What Europe can learn from Trump’s trade manoeuvres against Canada and Mexico

Problem

On 1 February, America announced destructive trade tariffs against Canada and Mexico, America’s most important trade partners and security allies. But, within 48 hours, the White House had backtracked. They accepted partially repackaged commitments from the Canadian and Mexican leaders relating mostly to the ‘influx’ of fentanyl and immigration to the United States.

By pausing the tariffs, officials alleviated the significant turmoil on Wall Street—suggesting that financial markets most effectively regulate the president’s actions. But what the episode did not entirely clarify is whether President Donald Trump sees tariffs as a tool for political bargaining, trade balancing, or domination.

In any case, that Trump does not believe any trade deal is worth the paper on which it was printed is an important insight for European spectators, who should watch, engage with, and draw from Canada’s and Mexico’s experience. After all, they will soon be in the spotlight.

Solution

1. Bring a big stick
   Both Canada and Mexico announced resolute countermeasures in response to Trump’s tariffs. Next to Ottawa’s counter-tariff package, worth up to €100bn, Canadian provinces such as Ontario also moved to stop purchasing American liquor from Republican states and review contracts with US suppliers. The EU has similar retaliation instruments at its disposal; the threat of uprooting US markets is a necessary condition for cutting a deal.
   
2. A single voice
   As well as imposing countermeasures,Mexico committed to tighter border patrols while Canada agreed to take action against uncontrolled migration and the fentanyl trade. Europeans must therefore also be agile in their search for a political deal. The 27-strong member state EU is a powerful trading bloc, but its Achilles’ heel is the disparate politics of its member states. If America offers tariff exemptions to certain sympathetic member states—Austria, the Czech Republic, Hungary, or Italy, for instance—European solidarity could fracture. Europeans must speak and negotiate with one voice, even if Trump seeks bilateral accommodation.
   
3. Reinforce relations with Canada and Mexico
   Canada and Mexico might be uniquely reliant on the US market; but they took a principled stand. While their dependence on US supply chains will remain significant, Europe should assist any other NATO ally and trade partner at risk of coercion by exploring options for trade diversion. For example, the EU could establish an emergency supply-chain taskforce under the EU-Canada Comprehensive Economic and Trade Agreement to explore emerging market opportunities for traders on both sides of the Atlantic that could substitute for lost trade with the US.

Context

The Trump administration imposed and later paused a 25% tariff on imports from Canada and Mexico, and a 10% tariff on China. Even as president-elect, Trump repeatedly signalled such moves—but the sudden implementation, focus on fentanyl and migration as alleged security triggers, and wider view that globalisation is detrimental to American interests make this episode more complex than when the US imposed tariffs on steel and aluminum in 2018.

By pausing the measures against Mexico and Canada, Trump has eased tensions for now—but Europe is still in his crosshairs. Furthermore, a trade war between the US and China has kicked off, casting a further shadow over global trade relations.