Our leaders did not recognize America’s shift toward economic coercion and self-sufficiency. Strategic adaptation is the answer.
by David Carment, Dani Belo. Originally published on Policy Options
March 1, 2025
U.S. President Donald Trump’s economic strategy, though seen by some as a sudden shift, reflects a longstanding U.S. goal of insulating itself from the uncertainties of a multipolar world while ensuring domestic economic growth.
America’s push for economic self-sufficiency and military restraint – what its proponents see as the opposite of seemingly endless wars, bloated military budgets and ever-expanding international security guarantees – signals a desire to end costly interventions such as aid to Ukraine and the decline of neoliberal policies.
A key part of this shift is the realization that economic integration doesn’t necessarily make countries more responsible, open or peaceful. In fact, as the cost of engagement in conventional military operations increases, economic relations have become the dominant domain for the exercise of power and overall interaction between states.
After the Cold War, strong economic ties promoted peace. Today, economic warfare – often without formal war declarations – plays a central role in global power dynamics, shifting focus from military action to economic leverage.
The U.S. has long used the rationale of national emergencies – more than 40 are currently active – to justify imposing costs on adversaries and allies alike. This strategy has boosted America’s share of G7 GDP to more than 50 per cent, reinforcing its dominance among key trading partners.
Canada’s strategic blind spot was failing to recognize America’s shift toward economic coercion and self-sufficiency. Jake Sullivan, national security adviser to former U.S. president Joe Biden, describes this as a statist focus on reshoring critical industries. Trump, in contrast, targets alliances, foreign aid and trade deals that he says disadvantage the U.S.
Over the past few years, Ottawa’s response has been mixed, drawing closer to the U.S. without adapting to multipolar complexities. It leans on shared neoliberal values, such as Biden’s alliance of democracies, which are seen by some other countries as exclusionary and divisive.
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At the same time, Canada engaged in high-stakes confrontations with India, China, Iran and a proxy war with Russia. These policies have not only isolated Canada, they have accelerated multipolarity through “competitive multilateralism.” The rise of BRICS, for example, reflects efforts to “future-proof” economies via co-ordinated de-dollarization, reducing vulnerability to Western sanctions.
The answer for Canada is a strategic reset in several areas – a bold approach to foreign policy rather than reactive compliance with U.S. positions; a move away from our longstanding defence and security reliance on our southern neighbour; giving up on discredited neoliberal “state-building”; and a focus on economic diversification and strategic autonomy in defence and diplomacy.
The Trump administration’s approach to security and diplomacy prioritizes short-term economic gains over long-term stability, leaving Canada and other allies to manage the consequences.
For instance, aggressive pressure on Iran and unconditional support for Israeli security may bolster Israel’s deterrence but also risk escalating tensions with Hezbollah, Hamas and other regional actors such as Turkey, Syria and Lebanon.
Trump’s transactional diplomacy – such as pushing Arab states into normalization deals without addressing core security issues, including the fate of the Palestinian people – results in fragile agreements lacking lasting stability. While a strong Israel may be key to regional security, peace requires more than economic leverage and military deterrence. It needs genuine diplomacy and conflict resolution.
Trump’s effort to end the Ukraine war shifts the burden of reconstruction and security onto Europe, creating a vacuum that invites instability. By favouring disengagement over Ukrainian sovereignty, Trump risks forcing Europe and Canada to bear the costs of rebuilding Ukraine, exacerbating their relations with the U.S. and further straining nations already facing economic and political challenges.
Meanwhile, Africa’s conflicts will receive less attention under the new Republican administration, worsening humanitarian crises and insecurity.
With Trump’s focus on economic nationalism, U.S. engagement with the continent is reduced to resource extraction and counterterrorism, neglecting broader issues that drive instability. With USAID weakened and diplomacy deprioritized, African nations face reduced aid, fewer diplomatic efforts and diminished security co-operation.
So, how does Canada adapt to these changing geopolitical circumstances?
First, our leaders must recognize that their policy choices risk becoming incoherent in a divided strategic landscape where economic coercion and geopolitical realignments require confident, autonomous decision-making rather than reactive compliance with U.S. priorities. Instead of seeking retribution through a tariff war, Canada’s leaders must initiate a strategic reset.
For example, Canada’s strategic myopia – exemplified by its blind commitment to ineffective alliances and counterproductive interventionist policies – continues to limit its ability to adapt to these new realities.
The reliance on military spending objectives, such as meeting NATO’s two per cent of GDP target, is a diversion from the deeper structural challenges Canada faces in traversing an increasingly divided global order in which the U.S. is no longer a reliable and predictable partner.
Second, Canada’s growing dependence on the U.S. has blurred the lines between its own defence and security policies, and those of its southern neighbour. For example, the recently released political interference report shows a Canada that remains aligned with Biden-era American interests, particularly regarding China and Russia but also India and Iran.
The report supports an agenda that ensures Canada cleaves closely to America’s security and defence interests through the pretence that America’s problems with China (and Russia) are also our problems.
The naivete and lack of self-awareness in the report are troublesome, given that Canada’s diplomatic and trade relations with Russia, Iran, India and China have become ineffective and compromised by virtue of Washington’s unremitting pressure on Ottawa.
Third, our leaders must wean Canada off institutions deeply rooted in unrestrained and poorly executed coalitions that seek to isolate adversaries, further regime change and destabilize internal politics. These are the costly and ineffective neoliberal state-building agendas of the Biden, Bush and Obama eras that are not suited to today’s multipolar order.
Fourth, to hedge against an unreliable ally such as the U.S., Canada must pursue a dual strategy focused on economic diversification and strategic autonomy in defence and diplomacy.
A flexible foreign policy means engaging selectively in U.S.-led initiatives rather than committing to them unconditionally – whether it’s military alliances, economic agreements or on diplomatic fronts.
Historically, countries such as Turkey during the Cold War, India post-Cold War and Vietnam amid U.S.-China rivalry, leveraged their autonomy to secure benefits from competing powers. Ottawa can learn from these cases.
Demonstrating strategic alternatives, such as deeper trade and security ties with other global players, will compel the U.S. to actively engage with Canadian interests rather than taking them for granted. This approach boosts Canada’s bargaining power and ensures its policies reflect national interests, not the shifting goals of changing U.S. administrations.
For instance, instead of aligning reflexively with Washington’s China strategy, Canada can engage with Beijing and Indo-Pacific nations such as Japan, South Korea and India, which share economic interests without demanding strict alignment with U.S. policy.
On energy, Canada should expand liquefied natural gas (LNG) exports to Europe and China, reducing reliance on U.S. refiners and increasing its global leverage.
Economically, Canada should lessen its reliance on the U.S. by deepening trade with the European Union, the Indo-Pacific region and Latin America. The CPTPP and CETA trade agreements provide solid foundations, but Ottawa must proactively expand these ties, secure new supply chains and reduce vulnerability to U.S. protectionism.
Strengthening the domestic industrial base by incentivizing investment in energy, critical minerals and advanced manufacturing is crucial. A targeted approach to reshoring industries such as semiconductors and green technologies would help Canada insulate itself from U.S.-driven economic shocks.
In defence and diplomacy, Canada must assert strategic independence by reassessing security commitments and international coalitions. Defence spending should prioritize sovereignty-enhancing capabilities such as Arctic security, cyber defence and energy security.
A “continental resilience” model – strengthening Canada’s defence while maintaining flexible partnerships with European and Indo-Pacific allies – would offer balanced security.
Diplomatically, Canada should lead on multipolar diplomacy, avoiding rigid alliances such as the “democracies versus autocracies” framework that isolates Russia from meaningful dialogue. Independent engagement with global powers such as China, India and key Middle Eastern nations can expand Canada’s geopolitical options.
Ultimately, Canada must shift from dependency to leverage within North America, ensuring the U.S. courts Canadian partnership. A flexible foreign policy, diversified global ties and strategic autonomy will position Canada as an independent power broker and vital intermediary that Washington cannot afford to alienate.
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This article first appeared on Policy Options and is republished here under a Creative Commons license.