give it some tariff protection so we can keep competition out, allow it to grow, then we'll lessen our tariffs and it can compete on an international basis. Well, in the 1890s that was fine, but in the 2020s there are not a lot of infant industries in the United States.
MH: While Trump says he wants manufacturing to come back to the U.S. — and that may happen — tariffs also stunt growth of established industries. Though it’s a bit soon to tell how profound an impact the current trade war will have on American companies, organizations are starting to feel the effect on their bottom lines. The second key difference is that when we fought trade wars before, we had no or weak bilateral and global agreements around trade.
DA: In previous times when Americans raised tariff barriers, we could raise tariff barriers as well because there were no agreements that governed Canada-U.S. trade. In this instance, Trump is illegally launching a trade war that not only contravenes the Canada-United States-Mexico Trade Agreement, which we signed in good faith and he signed in good faith, he's also contravening World Trade Organization rules that the United States is a party to.
MH: So, we’re in this weird legal limbo as we wait to see how much power these agreements actually hold, and any dispute we may bring to adjudication tends to take years to settle. Finally, remember, Canadians were effectively pushed into freer economic trade in the ’80s. And yes, it really benefited us, now we’re coming out on this side feeling a bit, well, betrayed.
DA: We’re kind of like, wait a second, guys, didn't we make an agreement with you? Didn't we go through that kind of hell of the 1980s and negotiating this and fighting over this and finally deciding that we wanted to have a trade agreement with you? Now you've turned around and launched this attack upon us, which is largely unprovoked.
MH: So now the worst news: if these tariffs remain in place long term — that is TBD considering some of the waffling on trade down in the U.S. — that, frankly, doesn’t bode well for the Canadian economy.
DA: We're tending towards recession. So if the United States does continue in this measure and does have a kind of recovery, and Canada can't get access to these markets, still suffers from these punitive tariffs, we are going to be behind them. If we do have a recovery, that's not going to be as good. We may have a longer recession, a deeper recession, because so much of our economic effectiveness is dependent upon access to the United States market.
MH: Because remember, historically, we’ve come out of trade war-induced recessions stronger because of our deepened ties to the U.S. Without that, well, the future feels a bit more uncertain.
And even if some sort of agreement comes out of this — something the federal government is actively working towards — the damage may already be done, and Canadians’ trust in the system broken. But here’s the silver lining: unlike past disputes, this time we’re not in this battle alone.
DA: In the past, we've tried to diversify our economy away from the United States. However, we've been the ones trying to do this on our own, saying, hey, we don't want to be so dependent on the United States. Europe, will you trade more with us? Japan, will you trade more with us? And most of the time, those countries have said, hey, you've got a pretty good thing with the United States right now. We're having our own thing going on. We're not that interested.
MH: Now, Trump’s tariffs are affecting everyone and have destabilized our faith that the U.S. can be a reliable partner. If a single American president can upend 100 years of trade precedent, what guarantees can countries have about the security of agreements with the U.S. going forward? Ultimately, that’s really pushing Canada back towards that third option we talked about earlier — diversification.
Building on some work that previous governments — notably Jean Chrétien’s Team Canada efforts and trade agreements with Europe and Korea developed by Stephen Harper — Prime Minister Mark Carney is actively out pitching Canada as a potential partner around the globe.
DA: For the first time, when we say to other countries, hey, we need to kind of diversify our trade. Let's try to build better relationships. Maybe sell you some liquid natural gas or do some defence production procurement. For the first time in a long time, all these other countries say, you know what, we're going through the same thing. Maybe it is time for us to kind of cut new deals.
MH: Internally, we’re looking at reduced trade barriers between provinces, and we’re doing some serious soul-searching. Dimitry thinks that’s a positive thing.
DA: You know, we kind of got lazy in the last 40 years. The American economy and the American market were there. We got access to it. We didn't do the hard work of trying to build better relationships with Europe or places like China or Japan. We do need to expect that there's going to be a rough ride. But most importantly, we need to rise to the challenge. We need entrepreneurs and governments and firms to start thinking about how Canadians can exploit the advantages that they have in a new kind of economy in the 21st century. Canadians should recognize that this provides an opportunity for us to start building on our strengths. And, you know, the great thing is that history shows us that the Canadian people have been pretty resilient in these situations.
Musical outro
MH: This has been Rotman Executive Summary, a podcast bringing you the latest insights and innovative thinking from Canada's leading business school.
Special thanks to professor Dimitry Anastakis. Join us next month as we chat with professor Opher Baron about why more medical professionals alone won’t get us out of our current healthcare crisis. If you’re just tuning in for the first time, check out some of our earlier episodes – we tackle everything from why it’s time to explore a four-day work week to where you can actually get the best innovation. Make sure you subscribe on Apple, Spotify, YouTube or Amazon. Please consider giving this episode and the series a five star-rating — it’s hugely helpful in getting the word out.
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This episode was written and produced by Megan Haynes. It was recorded by Dan Mazzotta and edited by Avery Moore Kloss.
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