“I think the challenges we face are existential… And I think Canadians need to understand that our neighbour has desires and ambitions and goals under the current administration that no other administration in American history has had – and that this poses a genuine challenge for all Canadians and for the future of our country.”
—Former Canadian Ambassador to the United Nations Bob Rae
Canada’s longstanding, dependent economic relationship with the United States has abruptly, involuntarily, and radically shifted following U.S. President Donald Trump’s imposition of tariffs and threats of annexation.
Canada is now in an economic war, with sovereignty at risk and thousands of industrial jobs on the line in the immediate future. How Ottawa responds with an alternative comprehensive economic strategy will determine whether Canada can survive this new geopolitical and economic reality.
Canada has no choice but to restructure its relationship with the U.S., and rapidly. The 75 per cent of merchandise exports that go to the U.S. in key sectors like energy and manufacturing, which together accounted for 19 per cent of Canada’s GDP in 2023, while no other country accounts for more than five per cent of Canadian exports, are vulnerabilities that are being exploited by a hostile neighbour.
Mark Carney’s epitaph to the global economic order at the Davos World Economic Forum drew widespread praise for its candour in challenging the U.S. economic coercion that Trump has unleashed on the world. “Canada lives because of the United States. Remember that, Mark, the next time you make your statements,” was Trump’s menacing reply at the same podium.
In the weeks since, threats on Canadian sovereignty have escalated, becoming increasingly bellicose. The U.S. State Department has breached significant red lines by meeting multiple times with Alberta secessionists, called out as treasonous by the Premier of B.C. The so-called Delegation to Washington included the president of a constituency association from Alberta’s governing United Conservative Party (UCP) and two former Conservative members of Parliament.
There should be no more urgent matter than the marshalling of the nation’s resources and civil society to unite Canada. The progressive Canadian nationalism that launched the Elbows Up movement remains strong, but it is more than apparent that conservative and pro-U.S. political forces, key sections of Canadian capital, and a divided working class are fault lines undermining Canadian solidarity and resolve.
A critical fissure weakening Canada’s negotiating position with the Americans comes from the most powerful echelons of big business. In a revealing interview with Bloomberg News, Goldy Hyder, President and CEO of the Business Council of Canada called Carney’s Davos speech a “dangerous narrative separating Canada from its number-one trading partner,” instead of taking care of “priority-one to ensure the review of CUSMA goes smoothly.” Hyder said other countries were not following Carney because they “read the memo and understood the plot by showing up to the White House and pledging to invest billions of dollars in the U.S. economy, which has allowed them to move forward on lower-tariff trade deals.”
Hyder’s sniping comes as no surprise. His organization was the principal business force that pushed for Canada to enter into free trade with the U.S. in 1989, and the corporations they represent were the main beneficiaries of the FTA and NAFTA. Two thirds of the 16 corporations on the BCC Board of Directors and nine the 10 largest have extensive business interests in the United States. The single largest company on the BCC Board, BMO Financial Group with $1.5 trillion in assets, reported 32 per cent of its net income from U.S. banking in 2025. TC Energy, formerly TransCanada Pipelines, is a $118 Billion company represented on the BCC Board which today owns 13 natural gas pipelines in the U.S. that are its largest source of profit. Emera, the $41 B, east coast energy company draws 65 per cent of its profits from its Florida operations.
The BCC corporations have enormous material interest in the U.S. economy and their number one priority is a deal at any cost to renew CUSMA. The CEOs on the BCC have agreed in advance to U.S. demands on Canada to sacrifice dairy supply management, ownership rules in telecom, media and culture. The Americans will want much more still.
The vast majority of Canadians do not support conceding to American demands. However, building the unity and strength that Canada needs will require more than refusing a bad deal. Canadian unity must be based in a national industrial policy that supports the material interests of working class Canadians, and critical sections of business must adhere to it.
The Carney government has advanced elements of a national policy with policy and programs like the National Projects Agenda, Buy Canada procurement and the Build Canada Homes agency. However, as we found in our assessment of that plan at the CCPA Elbows Up Summit, its lack of ambition, emphasis on resource exports and absence of social investments falls significantly short of a coherent and transformative industrial national policy.
The federal government has instead made national policy secondary to trade policy, with the twin objectives of doubling non-U.S. exports within a decade and incentivizing massive foreign investment from non-U.S. trading partners. This strategy has significant risks, with slow and marginal results for working class Canadians and key economic sectors that require immediate interventions to secure Canada’s industrial base and national security.
The canola-for-cars trade agreement in Beijing directly benefited agricultural, fisheries and possibly energy exports. But the provision to grant Chinese electric vehicle manufacturers access to the Canadian market was sharply criticized by Unifor for its failure to produce tangible or transparent commitments to vehicle production. It revealed another fault line for Canadian unity when new trade deals leave Canadian workers behind.
At Davos, Carney acknowledged that the multilateral trading system contained “illusions” and a “gap between rhetoric and reality.” He said “we know the old order is not coming back. We should not mourn it.” However, the illusions of the old order and its multilateral institutions—the WTO, World Bank, and International Monetary Fund—were more than the rules of free trade.They were also the rules demanding the financialization of productive economies, the end of industrial policy, and a global division of labour in which manufacturing and value added services would performed by cheap labour while countries like Canada, would be “hewers of wood and drawers of water.” Our energy and mineral resources are vital assets, but without a comprehensive national industrial policy, Canada will not break free of the old order.
To date, the trade diversification strategy has reinforced overdependence on resource exports. In 2025 Canadian exports to the U.S. declined by 4.9 per cent, while exports to the UK and EU increased by approximately the same dollar value. But while exports of automobiles and parts, aerospace and forest products declined, the increased exports to Europe and China were dominated by gold, oil and minerals.
In the Qatar agreement, Carney announced that Qatar’s US$577 billion sovereign wealth fund, the Qatar Investment Authority, would also make unnamed investments in Canada. “This capital will help the projects get built faster and supercharge our energy industries, while helping to create thousands of high-paying careers for Canadians,” said Carney.
Qatar, a theocracy with an egregious human rights record, has no interest in operating productive facilities and employing Canadian workers. They will come to Canada as investors seeking only guaranteed returns. QIA recently offered a glimpse of its business model when it made a US$500 million investment in Canadian mining company Ivanhoe, securing a four per cent stake in the company. Ivanhoe has no Canadian mines; its major operations are in Congo and South Africa.
The perceived need for foreign investment, in part, results from the failures of Canadian business. Since the launching of the trade war against Canada, capital investment by Canadian business has declined. Canada’s private sector is a notorious laggard when it comes to research, development and investment compared to its G20 and OECD counterparts. Canadian companies are currently holding $727 billion in cash deposits, a situation once called out by Prime Minister Mark Carney as “dead money.”
The answer to that huge reservoir of uninvested capital in the 2025 federal budget was a new round of temporary tax incentives and write-offs that have been employed multiple times in the past with very limited impact on the fundamental problem of weak corporate investments.
The federal government’s global investment strategy may be diversifying trade opportunities away from the U.S., but it is only producing modest returns for Canadian industries and workers to withstand the American siege that is calculated to weaken and divide Canada. Moreover, the prospects for a flood of foreign investment into Canada to fill the investment gap are not great. Foreign direct investment in Canada is expected to decline in 2025 from 2024 levels and in the most recent two quarters to report in 2025 there was a $15 billion net outflow of foreign investment from Canada to other countries.
The most effective and very likely the sole mechanism capable of filling the investment gap separating the country from its potential is direct federal investment and industrial policy. Canada’s Parliamentary Budget Officer has estimated that direct spending on housing and infrastructure has a multiplier effect far greater on jobs per dollar and on GDP growth than other forms of investment incentives such as capital cost allowances or reduced business profit taxes. According to the 2025 federal budget, Canada has the lowest net debt to GDP ratio in the G7. That “immense fiscal capacity” that Carney cited in his Davos speech, is a firm basis for large investments in national projects, housing and the care economy.
Investment conditionality is equally important to produce results. Canadian Auditor General reports detail litanies of public investments that have not delivered intended outcomes. Presumably, the extensive business experience and connections Carney has assembled in the new Liberal government and at the top of the public service might improve that performance—and it would not be the first time that business leaders have been brought into government during times of crisis.
When World War II Industry Minister C. D. Howe recruited his “$1 Day Men” to run the 28 Crown corporations the government had established to rapidly industrialize Canada, he called on the industrialists of the day to build and operate factories and infrastructure. The government did not wait for private-sector initiatives driven by financiers. “We tell industry what we want; we provide the means; we expect results,” Howe told Parliament in 1941.
The publicly funded and directed supply-side industrial policy of the Mackenzie King wartime government transformed the Canadian economy. Between 1939 and 1945, as Canada restructured its economy for the war effort, gross national product more than doubled, the unemployment rate fell to one per cent and wages grew nearly 70 per cent. For the next thirty years the Canadian economy enjoyed a “Golden Age” of economic growth and social progress.
The extraordinary 109 per cent debt-to-income ratio that existed at the end of the Second World War shrank to just 20 per cent as the Canadian gross domestic product expanded. Governments did not cut public programs during this period, but expanded them as spending for health care, education and welfare grew. Public debt rose again as economic growth slowed after Canadian corporate tax rates were reduced by more than 50 per cent between 1960 and 2020, while corporate incentives replaced industrial strategy.
The Biden administration in the U.S. provided new evidence for the benefits of industrial policy. Corporate taxes were increased and government subsidies were directed to leverage investment in green energy projects with new jobs and union contracts. The results were more than 1.6 million new jobs in manufacturing, construction, mining and forestry. In Trump’s tax cutting and deregulation first year, there are no new net jobs in these sectors.
The reluctance of the federal government to implement a state-led national industrial policy can only be explained by its political calculations and alliances. But surely the growing threats against Canada and the evident fault lines of division call for a recasting of political alignments.
The first realignment must be a fundamental shift towards Canada’s working class that brings their interests into the forefront of policy and action. The rhetoric of “protecting Canadian workers” rings hollow in the face of 34,000 lost jobs in trade exposed sectors, further unnecessary layoffs in the federal public sector, and a youth unemployment rate of 13.3 per cent. A Bank of Canada survey suggests 21 per cent of employers are planning job cuts in 2026. The most recent polling after Carney’s successful Davos speech, shows that working class Canadians without college education still lean Conservative, with a virtual tie among college educated and the trades.
The remedy for these circumstances is employment-centered, universal program spending, expanding worker rights and collective bargaining. Canada’s labour movement is the major social force that cuts across sectoral divisions and when brought into Canada’s war room it will provide the counterbalance to corporate executives and insist on concrete results for workers.
There are large economic and social sectors representing the vast majority of working and middle class Canadians, professionals, and entrepreneurs who see their future in an independent, progressive Canada. The auto sector has cross border supply chains that will endure but it has bold proposals also to protect and expand Canadian productive capacities. Forestry and steel industry associations would welcome a renewed CUSMA, but they are thinking beyond the vicissitudes of American markets and orienting towards Canadian and non U.S. export markets.
The communications, technology and cultural sectors are focused on strengthening Canadian capacities, data and cultural sovereignty. Health and other care sectors are calling out for attention to Canadian medical research and supply chains with the goal of protecting patients through comprehensive public health. These are the sectors that should be the focus of Canadian unity and trade war strategy, and the objects of a robust national industrial policy.
As we could expect after half a century of corporate integration, Canadian capital is divided and there are large sections of business that now see themselves as permanently tied to the U.S. economy. Canada cannot ignore their losses that may result from an independent Canadian economic and security policy, but it cannot put the interests of the largest corporations before others by taking the concessionary path to a bad trade deal with the United States.
Persuasion is unlikely to resolve these tensions, and in the end only the clear assertion of Canadian national interest will clarify the rights and obligations of the largest corporations, both Canadian and U.S. owned and controlled.
The U.S. has used national security to justify its economic coercion and imperialist designs on Canada and the world. But it is Canada that has legitimate national security concerns, and it is past time to declare those interests by taking firm action against foreign interference, reinforcing Canadian defence forces and by using its national security powers to protect and build strategic economic sectors. Most important, it is urgent now to unite Canada with our own investments in our own material interests.
“In this more uncertain and dangerous world, we’ve chosen to create greater stability, security and prosperity together,” Carney said in Davos. That is the message that Canadians need to hear, but it was delivered to the wrong audience. Because in the new global order, Canadian unity and prosperity must be made-in-Canada, together and between Canadians.
