Canada’s evolving approach to trade threats under President Donald Trump provides valuable insights for middle powers navigating the turbulent waters of economic nationalism. By leveraging strategic assets and embracing a more assertive posture, Canada demonstrates how nations deeply integrated into global supply chains can protect their interests against much larger partners. For Brazil, Latin America’s largest economy, Canada’s pivot from diplomatic acquiescence to calculated confrontation offers key lessons on crafting effective trade strategies in an increasingly polarized world. The global trade system is entering a phase where middle powers must rely on strategic leverage, not goodwill. Brazil, with its vast resources and influence, has the potential to shape—rather than merely react to—this new reality.

Canada is taking Mr. Trump’s tariff threats with grave seriousness, crafting a three-stage retaliation framework.

This strategy begins with targeted tariffs on U.S. consumer goods from politically sensitive states like Florida, Kentucky, and Tennessee to maximize political pressure on the Trump administration. If these measures fail, Canada’s response will escalate to broader tariffs and export taxes and restrictions on critical commodities such as hydroelectric power, uranium, and potash. However, domestic rifts—such as Alberta’s (an oil producing province in Western Canada) opposition to using oil as leverage—highlight the importance of internal political alignment to maintain negotiating strength. “Never underestimate Canadians,” said Foreign Minister Mélanie Joly, as reported by the New York Times, reflecting Canada’s resolve. “We fight very hard, and we’re very courageous. We are willing to be surgical and appropriate to have an impact on American jobs.”

During Mr. Trump’s first term, Canada’s preference for behind-the-scenes negotiations invited further demands. Under Chrystia Freeland, then Foreign Affairs Minister in charge of negotiations, Canada secured key provisions in the renegotiated NAFTA but at the cost of significant concessions on dairy market access and critical intellectual property rules—prompting criticism that these sacrifices undermined the nation’s agricultural sector, added long-term costs, and curtailed future policy flexibility.

While these compromises safeguarded the auto industry, they highlighted Canada’s dependence and negotiating vulnerabilities with its largest trading partner.

This experience informed Canada’s new strategy: publicly leveraging strategic assets in advance and adopting a phased retaliation framework to deter further aggression. If Mr. Trump prefers to negotiate in the open, Canada is showing it can reciprocate.

Canada’s phased retaliation framework is designed as a measured response, beginning with politically targeted tariffs and escalating to export restrictions on sensitive commodities.

By focusing on goods and jobs from swing states and Republican strongholds, Canada aims to influence U.S. political decision-makers. This “let Americans talk to Americans” strategy leverages Canada’s deep integration into U.S. and global supply chains, where disruptions—such as in automotive manufacturing, with vehicles crossing the U.S.-Canada border multiple times—would have widespread repercussions. Canada has made the potential costs of these disruptions clear in advance, underscoring the real stakes of an escalating trade conflict.

Speaking to Bloomberg, Jonathan Wilkinson, Canada’s energy minister, underscored the economic and national security rationale behind Canada’s hardened stance, pointing out that the United States lacks viable alternatives to Canadian resources.

He highlighted that U.S. refineries in the Midwest, configured for heavy crude from Canada, would face unpalatable options, such as importing from politically volatile Venezuela. “It’s also true of critical minerals where we provide significant amounts,” Wilkinson added, “and [the U.S.’s] alternative is to buy from China. The same thing is true with uranium. The same thing is true with potash, where yes, they do have an alternative: it’s called Russia.”

Indeed, Canada is the largest supplier of U.S. energy imports—including crude oil, natural gas, and electricity. Canada’s share of U.S. crude oil imports by quantity increased from 33% (924 million barrels) in 2013 to 60% (1.4 billion barrels) in 2023, underscoring just how deeply the two economies are intertwined in the energy sector.

For Brazil’s policymakers and business leaders, the implications are significant. Like Canada, Brazil possesses resources that major powers covet—from agricultural commodities to rare earth minerals. Yet Brazil’s traditional approach to trade disputes has often favored accommodation over confrontation, even when facing questionable restrictions on exports. Canada’s experience suggests this strategy may need revision. By highlighting American dependence on its resources, Ottawa demonstrates how strategic assets can be used to deter aggressive trade actions.

Brazil’s position parallels Canada’s in key ways. Both nations control commodities critical to global supply chains and face challenges in diversifying export markets. Yet Brazil’s broader resource base and ties to emerging economies provide unique leverage and new opportunities. Like Canada, Brazil must recognize its indispensable role in global trade—whether in soybeans, iron ore, or rare earth minerals—and use this to strengthen its bargaining power.

By aligning federal and state interests and addressing internal divisions, Brazil can adopt a phased response framework, targeting politically sensitive constituencies to maximize influence.

As global supply chains shift and resource nationalism rises, Brazil’s agricultural, mineral, and industrial strengths position it to demand more equitable trade relationships. However, realizing this potential requires three fundamental shifts:

Accelerate Market Diversification

Canada’s experience illustrates how overreliance on a single trading partner can create a significant vulnerability. Brazil has begun expanding into Asian and Middle Eastern markets, but it must move faster to reduce its exposure to unilateral tariffs or sanctions. For example, India’s market of 1.4 billion people and a growing middle class makes it a prime destination for Brazilian commodities, yet trade volumes between the two countries remain disproportionately low. Tariff and non-tariff barriers, along with a lack of deep bilateral agreements, have limited Brazil’s access.

Similarly, Brazil has a growing but still relatively limited trade presence in the Middle East. Gulf Cooperation Council (GCC) countries like Saudi Arabia, the UAE, and Qatar have high food import needs and are increasingly interested in sourcing commodities from stable, long-term partners.

Map and Monetize Strategic Leverage Points

Beyond staples like soybeans and iron ore, Brazil’s clean-energy potential, biodiversity, and role in critical mineral supply chains can serve as potent negotiating tools. Canada’s threats to restrict exports of oil, uranium, and potash have shown how such assets can shift the cost-benefit analysis for larger partners. Brazil should systematically identify and catalog its own leverage points to strengthen its position in trade disputes—and be willing to use them as leverage when necessary.

Forge Stronger Domestic Consensus

Canada’s ability to adopt a more assertive stance depends on presenting a united front, even amid provincial disagreements. Brazil, with its decentralized political structure, must align federal, state, and bureaucratic interests to amplify its negotiating power. Strengthening coordination among policymakers, industries, and trade associations will ensure Brazil’s responses to unfair practices are clear and cohesive.

Of course, confrontation carries risks. Trade wars can escalate, increasing inflation and hindering cross-border investment. Yet Canada’s experience shows that calculated assertiveness—backed by credible resources—can strengthen, rather than weaken, negotiating positions.

For Brazil, the strategic imperative is clear: in a world where economic nationalism increasingly trumps free-trade orthodoxy, the tools of international statecraft must evolve. This means preparing sophisticated responses to trade threats, cultivating broader alliances, and signaling resolve when defending strategic interests.

As Brazilian policymakers confront future trade challenges, Canada’s ongoing transformation underscores a vital lesson: confrontation need not replace cooperation. Rather, credible deterrence—backed by strategic assets and political unity—can secure more equitable trade relationships. In a world where trade is increasingly weaponized, the challenge for Brazilian policymakers lies not just in defending their interests but in turning their strategic assets into tools of influence—before someone else, armed with their own “art of the deal,” negotiates those assets away.

*Michael Paramathasan is a former Director and Senior Policy and Political Advisor to the President of the Treasury Board of Canada in the Canadian Cabinet. He played a key role in the ratification of the renegotiated NAFTA (USMCA) and the Canada-UK Trade Continuity Agreement.

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NOTES:

Statistic on U.S. oil import from Canada: https://crsreports.congress.gov/product/pdf/IF/IF12595

1. Canada’s Negotiation Approach and Concessions During USMCA Talks

During President Trump’s first term, Canada engaged in behind-the-scenes negotiations to address trade tensions, particularly concerning the North American Free Trade Agreement (NAFTA). This approach led to the renegotiation and establishment of the United States–Mexico–Canada Agreement (USMCA). Under the leadership of then-Foreign Affairs Minister Chrystia Freeland, Canada secured key provisions in the USMCA. However, this came with significant concessions, notably in the dairy sector and intellectual property rights.

• Dairy Market Access: Canada agreed to eliminate tariffs on dairy imports up to a set volume, known as a Tariff Rate Quota (TRQ), covering an amount equivalent to 3.6% of the Canadian market. Imports exceeding this quota would revert to existing tariffs. This concession expanded U.S. access to Canada’s dairy market but maintained the overall structure of Canada’s supply management system.
• Intellectual Property Rules: The USMCA required Canada to strengthen its intellectual property protections, including extending the data protection period for biologic drugs. This alignment with U.S. standards was seen as a significant shift in Canada’s IP regime, potentially leading to higher costs for Canadian consumers.

While these compromises aimed to safeguard critical industries, such as the automotive sector, they also exposed Canada’s vulnerabilities in negotiations with its largest trading partner. The necessity to make concessions in areas like dairy and intellectual property highlighted the challenges Canada faced in balancing domestic interests with external pressures.

1. Canada’s Export Dependence on the United States

Canada’s economic relationship with the United States is characterized by a high degree of trade dependence. In 2018, approximately 75% of Canada’s exports were destined for the U.S. market. Recognizing the risks associated with overreliance on a single trading partner, Canada has made efforts to diversify its export markets. By 2023, the share of exports to the United States decreased to around 65%. This shift indicates progress toward diversification, yet the U.S. remains Canada’s predominant export destination, underscoring the ongoing vulnerability to U.S. economic policies and trade actions.

These insights into Canada’s negotiation experiences and trade dynamics offer valuable lessons for other nations, such as Brazil, in managing trade relationships and mitigating risks associated with dependence on a single market.