Introduction

On May 12, GA hosted a very special Student Insight Night with Research Fellow Christophe Van Der Kwast on how recent diplomatic shifts in the United States affect its allies, using Canada as a key example. Christophe discussed the Canadian perspective after returning from a several-month-long internship at the Consulate General of the Netherlands in Toronto. He will share his experience and what he learned, being in Canada during the most recent Presidential Election and the first month of the U.S.’ newest administration. 

Topic of the night

While the U.S. has an extensive network of allies, few are as integrated as Canada. Whether you look at economic integration,  cultural exchange, people-to-people contacts or politics more broadly, Canada is heavily influenced by changes in U.S. policy. This has been especially true during Donald Trump’s second term, where his tariffs on vital sectors in Canada and his threats of annexation turned out to be a sign of things to come for others. This makes Trump II, from the Canadian perspective, an interesting case study for the impacts Trump II is having on both America’s position in the world and what it’s doing to other countries at an internal level.

Canada’s interconnection with the U.S. 

Christophe began by sharing statistics regarding Canada’s integration with the U.S. 75.9% of Canadian exports go to the U.S., in industries such as aluminium, it is around 95-96%. He added that Canada has several trade barriers within its own borders between provinces. Because of this, it is often easier to trade with the U.S. than between provinces in Canada. Additionally, Christophe reminds us that while many of Trump’s recent tariffs are being repealed, they do not include pre-existing tariffs, including a 10% base tariff, steel and aluminium tariffs, and tariffs on Canada and Mexico. Christophe said he would focus on three industries in Canada: Auto, Oil, and Minerals.

Auto Industry

Beginning with the auto industry, Christophe explained how the Canadian auto industry is incredibly intertwined with the American auto industry. He also mentioned that it is mainly concentrated in Canada’s richest (in terms of GDP) and most populous province, Ontario. Much of the production in Ontario was connected to and done in the U.S., particularly Detroit and the Rust Belt. 

Because of the dominance of free trade, countries in the past could specialise in specific areas and become really good at a particular part of the process. As such, Canada’s auto industry will be heavily damaged by new restrictions as it relies on the U.S. to handle certain aspects of the production process while specialising in others. In the past, rather than doing everything in Canada, you could begin the process in Toronto, then send parts to Detroit, then send it back to Waterloo, and so on, allowing for each plant and city to specialise in a specific area. This increased efficiency and brought down production costs. To do this, Canada must pay high tariffs to the U.S. to send parts across the border now. Additionally, due to the production process involving sending parts across the border multiple times, the U.S. tariff will be paid multiple times, further increasing costs. This cost will then be passed onto the consumer through higher car prices. 

Oil

The next industry was oil. Similarly, Canada’s oil industry is deeply tied to the U.S. All of Canada’s oil pipelines go through the U.S. at some point. This is because Canada’s oil is quite heavy and less liquid. Rather than developing its refinery capabilities, Canada often relied on the U.S. (and also countries like the Netherlands) to refine the oil as these countries had developed refinery capabilities. 

Unlike the auto industry, however, Christophe points out that the oil industry will likely be better able to adapt. Because of Trump’s policies, U.S. allies look to other countries to increase trade. Canada’s oil wealth is vital to Europe as they seek energy alternatives amid the Russo-Ukrainian War. The demand for oil remains high and will remain so in the near future. 

There were also questions at this time, such as how Canada sends oil to the Netherlands and how efficient it is. Christophe shared that it was shipping and added that international shipping is extraordinarily effective. Additionally, he added that Canada has been one of the most eager participants in the free trade world order since the 1990s, choosing to rely on specific countries’ specialisations rather than attempting to build a holistic industrial economy. 

Additionally, there was discussion on whether Canada could adopt a similar industrial policy to the U.S. under Biden’s presidency. However, Christophe said this was unlikely as Canada has many limitations, is struggling economically, has slow growth, and cannot print money infinitely like the U.S., as the dollar remains the world’s reserve currency. 

Minerals

Finally, Christophe mentioned that Canada has a plethora of rare earth minerals—almost all of them—and is one of the wealthiest countries in terms of mineral wealth. Canada also has a strongly developed mining and refinement industry. 

Canada has mineral opportunities that countries like the Netherlands and many European countries do not have due to their more densely populated populations. 

Countries have been looking to increase their access to minerals well before Trump, especially as part of the energy transition to combat climate change. Canada benefits from this and has a significant opportunity as countries will seek to develop positive trading relationships with Canada due to its mineral wealth and reliability compared to the U.S. 

Soft Power

The final point Christophe made was on soft power. He added that when he was in Toronto, he would hear people discussing what they would do if the Americans invaded. Trump’s most significant impact on Canada and the world at large has been the destruction of American soft power. Christophe then brought up the Canadian election. The Conservatives, whose leader Pierre Pollievre has been compared to Trump, had led the Liberals in the polls for over two years. Pollievre’s Conservatives had a 20% + lead, which is typically very difficult to overcome. 

This was primarily due to the Liberals’ failure to deal with Canada’s economic situation, with Trudeau taking much of the blame. However, with Trump coming back to power and threatening Canada with annexation, these economic issues fell to the side, and the most significant issue became who could best stand up to Trump. The new Liberal leader, Mark Carney, was deemed that person by most Canadian voters.

Poilievre, for his party, lost his own seat, and his lead completely evaporated in a matter of a few weeks. 

Christophe ended by adding that countries are cancelling U.S. orders and instead seeking to buy from other allies. 

The U.S. played a significant role in creating the rules of the game of the United Nations and these international organisations. Trump is ceding the soft power the U.S. had built over the years. 

Discussion

Several key topics were brought up. The first was the NDP in Canada. Christophe brought up how the party bled support to the Liberals and how the NDP was associated with Trudeau because it gave him a confidence and supply agreement in exchange for policy concessions. But once Trudeau resigned, the Liberals surprisingly were able to shake off the negative image of Trudeau in a way the NDP simply couldn’t. 

Christophe also mentioned the reversal of the anti-intellectualism trend. We had seen this backlash against elites for years, but here in Canada, a self-described globalist elitist who worked for various international organisations won widespread support. In this regard, the backlash against Trumpian populism has counteracted the anti-intellectualism trend worldwide. 

In Australia, Peter Dutton, who is also associated with Trump, faced catastrophic defeat, with his Coalition facing one of its worst results ever. 

Another topic was increasing relations between Canada and the European Union. Christophe says this is possible. Canada lacks the capability in areas like data centres where Europe succeeds. However, Canada has oil and minerals that Europe wants. Additionally, Canada aligns with the EU in how it negotiates and does business, following a series of rules and norms. In comparison, Trump prefers more personal connections and negotiations, making for a more unstable relationship. 

There was also the question of increasing cooperation between the Anglosphere minus the U.S., such as with the Five Eyes and such. Here, Christophe said this was more complicated as it is more secret. He brought up how the U.S. improved its intelligence capabilities significantly during the war in Ukraine, as it was able to test new technology. 

Canada and other countries can do this as they continue to support Ukraine through intelligence gathering. However, it is worth acknowledging that the U.S. is a world leader in technology and leaves a massive hole, especially in intelligence.

Our discussion then turned to whether the relations with the U.S. can be repaired. Why is this time different from his first term? Christophe made the case that countries won’t forget and are generally more sceptical about relying too much on one country. He did acknowledge the gravity of U.S. economic power. He admitted there was a chance that the sheer power of the U.S. economy might force countries back into the U.S.’ orbit.

Additionally, unlike in his first term, Trump’s actions are bigger. For example, his “Liberation Day” tariffs were unlike anything we had seen before. Rather than targeting allies in specific industries, he launched a trade war against the entire world without regard for the consequences. Even as he pulls back, the memory of these tariffs will stick in the minds of foreign leaders. 

Finally, he has surrounded himself with those who are personally loyal to him. In his first term, you were pro-global system types like Jim Mattis. Those people are no longer there, so the guard rails are gone. Rather than having experienced people holding him back, his inner circle is filled with those who will support him and his ideas regardless of the consequences. 

A discussion was held on the types of leaders most effective in dealing with Trump. Carney was viewed as a good figure to stand up to Trump thanks to his confidence and knowledge of moving the country into a different economic system. Carney is willing to stand up to Trump, which Trump respects. The examples of Mark Rutte from the Netherlands and Malcolm Turnball from Australia were brought up as leaders that Trump respected despite their saying no to him. Comparatively, Shinzo Abe of Japan tried to appease Trump early on and was met with only more demands. 

There was also the question of whether the right would become stronger after Trump leaves. The discussion turned to whether the Republican Party can be taken back by non-Trump Republicans and his appeal. The case for Trump’s appeal was that many in the U.S. were discontent and wanted something different, coupled with low turnout and polarisation. Some argued that by having a dialogue with the non-Trump Republicans, they can take back control after Trump dies or leaves. In contrast, others believed that Trump had taken over the party and that there weren’t committed Republicans left to win over. 

Conclusion

The event ended with a thank-you to the audience, a quick promotion of GA and what we do, and some nice discussions afterwards. 

We want to thank Christophe for an excellent presentation and everyone who attended and contributed to the great discussion.