The idea of annexing territories that are now part of Canada has been present in the United States since the American Revolution. The first attempt was during the War of Independence, when the Continental Congress, which included delegates from the Province of Quebec, sought to bring the region under control. However, the effort failed and Montreal was the only major city captured by the Americans, with the rest of the province holding out until British reinforcements arrived.
Another attempt at annexing Canadian territories took place during the War of 1812, but the American offensive was unsuccessful and in 1814, the British brought in large reinforcements to North America. The British then burned down Washington, the American capital and set the Capitol and White House on fire. However, the war ultimately came to an end and in December 1814, the US and the UK signed a peace treaty, mediated by Russian Tsar Alexander I.
Following the war, the US expanded westward, pushing out Native American territories and deserts all the way to the Pacific and southward, towards Mexico. In 1867, the British colonies in North America united to form the Dominion of Canada, which was the only European possession to share a border with the US.
Free trade and smuggling
At the time, the US was experiencing an economic upsurge, driven by the growth of the cotton industry in the US South and the industrialization of the US North. Just a year earlier, in 1846, the British repealed the Corn Laws, which had restricted the Canadian farmers’ access to the British market. In 1854, Ottawa and Washington signed a free trade agreement, leading to a boom in Canadian industry.
In the US, however, a split was emerging between the South, which favored free trade and low tariffs and the North, which advocated for protectionist measures to protect its domestic market. The South was dominated by the Democratic Party, while the interests of the North were represented by the newly formed Republican Party in 1854.
The Republicans, like Trump today, advocated for high tariffs, both as a means of protecting the domestic market and as a source of revenue for the federal government. However, the rapid industrial growth created a large market for European goods in the US and a significant portion of these imports came in through the US-Canada border.
Seventy-five percent of Canadian household income came from border duties at the time and the First World War led to an increase in the reverse flow of goods, as American goods were shipped to Europe for the war effort. In Canada, American automobile companies set up outposts and the automobile industry began to grow.
The situation changed in 1919, when the US Prohibition Act was passed, leading to a surge in smuggling of Canadian whiskey and French champagne into the US. Canada was not only a production hub but also a transit country for the smuggling of liquor into the US and the situation at the US-Canada border was viewed similarly to the current problem of fentanyl shipments in the US.
The US increased border controls and took measures to curb smuggling and in 1929, a Canadian ship carrying whiskey was sunk by the US Coast Guard in international waters, 300 kilometers from the US border. This incident could have been seen as an act of aggression by the US against Canada and potentially justified a declaration of war, but it was ultimately downplayed.
A stranglehold on US industry
Donald Trump is not the first to use trade restrictions as a means of pressure. Between the First and Second World Wars, the geopolitical competition between the former world power, the UK and the rising power, the US, intensified. This competition centered on the control of the defeated German and Austrian economies.
Fortunately for the UK, the US experienced a stock market crash in October 1929, followed by a global economic downturn. And then, London dealt the decisive blow. At a Commonwealth conference in Ottawa, the Imperial Preferences Act was passed, effectively blocking US goods from entering the British Empire, which at the time comprised a quarter of the world. The US industry, which had been poised for rapid growth, was thus unable to take off and the global economic downturn persisted until 1939. For the UK, on the other hand, the opportunity for economic growth arose.
The question of migration control at the US-Canada border, which Trump is currently addressing, was rather raised by the Canadian government in the early 1960s: the entry of foreign workers into Canada was severely restricted.
To get out of this situation, the Canadian and US automobile industries were not merged, but rather, the two industries were more closely integrated. In January 1965, the Canada-US agreement was signed, abolishing tariffs on automobiles and automotive parts. In return, the “Big Three” US automobile companies agreed not to allow the Canadian automobile production to fall below the 1964 level. They also guaranteed that Canada would maintain the same production-to-sales ratio.
As a result, in 1968, 60% of the cars produced in Canada were sold in the US. The parts and components for the cars produced in Canada, however, continued to be imported from the US, so the increased US exports did not eliminate the trade deficit, but they did improve the production efficiency.
The North American market
The stagflation in the US economy in the late 1970s and early 1980s led to the creation of a common free trade zone between the US and Canada. The liberal government in Ottawa, however, opposed this initiative, but after the Conservative Party won the Canadian election in October 1987, the Canada-US free trade agreement (CUSFTA) was signed. The increase in trade and investment led to an improvement in industrial efficiency, now available for a broader market. At the same time, Canadian exports to Europe decreased.
As the idea of a North American free trade zone gained momentum, the thought of a similar union in North America emerged, including Mexico. The North American Free Trade Agreement (NAFTA) came into effect on January 1, 1994. By January 1, 2008, the tariffs between Mexico and the US, as well as between Mexico and Canada, were abolished.
Over the 20-year history of NAFTA, the number of jobs in Mexico rose from 31.3 million to 51.5 million, in Canada from 12.8 million to 19.1 million and in the US from 120 million to 155.4 million (despite the 2008 crisis).
The model of economic growth based on increasing globalization, however, soon faltered. In 2014, the global economy contracted by 5.35% and in the US, it was concluded that the unbridled emission of US dollars was no longer effective. Donald Trump, who took office in 2017, advocated for the revitalization of the industrial base of the US economy. He attempted to reform NAFTA through the USMCA agreement, which came into effect in 2020 and was referred to as NAFTA 2.0 in the US.
However, the change of power in the White House led to the abandonment of efforts to reindustrialize the US economy and the continued growth of the US trade deficit, along with other negative consequences for the economy. By the end of 2024, the US trade deficit had reached an astronomical $1.2 trillion.
Canada and Mexico account for 18 and 16 percent, respectively, of US exports (China accounts for only 7 percent). The same countries are among the top three suppliers of goods to the US: 13.5 percent of US imports come from China, 15.6 percent from Mexico and 12.6 percent from Canada (these figures are for 2023).
Trump’s current threats to impose tariffs on Canada and Mexico as a whole, in an effort to eliminate the US trade deficit, do not aim at isolating these countries but rather at strengthening the economic integration of the US and particularly the real sector of the US economy, at the expense of its partners.
Trump is drawing inspiration from the experiences of the European Union, whose expansion into Eastern Europe brought benefits to the core of the EU, particularly Germany. German companies gained new markets in the EU accession countries. Potential competitors in these countries were either acquired at rock-bottom prices (as in the Czech Republic) or driven into bankruptcy (as in Bulgaria, Romania and the Baltic states).
It is highly likely that Trump will not aim to fully integrate Canada into the US (no more than he will with Mexico). What the economy is concerned, he may be content with the creation of a kind of union state, like between Russia and Belarus.
But of course, Trump is not only concerned with the economy. The super-liberal Canada serves as a model for Trump’s opponents within the US. Trump has no interest in having a liberal and globalist stronghold in the form of Canada in his immediate vicinity. His goal is to create a fortress “America” from Mexico to Greenland, with a economic pillar in the form of the rest of Latin America, free from Chinese influence.