Mark Carney’s radical vision for handling Trumpian America

On October 7th Mark Carney met Donald Trump. It was Mr Carney’s second visit to the White House in his six months as Canada’s prime minister. He went seeking a deal to end, or at least temper, Mr Trump’s barrage of tariffs. The stakes are high. Duties on Canadian exports of steel, cars and aluminium have started to damage its economy. Mr Carney’s government enjoys a high approval rating compared with those in other Western countries, but it is starting to slip. A deal on trade would remove the shackles of uncertainty that are currently hobbling Canada’s economy.

Nothing had been announced by the time Mr Carney left Washington on October 8th, after a relatively warm public exchange with Mr Trump in the Oval Office. But his negotiators stayed in town, hammering away. There is talk of a deal to be announced within days, perhaps on steel, energy and aluminium.

Speaking to The Economist in Ottawa on September 29th, Mr Carney said that a deal would benefit both Canada and the United States, particularly in sectors that are deeply integrated between the two economies, such as carmaking, steel, aluminium and wood for building houses. “It makes sense to maintain that degree of integration, in some cases, even to deepen it,” he said. Canada is not alone in suffering from the tariffs. They are also hurting American businesses that depend on Canadian supply, particularly of aluminium.

But tariff relief is just Mr Carney’s most immediate concern. In the longer run he faces a much bigger challenge: building a Canadian economy and trading system that is adapted to a United States which he believes to have changed permanently, one which will maintain barriers to its market even after Mr Trump leaves office. “We went through a multi-decade period of steadily increasing integration with the United States,” says Mr Carney. “And that process is over. That’s a rupture.”

When it comes to the bilateral relationship, Mr Carney acknowledges Mr Trump’s oft-repeated claim that the United States “has the cards”. But he insists that there is “not just one game” and that Canada is “going to play other games with other players”. He has cut taxes and simplified regulation to foster an infrastructure boom at home; he says he will double Canada’s rate of home-building; he is working to eliminate the significant trade barriers between Canada’s provinces. The other players are Europe and Asia, with which Mr Carney wants to expand trade dramatically. “We can give ourselves far more than the United States can take away,” says Mr Carney.

Internal trade liberalisation has already begun. Federal restrictions on trade between the provinces were removed soon after he took office, and negotiations between the provinces themselves are continuing. Mr Carney talks of building “One Canadian market”. He says that doing so would offset the economic damage caused by the worst-case scenario in which the United States suddenly applies its average tariff to all Canadian exports, 85% of which are currently tariff-free. “It’s worth almost a quarter of a trillion dollars to the Canadian economy,” he says.

Mr Carney also wants to get Canada “building infrastructure at a pace and a scale that we haven’t done for generations”. That includes oil pipelines, port expansion, electricity transmission lines, critical-mineral mines and, of course, housing. He has cancelled a planned rise in capital-gains tax and is “changing the way we do regulation in this economy so there’s much greater certainty”, in the hope of stimulating investment. This is an attempt to reduce the high levels of unpredictability prompted by Mr Trump’s trade policy, which Mr Carney says is causing businesses to “hold back” on some investment.

Plans for diversifying international trade are even more dramatic. Europe, Japan and South Korea may currently be prepared to pay Mr Trump’s tithe for market access, but for how long? When they tire of tariffs, Mr Carney believes they will ask themselves a different question: “Where are the big trading blocs that have the potential to establish a form of rules that’s broadly consistent, away from the United States, away from China?”

The European Union is obvious, he says, as the world’s second-largest free-trade bloc. The other is CPTPP, the world’s fourth-largest trade bloc, made up of 12 countries including Canada that together represent 14% of global GDP. “One of the opportunities which we’ve begun discussing with the European Union, with many of the countries in CPTPP, is bringing them together or bringing a bridge between the two,” says Mr Carney.

In aggregate, he says, all these measures “will more than swamp the scale of the trade shock”. But it will take years for investment and trade to build, and the trade shock is here today. Exports to the United States are down sharply compared with 2024, according to Statistics Canada. Two-thirds of Canadian manufacturers say they are experiencing tariff pain. Unemployment hit 7.1% in August. In cities dependent on car manufacturing, such as Windsor, Ontario, it is running as high as 11.1%. In the second quarter of 2025 Canada’s GDP fell by 0.4% as exports to the United States collapsed. Any deal that Mr Carney’s negotiators can strike in Washington to ease this pain will be welcomed.

Pressure at home is starting to build. A survey released on October 5th by Abacus Data, a pollster, suggests that 46% of Canadians support his government, a four-point drop from the previous poll in September, seven points lower than the peak of support in June. That is still high when compared with the doldrums in which other Western leaders find themselves. But the rising cost of living is now Canadians’ dominant concern, while dealing with the threat posed by Mr Trump has been slowly slipping down their list of priorities.

That may soon begin testing Mr Carney’s approach to politics. He has taken the Liberal Party sharply to the right, scrapping a consumer-facing carbon tax, reducing the number of migrants who are allowed into Canada and cutting taxes. He says his government has stayed relatively popular because it has acted decisively to carry out campaign promises at a “scale that makes a difference”. He suggests that the focus on infrastructure and housing—his government’s slogan is “Build Canada Strong”—is popular too.

It is true that his government has moved quickly. But it is quite possible that it remains popular to date not because of decisive action, but because Mr Carney has been standing up to Mr Trump. If so, doing a deal with Mr Trump may prove unpopular, no matter whether it objectively strengthens Canada. If tariffs keep hammering Canada’s economy, and the pain pushes Trumpian bombast further down Canadians’ list of priorities, Mr Carney’s role as a Trump-battler will help him less.

In any case, Mr Carney has no choice but to try and work with Mr Trump, even as the American president reiterates his desire for Canada to become part of the United States (he raised it jokingly during their meeting). Mr Carney says that he and the president have been texting and talking more frequently of late (and that he finds Mr Trump to be “very sharp” and “decisive”). Mr Carney may well succeed in “Building Canada Strong”. But strong or not, Canada will be stuck with the United States for many years to come. ■