Mark Carney walking away from a lopsided trade deal with the US raises the question of whether Canada can withstand American economic and political pressure. More than 70 per cent of Canada’s trade is with the US, compared to about 15 per cent of US trade with Canada. A great power is asserting dominance over a neighbour that Donald Trump has repeatedly portrayed as a potential 51st state or, at minimum, a vassal with limited capacity to pursue independent policies.

Canada’s defiance will bring short- and potentially medium-term pain to its economy and standard of living. The $27 billion in dollar-for-dollar tariffs announced by Ottawa could further anger Trump and prompt additional tariffs on Canada. If the US carries out its threatened 50 per cent tariffs on Canadian autos and steel from January 1, and Canada’s threatened retaliatory tariffs on oil and electricity exports take full effect, prices could rise significantly on both sides of the border. High unemployment could follow.

But countries do not always behave according to economic rationality when confronting a cantankerous neighbour. When the stronger side asserts too much power, it can generate nationalism in the weaker country, as is evident in Canada today. Carney cannot unilaterally accept a trade deal that could become a........

© Indian Express