Note: An earlier version was presented to Royal Roads University, May 27, 2025 Victoria BC. He has written extensively on the resurgence of populism across the globe, see Has Populism Won? The War On Liberal Democracy with Marc Froese (2022) For more writing by Daniel Drache on the rise of populist authoritarianism and its threat to liberal democracy see his webpage https://danieldrache.com
Trump and the Troubled Future of Canada
I don’t know what you think about Trump’s second presidency, but after 5 months of swinging his wrecking ball, where is it all going? This is our first focus. The second is how our new Carney government needs to safeguard Canadian sovereignty and democracy by ending our reliance/addiction on US markets. So, what’s Carney’s plan and strategy for decoupling?
Carney is a once-in-a-generation crisis leader and his big vision idea of ‘strategic autonomy’ intuitively makes plenty of sense in a trade war. But it is also a dramatic rupture with Ottawa’s old model of political economy of export-led growth. His new model presents many radical challenges.
The most obvious dilemma is that we are trapped on a narrow ledge and we don’t have a lot of experience with what it takes to build collective resistance in the face of a shattering, existential trauma. This is what the Chinese call ‘eating bitterness’ (吃苦, chī kǔ) and we can’t lie flat when Trump says that Canada isn’t a real country and it is his intention to “break us so Americans can own us.”
The painful truth is that the US is no longer our most reliable partner and ally which effectively ends 100 years of Canadian history where America was our primary collaborator and export market for our rocks and logs, energy, autos and even cultural products such as the thousands of heavily subsidized made-in-Canada films that are shipped back across the border for finishing in Los Angeles.
The Old Political Economy Model of Export Led Growth
Canada’s stubborn belief in an export led growth model is what economists would call a volume strategy shipping as much oil and gas, aluminum, hydro, potash, lumber as the American industrial giant must get its hands on from its northern neighbour.
For decades we Canadians put all our eggs in one basket. American multinationals bought our resources at market driven prices and this arrangement meant that even in the twenty first century, Canada was trapped in its traditional role as ‘hewers of wood and drawers of water’. It was a highly advantageous, socially ‘constructed’ division of labour for American capital and Canadian elites.
Good neighbour Canada imported the high value, high-tech sophisticated goods and services made in American mass production industries and the sheer amount of investment and export driven activity since the signing of the Canada US Free Trade Agreement in the 80s torpedoed Canadian aspirations for a robust defence of our sovereignty.
Trump’s primary goal now is to force Canada’s branch plant, mass assembly auto operations to migrate south, grab our strategic minerals, tighten his grip on our energy industries, and take control of the key drivers of the Canadian economy. That’s a lot of heavy lifting even for Trump as he doubles down. If Trump continues to keep the tariffs in place he will destroy many leading sectors of Canada’s economy.
Already Honda laid off a thousand workers from its EV factory. “The market-cooling consequences of U.S. tariff actions will continue to be felt by everyone, Honda included,” said Flavio Volpe, head of the Automotive Parts Manufacturers’ Association, in May 2025.
Stellantis just announced it will postpone production of the 2026 electric Dodge Charger R/T at its Windsor assembly plant caused by the U.S. tariffs on Canadian-made cars. It promised the union that no jobs would be lost because they produce other models. These are still early days, and we need to map and document job loss and possible business failures. Some shifts at the plant have been temporarily canceled,
Provincial governments including Alberta, B.C. and Quebec are facing ballooning deficits in recent months. Even Ontario is predicting a deficit of $14.6-billion for the coming fiscal year, almost ten times larger than it forecast last fall, as the province struggles from the impact of U.S. tariffs.
So, to meet this crisis we need a calibrated response to ensure that Trump’s aggressive trade war does not break us.
What this means pragmatically is that Carney is running a marathon to find the tools and the political will to confront Trump’s punitive tariffs as he intensifies his economic war, lashing out at both allies and competitors.
Flashing Red Lights, This Time Is Different
There are the few things that we need to know why this time is different.
Maybe we don’t know how to interpret these 80 million flashing red lights, one for every American who voted for Trump and his nativist beliefs. Maybe this aberrant moment in American democracy will pass and geopolitical sanity will prevail once again. Maybe Americans today are less scared and angrier by Trump’s extreme tactics. Maybe they will continue take to the streets in many more national days of ‘no King’ anti Trump protests. Maybe the courts and mainstream media will step up and be effective guardrails between Trump chaos and his attacks on the rule of law.
We have also seen that the democratic opposition has won some critical battles from Superior Court Judges. We want to believe that resistance is never futile.
So far not the courts, not the mainstream media, not Trump’s declining approval ratings have slowed him down. He is in full throttle triggering new confrontations ALMOST daily with judges, courts, the Constitution and some of America’s biggest corporations including Walmart, Apple, big Pharma, Ford.
In the medium term I don’t see any return to so-called normalcy in the two-party system with less polarization and the hard-Republican right losing legislative power to aggressively fight the justice system and universities. Canadians are in a dark place from the 47th president who will do anything to get what he wants.
The Enemies List
The framing narrative of the first 4 months of the Trump presidency bristles with this kind of anger and score settling. It is an administration on a war footing attacking the Constitution and the laws of the United States since his inauguration. There is no happy ending to Trump’s imperial presidency in the near future. Instead we are looking at more violence, mass removals, disappearances by ICE and other security forces supporting a massive clampdown on the rule of law and individuals’ rights and freedoms.
We have seen his enemies list including the former president and other officials from the Biden presidency, attacks on judges, defiance of judges’ orders, a systematic attack on leading universities including Harvard, Columbia, Pennsylvania, Cornell, Michigan among others, deportations immigrants, including the egregious illegal removal of a Salvadoran immigrant who mistakenly was sent to a notorious mega-prison in El Salvador. Defiantly, the Trump administration has willfully ignored the Superior judge’s order to return him and others to the US until recently the Federal Appeals court has ordered the Trump administration to keep him in the United States.
Eating Bitterness the Attack on The Rule Of Law
His next big target now before the US Supreme Court is taking aim at the U.S. Constitution’s Fourteenth Amendment guaranteeing birthright citizenship to anyone born in the United States. The court will shortly hear the government’s case to deny birthrate citizenship.
Trump has said repeatedly that he will run for a third term expressly prohibited by the Constitution. No one knows what he will do. Resistance by American citizens is never futile but so far, the system is rigged against them.
It is hard to come to terms with the fact that Trump has seized the commanding heights of the economy and taken control of the nerve centres of government, once thought as unobtainable goals for any president because of the division of powers balancing the three separate but equal arms of government, the Presidency, the House and the Senate.
His first term taught him an invaluable lesson. Nothing happens without planning, a strategy and without agency. His 2nd term is dramatically different from his first for a particular reason.
With his cabinet of 17 hand picked billionaires and an 800-page strategy document from the far right think tank, the Heritage Foundation, his administration has embedded Project 2025 to restructure, downsize and undermine the effective oversight role of government in the economy. Medicaid, food stamps, children’s health programs, public broadcasting, climate change have all been cut to pay for Trump’s tax cuts.
More than 120,000 civil servants have been traumatized, arbitrarily fired, laid-off, or dismissed by Musk’s Department of Governmental Efficiency in many more are expected to be fired with the favourable Supreme Court ruling to permit further mass dismissals . Even with the courts reinstating some individuals, the Administration isn’t finished its purge. It has prepared new plans for the 2nd round firing of hundreds of thousands of civil servants including the military, FBI and the CIA.
Whether you listen to social media, watch a news broadcast, read an online newspaper you are overwhelmed with the barrage of non-stop breaking news to erase diversity, equity and inclusion from every government program, agency and institution from primary school funding of many programs, to trans-rights in the military, to VOA, to women’s reproductive rights.
No corner of government activity is too small to be ignored. In 2021, JD Vance gave a speech entitled “The universities are the enemy”. The future vice-president argued that “we have to honestly and aggressively attack the universities in this country”. As FT commentator Gideon Rachman has recently written, “universities are at the heart of the American liberal establishment. If liberalism is to be defeated, the top universities need to be taken down.”
Remember these concepts, ‘the commanding heights of the economy’ and ‘nerve centres of government’. They highlight the reasons for the unprecedented rise of unbounded presidential authority and the speed and determination employed by Trump to bake authoritarianism into the institutional fabric of American life.
So far, a majority of Canadians are angered by Trump’s repeated attacks on Canadian sovereignty according to the latest public opinion polls.
We have seen that many Canadians are boycotting travelling as tourists to the United States particularly to their favourite destinations including Florida, California and New York. Canadians are the largest group of foreign visitors. In 2024, they accounted for 20.24 million visits, more than any other country with Mexico in 2nd place.
According to press reports, Canadian visitors to New York City are down by as much as 35%. These forms of unprompted spontaneous actions including boycotting American products are having an impact on US business and commerce in Maine, Vermont and Massachusetts neighbouring states with long established ties with Canada. Clearly Canadians are expecting a national response from Ottawa and these individual acts are not enough.
Canadians Are Willing to Up Their Game
So how can we up our game with Trump who is more determined than ever to inflict economic injury on Canadian industries and our sovereignty?
In a way no one thought possible the recent federal election which encouraged voters to see that defending Canadian sovereignty requires a different set of powerful levers in the hands of government to catalyze investment, diversify exports, invest in a skilled workforce and take charge of Canada’s economic future.
To redefine in a fundamental way our relationship with the United States and the global economy requires a fundamental rethinking of public policy. Delinking used to be a utopian idea discussed in graduate seminars but now has become in the recent election a mainstream goal of the Liberal party and Canadian voters. But it won’t be easy.
The new priority is that we need to push for the development of Canada’s advanced manufacturing industries and expand existing ones. Creating a different eco-system requires an economy no longer dependent on a single market for highly vulnerable auto, steel, aluminum and resource industries all targets in Trump’s tariff war.
An ever-growing number of Canadians now understand that Trump wants to re-industrialize America by de-industrializing Canada. That is why he is attacking the auto industry, one of the pillars of the Canadian economy which employs in its different sectors more than 125,000 workers with another 350,000 employed in value chains dealerships and related services.
Last year Canadian assemblers exported a million cars to US customers. Since Trump imposed a 25% tariff, already after 4 months of Trump tariffs, auto sales of made-in-Canada vehicles have collapsed by nearly 23% in April. Thousands of workers face losing their jobs.
Clearly Ottawa needs a defensive strategy to protect Canadian industries. It has to build synergies between consumers, investors, workers and governments to close the skills gap and boost high value-added employment. Canadians also want to learn about the new government’s plan to address the environmental crisis and build strategies to invest in AI in education, housing, manufacturing and many other spheres.
Decoupling: A Utopian Goal or the Only Alternative on Offer?
The question is how is this decoupling of the 2 economies going to occur?
Canada needs a major makeover of Ottawa’s policy framework. It needs to reimagine what it means to have a different sort of a resource-based economy.
There are number of things that have to happen. Canada needs to scale up and acquire more tools and resources to row and steer the economy. It has to create the institutional incentives to deepen the East West dynamics by building dedicated infrastructural corridors to lessen regional divides. It will have to develop new markets for its exports to Africa, Asia and Latin America.
There are many problems that need addressing in order to unlock new ways of building the Canada of tomorrow. For instance, it is unsustainable that Canada’s biggest pension plan, CPPI continues to invest more in American assets ---42% in 2024-- than Canada assets only 36%.
According to Bloomberg more than 47% are invested in American securities, a big number that has risen in recent times. Its disinvestment in Canada comes at a critical time of Trump’s trade war. One of the top priorities for the Carney government is to end this practice by rebalancing the investment priorities of Canada’s largest fund of Canadian savings.
We should look at other places such as Québec and Norway how they use these pools of savings to build social capital. It is what economists call a necessary home bias. Having access to our huge domestic pools of capital valued at C$714bn has to be an integral part of its strategy to finance these mega initiatives.
The new government could begin by backstopping its big ideas strategy by establishing three mega funds to invest in Canada in new and innovative ways.
First, Canada neither has a sovereign wealth fund to invest in industries of tomorrow nor is it providing venture capital for start-ups and regional hubs of entrepreneurship. We haven’t built refineries to refine Alberta’s oil that would make us less dependent on the American market and give us access to markets in Asia and elsewhere.
We are an energy superpower, the only major producer along with the US not a member of OPEC. We should join OPEC to offset our reliance on US interests.
Secondly Canada needs a national investment fund to address ‘the diploma divide’, so that young men and women have the educational attainment to work with the most dynamic new technologies where the best paying jobs are.
Thirdly investing in Canada in new ways has to become the most important priority. Deepening the national market and the east-west flow of goods and services by major investments in transportation networks and a transcontinental high-speed rail system has to be a macroeconomic priority this. Canada needs $ 100 billion fund to build Canada’s infra-structure for the 21stcentury. It is said that you cannot change geography but it is possible in the modern era to compress time and distance by reconfiguring supply chains.
Alberta Independence: A Movement without ‘Winning Conditions’
It's anyone's guess if the new Prime Minister will attain his strategic goals. There are too many unknowns with the threat of Alberta’s independence referendum, a high stakes regional drama that could derail Ottawa’s national trade strategy. It is unclear how deep and wide her support is when 80% Albertans are urban, strongly identify with Canada, vote for other political parties and are not supporters of Danielle Smith.
The Supreme Court of Canada ruled in the Québec referendum case that if there was a referendum with a clear majority vote on a clear question it would trigger a duty for the rest of Canada to negotiate the terms of separation in good faith. The Court's opinion emphasized to Québec and all Canadian provinces that unilateral secession is not legally permissible under the Canadian Constitution or international law.
How will she obtain a 55 % majority required by Canada’s Supreme Court in a referendum to leave Canada? High profile conservatives like Jason Kenny, the former provincial Premier, Pierre Poilievre, the federal Conservative national leader, Doug Ford, Premier of Ontario are staunch federalists and oppose her idea for separation. In theory she could hold a referendum but so far she doesn’t have ‘the winning conditions’ for a clear victory.
Are Canadians Ready for an Intellectual Policy Revolution?
In any event Canada is not a country designed for an intellectual revolution but we are not simply a prisoner of past mistakes. With Trump putting a knife to our throats, this existential crisis creates an unprecedented rupture with the old model of political economy.
Canada’s over riding objective must be to advance the goal of strategic autonomy by changing the structural dynamics that have integrated us in a one-sided relationship with American capitalism.
Advances in AI technology challenge the traditional ways the old model of political economy has shaped Canada for generations. With Prime Minister Carney it would seem that Canadians have chosen a once-in-a-generation leader with a vision for a policy sea change. Certainly, he has not been intimidated by Trump’s belligerence and provocative behaviour in their meetings.
In their joint press conference, Trump told Carney bluntly that in the future, there would be no made-in-Canada cars in the United States, they didn't need Canadian steel, he didn’t see a future for CUSMA, the trade agreement he negotiated replacing NAFTA and that all the reciprocal tariffs would remain in place indefinitely. He boasted that “even Canada was for sale, never say never.” Carney’s retort was both smart and feisty, “not everything” not the White House where you are sitting is for sale!
If and when there is a reset of the Canada US relationship, it will come much later. For the rest of us seated ringside watching the sovereignty fight of our lives, the first order of business is to build counterweights to Trump’s highly orchestrated chaos. Are we ready and do we have a learning mind set for what comes next?
Canadians are by temperament skeptical about deep change despite much social policy reform. We are uncertain about the future; yet the last several months vividly demonstrate that Canadians are psychologically prepared to be tested. Still, we don’t have the luxury of time any longer. In the end it’s the hard work mobilizing Canadians that will be decisive in the dangerously unpredictable Trump era.
Postscriptum: Notes from the Obvious to the Utopian
- The 7 things that would give Canada a heightened sense of political awareness is to find ways to balance the decoupling of our two economies with a big injection of realism. To build new leverage requires making strategic investments in addition to Canada’s top-heavy Infrastructural Bank:
- First, we would need a mega billion dollar sovereign wealth fund to finance strategic infrastructure development of energy corridors, transportation hubs, pipelines and harbors that would give us access to new markets in Asia, Europe and Africa.
- Secondly, we need a different institutional eco-system that builds cooperation, understanding and informational efficiencies by joining OPEC where Canada belongs as a global energy power and that would provide counterweight to American influence and power.
- Thirdly, it is said that you cannot change geography but it is possible in the modern era to compress time and distance by reconfiguring supply chains. In Canada among other things this would mean building a strong network of refineries and pipelines to bring Athabasca oil to Québec and beyond. It would also mean it would enable potash and Canada’s agriculture industries to supply markets no longer bounded by North America and predominantly US interests.
- Fourthly, establish a macroeconomic priority deepening the national market and the east-west flow of goods and services by major investments in transportation networks and transcontinental high-speed rail system financed by a massive transit fund.
- Fifth, build and prioritize national champions in telecommunication, aerospace, AI and climate change financed by a mega fund to create a national incubator to play a leading role in technological and climate change.
- Sixth, Canada needs to rethink its military priorities to develop a major presence in the Arctic defending Canadian sovereignty. It needs to build stronger ties with its European partners and develop the military capacity to be an effective partner with EU allies in NATO. Finally, it needs to rethink its military commitments and inter-operational agreements with United States.
- Most utopian and most unlikely, finally it is essential to build an institutional architecture for the 21st century. Canada needs to modernize the British North America Act, a colonial relic that ill serves the needs of modern Canada and is an obstacle for effective governance. We require rethinking the way powers are shared and exercised between cities, provinces, indigenous communities and the national government.