Ursula von der Leyen has the answer. Borrow even more money. Borrow like there’s no tomorrow.

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The most remarkable thing about the rapid demise of the U.S. is that when it hits the bottom of the ocean floor economically, it will be in a better state than the EU. The panic among EU leaders, in particular Ursula von der Leyen, is breathtaking. Barely a week passes before she makes another crackpot policy announcement, gives herself a salary increase, or makes a statement about needing to give even more money to Ukraine. But in recent months these announcements have become more radical and existential, and we are seeing a new dawn now in the EU where the only solution to cover up the feral spending and borrowing is to fabricate a war with Russia and then blame Putin for the whole fiasco.

Every now and again we get a sober reminder about the economic situation of the U.S., EU and Russia. The recent news that Putin is going to sell around 2 million tonnes of diesel oil to “global markets” (as U.S. media phrases it), the lion’s share going to the U.S. before, during and just after the midterm elections in a bid to stabilise the price to help Trump. We will have to assume that countries who buy some of their diesel from the U.S. will continue doing so, but it might, in fact, be Russian oil.

There’s a lot of fake news buzzing around originating from Trump, who likes to distract journalists away from the top issues. It’s hard to see how the American public will respond to Trump’s latest decision to buy Russian diesel, but it’s hard to see this being a solution to the global oil crisis, let alone Trump’s record-low ratings. Will Trump really go ahead with a new wave of strikes on Iran after the midterms, as he has said? Or is it that his own intelligence agencies have picked up information that Iran is poised for a massive strike, and so therefore he is obliged to send even more troops, plus a carrier, to the region?

Regardless of how France and Germany get their diesel in the coming weeks, after Trump forced these governments to dip into their own reserves by threatening a U.S. export ban, it’s hard to see how the Achilles heel of most EU economies – crude oil products – can still be controlled by Moscow. While intellectually challenged figures like Mark Rutte make such stupid comments about how Russia could never win a war with NATO based on comparative GDP data, this latest move might be a huge wake-up call for Macron and Merz, the latter facing dismally low poll ratings. How do you continue to fund a war in Ukraine with the ‘frenemy’ relationship pushed to breaking point, such as is the case now with the U.S. having to buy diesel from Russia? EU countries loathe Putin, as the one hope they had to magically breathe new life into EU economies by taking Ukraine under its wing was shattered when Russian forces invaded. Putin is everything they are not. Nobody can deny Putin is a leader – the very thing that is so desperately lacking in EU countries. Leadership.

But the situation now has reached farce. With a global diesel crisis brought about by Trump’s war with Iran, EU countries are expected to buy diesel on the international market, topped up by Russia. In fact, buying oil from your enemy is nothing new. Countries have been doing this for decades. Even in Syria, we saw terror groups in the north-east of the country take over the oil infrastructure and then sell oil back to the Assad regime.

It’s hard to see how EU countries will draw a line in the sand between their geostrategic military objectives and their very realistic need for a stable oil supply. But in the midst of this chaos, Ursula von der Leyen has the answer. Borrow even more money. Borrow like there’s no tomorrow. Her latest proposal is to expand the current seven-year EU budget to 2 trillion euros, and there is only one way this can be achieved, as member states are never going to cough up more for the EU experiment. She will be forced to borrow from international banks to replace a previous loan of 750 billion euros for COVID. This is the solution for failing economies. Where once for so many years EU apparatchiks would defend the EU’s failure to implement its own rule book, in preference for constantly adopting new legislation, now this seems to have been replaced by ‘create a panic about Russia and make the EU a sort of executive of NATO without a single trace of democratic virtue’. Von der Leyen doesn’t stipulate what this massive increase is for, but we can assume some of it will be siphoned off for Ukraine. Madness on steroids. But hidden in the text is a new series of taxes which the EU itself could impose on individuals, and so in the smoke-and-mirrors confusion we see there is a back-door way to start taxing EU citizens, something Brussels never touched before. How long has the whole project got?

Contact us: info@strategic-culture.su

Where growth persists, and at what cost

Those who study economic crises tend to imagine them as sudden shocks: a collapse that triggers panic, a stock market that plummets in a single session, a border that closes. These are the events of 2008 and 2020, the storms that mark a before and after. But there is a second form of suffering, less photogenic and more insidious, which does not make the headlines: slow paralysis, the absence of growth, an economy spinning its wheels without ever sinking or regaining momentum. This condition was familiar to seafarers. The sailing ships crossing the Atlantic feared hurricanes, but they also feared the Sargasso Sea, that currentless expanse where the wind died down and the hull remained trapped in seaweed for weeks. In 2026, the global economy is facing this second threat above all, and it is like the Titanic, as Leonid Grigoryev brilliantly wrote.

The ocean liner, to stick with the metaphor, has not sunk: it is afloat, and still growing, but it is making slow progress and its hull is holed in several places. Lookouts scan a fog that shows no sign of lifting, and captains are banking on the iceberg staying at bay. In its July forecasts, the International Monetary Fund has revised its global growth forecast for 2026 downwards, bringing it to 3 per cent compared with 3.5 per cent the previous year. Translated into absolute terms, against a global GDP exceeding one hundred trillion dollars at purchasing power parity, that half-point loss amounts to hundreds of billions that will not be converted into wages, tax revenue or investment. The tariff war between Washington and Brussels is being absorbed by the main players, but it leaves in its wake realignments and collateral friction, from Ireland to Canada; and, for purely accounting rather than political reasons, the prospect of the United Kingdom’s economic fragmentation is resurfacing.

The post-pandemic expansionary phase has never followed a clear course, and continues to come up against the obstacles of geopolitics. One driver in particular has fuelled GDP growth in recent quarters: the rush to build data centres. This represents a massive and geographically concentrated demand for investment, which has driven exports from Asian suppliers of semiconductors and equipment — South Korea, Taiwan, Malaysia and Thailand — but which relies on just a few companies and on expected returns that have yet to be realised. Such a cycle fuels GDP as long as construction work is under way; the crux of the matter arises later, when the installed capacity must generate revenues commensurate with the capital expended. Outside this framework, economies that grow do so for internal reasons: China on the strength of its own demand and manufacturing, India on its domestic market, and the United States on a combination of immigration, capital inflows and public spending.

The American case in particular warrants a clarification that debunks a common misconception. Every year, the United States imports goods worth around one trillion dollars more than it exports, and at the same time its leaders lament the loss of its industrial base. The two circumstances are not contradictory: they are the same equation viewed from two sides. A current account deficit of such proportions is, by accounting definition, nothing other than the counterpart to foreign savings flowing into the United States: the world supplies goods and, in return, accumulates assets in dollars, Treasury bonds and shares. As long as the greenback remains the reserve currency and the US securities market the most liquid pool available, this privilege finances the deficit on terms unattainable for anyone else. The same flow, however, props up the real exchange rate, penalises the export-oriented industry and is precisely what causes the deindustrialisation that is so often lamented. Tariffs strike at the trade side whilst leaving the financial root intact: they reshape the balance, they do not eliminate it.

The stranglehold of yields and the burden of debt

Towards the middle of the year, global inflation picked up again, driven largely by rising energy prices. A rise in prices stemming from costs, rather than excess demand, presents central banks with their most unpleasant choice: to rein in an economy already weakened by the shock, so as not to allow expectations to become unanchored. High energy prices act as a regressive tax, eroding disposable income and feeding through to price levels at the slow pace dictated by index-linked contracts and regulated prices.

On the debt front, the strain is even more evident. Yields on long-term government bonds are rising at an alarming rate: in the United States, the 10-year yield has hit 5 per cent, with other advanced economies following suit. It is not just the level that matters, but its structure. The long end of the curve is reflecting a rising term premium – that is, the compensation investors demand for tying up money over long horizons when inflation and the volume of new money entering the system remain uncertain. The stock of debt is already colossal, and the cheap bonds issued during the era of zero interest rates are being replaced, as they mature, with far more expensive issues: the average cost rises with a lag, but it does rise. Here, elementary and inflexible arithmetic prevails: the comparison between the real interest rate and the rate of real growth. When the economy grows faster than the cost of its debt, the burden eases of its own accord; when the relationship is reversed — and this is what is happening today in several wealthy countries — keeping the debt-to-GDP ratio stable requires budget surpluses that the electorate rarely allows.

A technical manoeuvre with political implications is helping to tighten the noose. The treasury departments of the major economies are seeking to return to the open market a portion of the long-term bonds hitherto held on central banks’ balance sheets, just as the latter are allowing the bonds accumulated during quantitative easing to mature and reducing their assets. The result is that the net supply of long-term bonds available to private investors increases the moment the lender of last resort steps aside; to absorb this supply, the market demands higher yields. At the same time, central banks are gradually raising interest rates to combat inflation, and the combination of these factors is pushing the system towards stagnation. It is the calm of the Sargasso Sea, not the storm. Against this backdrop, every additional unit of military spending, in budgets already stretched to the limit, becomes one unit less for healthcare, education and public works: the old choice between ‘guns and butter’, replayed on a continental scale.

Energy rents are changing hands

An entire region, the Middle East, has slipped into negative territory due to the fall in hydrocarbon production and exports. The rise in prices and margins — and, consequently, in dividends and share prices — has rewarded US energy companies, which control marginal production capacity and can turn on the taps when prices rise. This is a redistribution of rent: from the traditional supplier to the producer that has gained flexibility in recent years. The Middle East pays twice over – on its current export income and on its worn-out or damaged physical infrastructure – whilst profits migrate overseas.

Higher crude oil prices and diesel shortages do not merely weigh on factories, transport and the construction sector. Diesel powers logistics and mechanised agriculture, and a rise in its price ripples through the entire supply chain with a pervasiveness that petrol lacks. The most serious repercussions, however, lie beyond the statistics: uncertainty over energy prices raises the rate at which businesses discount long-term projects and discourages the accumulation of capital on which tomorrow’s growth depends. No prosperity can be sustained by data centres alone.

Europe in a lull

Against this backdrop, the world’s second-largest economic bloc — the European Union, including the United Kingdom, with over half a billion consumers — offers no counterbalance. Its GDP is, in practice, growing at the same rate as its population: measured per capita — the only way that truly reflects living standards — stagnation is almost total. It is weighed down by public debt and deficits, outdated industrial structures and infrastructure, and a demographic that even migration flows have failed to rejuvenate quickly enough. The underlying problem has a specific name: a productivity gap that has been widening for over a decade. Europe spends less on research and digital capital, fragments the capital market across twenty-seven legal systems, and has failed to produce technological leaders comparable to those in the US or China.

Capital is flowing out to the United States, drawn by higher returns and deeper markets; manufacturing is losing ground to Chinese production, which is now competitive not only on cost but also on technology; and politics, almost everywhere, is fragmented into fragile majorities that make any far-reaching reform a struggle. Energy costs are structurally much higher than in the United States — a legacy of dependence on imported gas and a transition launched without a stable supply bridge — and this gap is eroding energy-intensive industries. Productivity remains well below that of China in competitive sectors, and the mood of the electorate, as the polls show, is gloomier than one might expect in such a fortunate corner of the world. Meanwhile, the climate has also warmed too much, without waiting for the benefits of green programmes to materialise.

Sanctions and the tide turning

Almost everyone is aware of the dangers associated with the escalating sanctions spiral, but they dismiss them as a nuisance in day-to-day management. The point is that there is no orderly way out of the tangle of legal constraints, commercial interests and political calculations — determined by legislative and administrative bodies that fail to coordinate with one another. There remains the extreme measure that history associates with Solon: to wipe the slate clean in one go, as Athens did at the dawn of the 6th century BC with the seisachtheia, the debt relief that wiped out debts and re-established the civic pact. In the meantime, sanctions, the destruction of extraction and transport capacity, and the loss of export markets – factors that accumulate – behave like rogue waves: they plough through the oceans and return, often swelled in size, to those who generated them, in the form of imported inflation, disrupted supplies and exchange rate realignments.

There is a maxim of Clausewitz’s that can usefully be turned on its head here: if, for him, war was the continuation of politics by other means, sanctions are the continuation of war by means other than weapons. And the heaviest blows—as well as the most unjust ones—fall upon countries and social classes that are uninvolved in those conflicts and would prefer to remain so. After such experiences, it is hard not to yearn for less globalisation and less interdependence: systems theory teaches us that when the elements of a large network become unstable, the return to equilibrium is slower, because disturbances travel along the connections rather than dying out. It is the bitter flip-side of a global economy that had made integration its strength and is now discovering its vulnerability.

An inventory of imbalances

The likelihood of a recession depends, as always, on two factors: the accumulation of imbalances and a trigger which, by definition, cannot be predicted. The imbalances are the gunpowder — excessive leverage, inflated share valuations, risk concentrated among a few players, debt maturities clustered in the same months; the trigger is the event that ignites the fuse: a new pandemic, a stock market crash, a major collapse along the lines of 2008. Whether the gunpowder is accumulating is now a matter of debate amongst specialists. Added to this is a growing number of entities already sacrificed by geopolitical conflicts, by the slowdown and by the diversion of resources, diverted from development to stem the losses.

At the top of the list of forgotten costs lie global problems: poverty, development gaps and climate change. The Sustainable Development Goals set by the UN for 2030 will likely be achieved to around 17 per cent, with entire sections barely sketched out. A new-generation global project is needed, but this presupposes peace, compromise, coordination, stability and trust: all scarce resources, and trust more than any other. The ruling classes seem to have shifted their focus from long-term horizons to short-term clashes. International organisations have little impact; the major developed nations are preoccupied with their own troubles and sanctions; and no one is answering the question of who will take on the shared tasks — catch-up development, poverty reduction, and the management of global public goods. In almost every country, large sections of the population are grappling with one form of hardship or another, whether in healthcare, education or inequality of living standards.

Who will foot the bill

That burden will, by default, fall on the shoulders of the major emerging economies, whose interests largely coincide with global objectives and certainly do not run counter to them: the BRICS grouping and a number of like-minded countries. They have fewer resources than the West, but necessity compels them to coordinate their efforts. The Declaration from the latest summit, marking the group’s twentieth anniversary, rings out as a voice of reason in an era that uneasily evokes the so-called Thucydides’ Trap — that mechanism whereby mutual fear between a dominant power and an emerging one drives them towards conflict even when neither truly seeks it. There is no shortage of friction amongst the members, with divergent political systems and unequal levels of prosperity; yet the document points the way towards compromise – namely, the strengthening of the UN and the reform of the IMF – recognising that there are no radical shortcuts. In paragraph 49, it acknowledges that global challenges are intertwined and complex, hindering growth and exacerbating persistent disparities between countries and regions.

At an operational level, the Declaration outlines an industrial and energy policy tailored to the task of moving beyond the Fourth Industrial Revolution: completing infrastructure, boosting manufacturing, railways and innovation, ensuring access to technology and transitioning to home-grown technologies, whilst investing in human capital and social issues. It also defends free trade, open markets, freedom of movement and the security of global savings and finance, and puts forward an independent stance on the governance of artificial intelligence — already looking beyond the present. The fundamental demand is institutional: these countries have operated for decades within frameworks designed by the West, and are now calling for bodies that work for their own development. A review of IMF quotas to reflect actual economic weight, a broader role for institutions such as the New Development Bank, and payment channels less exposed to the geopolitical use of reserve currencies.

How much of this will translate into actual capacity remains the real unknown, to be measured in terms of probability rather than certainty. It is plausible, with moderate confidence, that over the coming years the group will consolidate settlement systems in national currencies and development financing; it is unlikely, for the time being, that it will supplant existing institutions or undermine the reserve currency – a goal that would require deep and liquid bond markets outside the dollar zone, which are not currently in evidence. The indicators to watch are tangible: the outcome of the IMF quota review, the volumes disbursed by the New Development Bank, and the share of intra-regional trade settled outside the dollar. However, those calling for institutions that serve their own development and the common good have a solid argument, because reform of the global architecture is the only arena in which partial compromises can still generate trust. Declarations of principle, repeated for years, only become part of the agenda when someone funds them.

And no inclusive governance can hold without respect for the cultural identities of peoples: that is where trust can be rebuilt – the commodity the world lacks most of all today.

Die EU verlängert ihre Russland-Sanktionen um drei Jahre. Damit wird der Wirtschaftskrieg zum Geschäftsmodell: zugunsten US-amerikanischer Energiekonzerne und Fonds – und zulasten der Europäer. Wer sich in diesen Tagen die Entscheidung der EU anschaut, die Strafmaßnahmen gegen Russland für volle drei Jahre zu verlängern, muss sich unwillkürlich an Julian Assanges Diktum erinnert fühlen:

„Das eigentliche Ziel ist ein endloser Krieg, kein erfolgreicher Krieg.“

Denn der völkerrechtswidrige Wirtschaftskrieg gegen Russland mittels einseitiger Sanktionen, der in kolonialer Absicht formal auf eine Verhaltensänderung Moskaus gerichtet ist, wird zum Selbstzweck.

Ungeachtet der Zerstörungen, die die Sanktionen in der Wirtschaft der EU-Mitgliedstaaten selbst anrichten, schält sich immer deutlicher heraus: Die Verewigung der EU-Sanktionen, die bisher halbjährlich oder jährlich verlängert wurden, dient vor allem der Interessendurchsetzung von US-Energiekonzernen sowie der Profitmaximierung von US-Investmentfonds wie BlackRock. Durch die Sanktionen erlangen sie unter anderem eine Monopolstellung bei der Energieversorgung Europas und können zu viel höheren Preisen verkaufen als eine mögliche russische Konkurrenz.

Die Investmentfonds profitieren wiederum von der begleitenden Hochrüstungspolitik – nicht nur in den USA, sondern auch durch ihre Beteiligungen an deutschen Rüstungsschmieden wie Rheinmetall.

Es gibt also ein Profitinteresse sowohl daran, den Wirtschaftskrieg zu verlängern, als auch daran, die Situation gegenüber Russland zu eskalieren. Dieses Interesse schlägt über die Europäer voll durch.

Es mag paradox klingen, aber ein erfolgreicher Wirtschaftskrieg würde dieses Bereicherungsmodell rasch beenden. Dass man jetzt für die kommenden drei Jahre Sanktionen verhängt, zeigt denn auch, dass man kein Interesse an einer schnellen Beendigung des Stellvertreterkrieges des Westens in der Ukraine hat. Mit einer Verhaltensänderung wird nicht gerechnet. Die Sanktionen sind zum Modell geworden, die Europäer auszurauben. Sie sind nichts anderes als ein Unterwerfungsakt unter die Vorgaben aus den USA. Der Vasallenstatus der Europäer wird so weiter vertieft – bis hin zur Gefahr, dass man die Bereitschaft zeigt, sich selbst für Washington aufzuopfern.

Es ist denn auch kein Widerspruch dazu, dass man, während man die Sanktionen gegen 3.000 Personen und Organisationen verlängert, zwei russische Oligarchen jetzt davon ausnehmen will. Die Aufhebung der EU-Strafmaßnahmen gegen Alischer Usmanow und Michail Fridman dient den Interessen einzelner Mitgliedstaaten und ist offenbar der verzweifelte Versuch, Russland zum eigenen Vorteil destabilisieren zu wollen.

Grönland als Vertragsmodell

Immer deutlicher wird hingegen, dass sich die Europäer dem aktualisierten US-Kolonialmodell unterordnen. Während der deutsche Kanzler Merz das Abkommen über Grönland zwischen Dänemark und den USA als Erhalt der Souveränität feiert, spricht der Text der Vereinbarung eine ganz andere Sprache.

Das Abkommen von 1951 war an die NATO gebunden und an dänische Mitwirkung gekoppelt. Der neue Deal gilt ohne Enddatum und überdauert sogar eine mögliche Unabhängigkeit Grönlands. Die USA sichern sich dauerhafte Stützpunkte, können weitere Basen mit dem Schutz des amerikanischen Kontinents begründen und müssen über das Prinzip neuer Standorte nicht mehr verhandeln, sondern nur noch über deren Ausführung. US-Truppen bewegen sich frei zu Land, zu Wasser und in der Luft – nun auch unter Wasser –, ohne dass dänische Behörden in Grönland dafür noch die Regeln setzen.

Hinzu kommt ein Vetorecht: gegen militärische Präsenz von Nicht-NATO-Staaten und gegen Investitionen von außerhalb der westlichen Blöcke in sensible Sektoren und Ressourcen. Formal bleibt die Souveränität Dänemarks und das Selbstbestimmungsrecht Grönlands bestätigt. Tatsächlich entstehen quasi extraterritoriale Entitäten, in denen Kopenhagen und Nuuk nichts zu sagen haben. Die USA bestimmen die zentralen Bereiche der Politik auf der Insel und sichern sich ein privilegiertes Ausbeutungsrecht.

Ein Modell für die ganze Hemisphäre

Zugleich wurde ein Vertragsmodell geschaffen, das auch für andere Gegenden der westlichen und der nördlichen Hemisphäre gelten soll: von Venezuela über die Kanalzone in Panama bis hin zu den Küsten Kanadas.

Es ist zugleich das Modell für eine Zerschlagung Russlands, die als Folge des Abnutzungskriegs in der Ukraine angestrebt wird, um gegenüber China wieder in die Vorhand zu kommen und den eigenen Niedergang aufzuhalten.

Moral des Völkermords

Die Moral dieser Ordnung hat US-Präsident Donald Trump vor der UN mit seiner Auslöschungsdrohung gegenüber dem Iran zusammengefasst. Sollte der Iran nicht den Vorgaben aus Washington zustimmen, dann „treibe ich sie in die Hölle“. Es ist die Moral des Völkermords.

Es liegt auf der Hand, dass der immer höhere Einsatz des Westens im Versuch, die Welt zu kolonisieren, die entsprechenden Gegenkräfte auf den Plan rufen wird. Allein in Europa wird man diese bei einer Kompradorenbourgeoisie vergeblich suchen.

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The U.S.-Canada relationship is entering a period of strategic change as economic tensions, U.S. pressure and Canada’s push for diversification challenge the foundations of their traditional partnership. From Closest Partners to Strategic Friction The Trump administration imposed 50% tariffs on Canadian goods, in response to which Ottawa has imposed retaliatory 15%- 50% tariffs on the […]

On Wednesday (16 September) Canadian Prime Minister Mark Carney had a good day at the EU Parliament in Strasbourg. Commission President Ursula von der Leyen indicated that she would like to work with Mr Carney “on opening the door for Canada to be the first associate member of the European Union", writes Dick Roche.

Prime Minister Carney was given a standing ovation by the Parliament’s Members. While it is not clear  what ‘associate EU Membership’ means, the offer from the Commission President and the welcome by MEPs was a plus, of sorts, for Mr Carney in his battle with President Trump.

A bumpy relationship

The relationship between Prime Minister Carney and President Trump was always destined to be a bumpy one. Days before President Trump was sworn in for his second term Justin Trudeau stepped down as Prime Minister of Canada. As Trudeau was leaving office the president-elect repeated comments that he had made during the 2024 US elections about Canada becoming the 51^st US State.

On 1 February 2025, as the contest to replace Mr Trudeau as the Liberal Party leader was getting underway President Trump, announced a 25% tariff on imports from Canada, Mexico and Canada: Canadian energy exports were subject to a 10% tariff. Trump explained the tariffs were intended to address the emergency related to fentanyl trafficking and illegal immigration.

Nine days later Trump announced a blanket 25% tariff on all imported steel and aluminium to “protect US industry and national security.” This hit Canada the biggest foreign supplier of steel and aluminium into the US market badly.

The pain for Canada did not stop there, on 26^th March Trump announced his 25% tariff on all automobile imports into the US. Again, another bad hit on - most Canadian vehicle production is destined for the US market. The impact on Canadian auto producers was somewhat ameliorated by the fact that the tariff applied only to non-US content vehicle imports from Canada.

The stream of tariff announcements from the US while hurting Canada played to Mark Carney’s advantage in the race for leadership of Canada’s Liberal Party. While a "political ingénue" never having held political office or been a Member of a Member of Canada’s Parliament Mr Carney brought deep economic experience to the contest. He won almost 87% of the votes cast in the leadership election.

Mr Carney was sworn in as Prime Minister of Canada on 14^th March 2025 - seven weeks into President Trump’s second term. Six weeks after his swearing in Mark Carney was elected to the Canadian House of Commons in the General Election of 28^th April 2025.  

Placating a cranky neighbour

From the outset  Prime Minister Mark Carney invested considerable effort in improving relations with President Trump. The two leaders met in the White House on 6^th May. The meeting, reportedly, went well.

Asked at the press briefing after the meeting about Trump’s suggestions that Canada should become the 51^st US state, Carney responded humorously. He recalled that during the recent elections he had met the owners of Canada. They were not he said interested in ‘selling the property’, something that Mr Trump as a property man would understand. Smiling President Trump responded ‘never say never.’

At the G7 meeting held in Kananaskis, Alberta, in June President Trump and Mr Carney had another cordial meeting.  

The cordiality  did not last long. At the end of June the first payments on Canada’s Digital Services Tax (DST) were due to be made.  The DST legislation enacted during the Trudeau Government, hit US tech companies causing fury in the White House. Trump called the tax a "direct and blatant attack on our country" and announced all trade talks with Canada would cease immediately.

Within days Carney announced that his administration would rescind the DST and halt the collection of the tax to advance negotiations with the US.

There was another flashpoint in January when President Trump reacted to reports that Canada and China were pursuing a comprehensive free trade deal. Prime Minister Carney defused the situation by explaining the talks with China were focused on adjusting existing arrangements.

While Carney faced criticism for ‘climbing down’ on the DST issue and for being too eager to placate the White House on China, his approach got US-Canada trade talks back underway.

By August 2025 there was some optimism that a breakthrough trade talks was close.  On August 18^th President Trump announced that a tentative understanding had been reached and as a result he was prepared to push back on the late August deadline for US tariff increases. 

The talks came to an abrupt halt three days later when Carney instructed Canada’s negotiating team to return to Ottawa.

That decision came as a surprise. Walking away risked incurring the wrath of President Trump. That was a risk that the Canadian PM had clearly calibrated.

When the US Trade Representative Jamieson Greer sought to blame Canada for the breakdown Carney responded that it was the US United States that made last-minute demands which Canada considered unacceptable, including efforts to introduce provisions that would impact Canada's trade autonomy and sovereignty.

President Trump  reacted immediately to Canada’s decision.  Using  a section of the Tariff Act 1930 that had never been used previously Trump imposed 50% tariffs across US$20 billion worth of Canadian products exported to the US.  

Carney announced that Canada would hit US exports to Canada with “dollar for dollar” retaliatory measures. These would come into  effect immediately after Labour Day 7^th September –the day when the starting gun for US mid-term elections is ‘fired’ to get into full swing.

Asked at the press conference whether Canada was starting a trade war with the United States, Mr. Carney responded: “you’re at war when you get attacked—we got attacked.”

In a televised address, Carney acknowledged that the steps he was taking  would come at a cost but argued that U.S. actions had left him with little alternative. He characterized the measures being taken by the United States as an attempt to hurt and divide Canadians. That, he suggested, was a miscalculation. Rather than weakening Canada, U.S. pressure would, he said, bring Canadians closer together.  

Backing Carney

All of indications suggest that Prime Minister Carney was correct in his assessment.

The leader of the Conservative Party Canada, Pierre Poilievre who previously accused Carney of being too willing to concede to Trump, strongly supported the decision to walk away from those trade talks.

Mr Poilievre  was not alone, with one exception the Premiers of Canadian Provinces publicly supported Prime Minister Carney’s stance.

The Premier of Ontario Canada’s most populous province, Doug Ford, an open critic of the US President, encouraged PM Carney to respond to Trump “tariff for tariff, dollar for dollar.”

The Quebec Premier, Christine Fréchette, was particularly supportive  of Carney’s refusal to make concessions to Trump on Quebec’s cultural protections.

Other Premiers have encouraged Carney to “fight back,” praised “team Canada,” criticised US tariff threats as unjustified, promised “full support,” and urged that Canada not accept a ‘subordinate economic relationship’ to the US.  

The Premier of Alberta where a referendum on a range of questions including Alberta’s future within Canada is to be held on 19^th October was the lone outrider,  cautioning against celebrating retaliatory tariffs and expressed the hope that negotiations be resumed.

Public support in Canada for the position taken by Carney has been positive. Reuters referred to  the tariff dispute encouraging a ‘rally around Canada’ effect that will likely dampen support for Alberta separation from Canada.

Ten days after the Canadian negotiating team abandoned the trade talks in Washington Carney’s Liberal Party received a very tangible indication of voter support when it won three by-elections for seats in the Canadian House of Commons including a seat in Quebec that had previously been held by a Conservative Party Member.

Opinion polls since the Canadian team walked away from the negotiations also show strong support for the position taken the Carney government.  

An Ipsos poll taken on August 26-27 indicates support across party lines for Canada standing up to the US - even if it resulted in higher costs and job losses: 63% of those surveyed felt Canada was right to stand firm in the negotiations.  Just 18 per cent said Canada should have made additional sacrifices to get a deal.

An Angus Reid Institute poll taken on 22 and 23 August immediately after the talks were ended found that 76% supported the line taken by the Canadian government.

A third poll by Abacus Data one of Canada’s most cited polling firms found that 60% approved of how the Carney government had handled the dispute while  18% disapproved.

Negatives for Trump

In the US, unsurprisingly, positions on the trade war with Canada splits along party lines. Democrats overwhelmingly oppose the Trump’s position arguing that tariffs cost consumers and businesses.

On 9^th September a group of nine Democrat Senators from states with close business ties with Canada issued a joint statement attacking President Trump’s “senseless trade war” with a key trading partner, primary export market and most enduring defence partner, pointing out that the President’s actions would force Canada to “diversify away from the US and deepen trade ties with other countries including China.”

Republicans generally, but not universally, support Trump’s position, arguing that Trump’s tariff stance is ‘putting America first.’ Concerns have been flagged in the Republican ranks that the tariffs will be an issue in the November mid-terms, particularly in competitive Senate and House races.  

Senator Susan Collins of Maine, the US state most exposed to the tariff dispute with Canada, who is facing a tough re-election contest in November has labelled the tariffs on Canada ‘a mistake’ pointing out that Canadian retaliation could cost Maine up to $170 million in export losses.  The Republican governor of Vermont has also been openly critical.    

The position for President Trump is considerably less positive than that of Prime Minister Carney. The Canadian Prime Minister enjoys the public and political support that President Trump conspicuously lacks. As this week's appearance in the European Parliament demonstrated Mr Carney’s support is not confined to Canada; he has international support which, President Trump again conspicuously lacks.

At the moment there is no obvious ‘off ramp’ to facilitate  a return to the negotiating table. Politically and temperamentally it will be harder for President Trump to pull back from the position he has taken in the tariff war than it will be for Mark Carney. Mr Carney has more political support for his position, at home and internationally than President Trump. He has also  played an infinitely better game than Mr Trump. For the moment the ball is very much in Mark Carney’s court. 

Dick Roche is a former Irish Minister for European Affairs and former Minister for the Environment. 

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