RIO DE JANEIRO— In late August, Canadian and American fighter crews flew integrated missions from Canadian bases. They were rehearsing cruise missile defense as part of a binational command that has operated since 1958. Days earlier, President Donald Trump had signed an executive order instructing federal agencies to rename Lake Ontario as Lake America and used the location of its deepest point to make an improbable claim over most of its volume.
The fighter exercise belongs to a dense web of agreements and institutions that has bound the two countries together for generations. The presidential order reaches back to an older North America, when borders were less settled and the absorption of Canada by the United States was periodically imagined as destiny.
Our forecasts still point to a prolonged trade war, with more U.S. restrictions and Canadian retaliation before year’s end. Some easing remains possible, but the bigger risk is that the dispute changes category. American involvement in Alberta separatism or Canadian restrictions on strategic exports would push it into sovereignty and national security. A rupture in intelligence sharing or NORAD remains remote but would mark a much deeper break.
An old bargain begins to fray
The possibility of Canada being absorbed by the United States was taken seriously on both sides of the border in the nineteenth and early twentieth centuries. During the rebellions of 1837, Upper Canadian militiamen burned the American steamer Caroline in New York, which had been supplying Canadian rebels. American expansionism later fuelled disputes over Oregon, Fenian raids , and fears that helped drive Confederation in 1867.
Some Canadians also contemplated union. In 1849, around 1,000 Montreal merchants, including a future prime minister, petitioned to join the United States, believing it would improve trade. Suspicion persisted into the twentieth century. Canada’s Defence Scheme No. 1 in 1921 envisaged raids into the U.S. after an invasion, while America’s War Plan Re contemplated occupying parts of Canada during a war with Britain. Canada abandoned Defence Scheme No. 1 in 1928. American planning continued into the 1930s.
However, the decisive shift came in 1940, when Franklin Roosevelt and Mackenzie King created the Permanent Joint Board on Defence. The DEW Line, NORAD, the Auto Pact, free trade, NAFTA and eventually the USMCA built an extraordinary architecture of integration on top of it. The two governments still fought, but the agreements binding the countries together endured.
That bargain is now fraying. Washington declined to extend the USMCA at its July review. Trump announced a deal in August, but talks collapsed days later after American negotiators pressed demands touching Canada’s protections for French language and culture, issues Prime Minister Mark Carney says were never open to negotiation.
Washington imposed 50% tariffs on roughly $20 billion of Canadian goods effective August 22. Canada answered with duties on about $20 billion of U.S. imports starting September 8, and Washington responded with bans on selected Canadian goods from September 29.
The contest is profoundly asymmetric. More than three quarters of Canadian goods exports go to the U.S., giving Washington far greater capacity to inflict broad damage. Canada’s leverage is narrower but concentrated in sectors Americans cannot easily replace. Washington can squeeze broadly. Ottawa can target political pain.
Oil, electricity and potash give Canada some of its strongest leverage. Canada supplied more than 63% of American crude oil imports last year and more than 81% of imported electricity. Serious disruption would quickly acquire a national security dimension. Provincial governments hold much of the authority, as Ontario demonstrated when it imposed an electricity surcharge in March 2025 and withdrew it a day later, making Canadian resource threats difficult to coordinate.
Canada can also make retaliation politically expensive. It has been the leading export market for dozens of American states, while declining Canadian tourism is already being felt in border communities and destinations such as Florida, New York and Nevada. Targeted tariffs can thus create pressure well beyond their nominal value as congressional elections approach.
Canada is already looking elsewhere. Carney has accelerated efforts to deepen ties with Europe, and Canada recently became the first country outside the European Union to participate in its SAFE defense program. Europe cannot replace the American market, though it can reduce certain dependencies.
China raises a different set of concerns in Washington. Canada began repairing its commercial relationship with Beijing earlier this year, prompting Trump to threaten a 100% tariff if Ottawa moved toward a deeper trade deal. He has warned Canada against becoming a “drop off port” for Chinese goods entering the U.S. Chinese involvement in Canadian energy or critical minerals would give Washington a stronger security argument for further pressure.
The sovereignty question
Sovereignty is more combustible. Trump has invoked Canadian statehood or called a Canadian prime minister “governor” at least 35 times since December 2024. Vice President JD Vance said in August that “Canada is a state” and argued that Canada would be vulnerable to invasion without American protection. Repeated often enough, such language changes how Canadians interpret whatever Washington does next.
On October 19 Albertans vote on whether their government should begin the legal process towards a later binding referendum on separation. The vote is nonbinding and Premier Danielle Smith supports remaining in Canada. Separatist leaders have nevertheless met State Department officials and floated a possible $500 billion credit facility for an independent Alberta. U.S. officials describe the contacts as routine. Verified financing or a commitment to recognition would cross a much more serious threshold.
Washington has limits of its own
America also faces constraints at home. The Supreme Court has already struck down Trump’s principal emergency tariff authority, forcing his administration to rely on less tested statutes. Public opinion is moving in the same direction, with a majority of Americans opposing additional tariffs.
The midterm elections add urgency. Democrats are favored to win control of the House, though the Senate remains considerably less certain. A Democratic House could bring closer scrutiny of presidential trade policy starting in January. The White House thus has an incentive to deepen pressure before then. Ottawa has more reason to wait and hope that congressional oversight and mounting economic costs narrow Trump’s room for maneuver.
A continued trade war remains the likeliest near-term outcome. A sovereignty or strategic resource crisis is less likely, and a security rupture more remote still. Yet both risks are rising as commercial coercion reaches into sovereignty and strategic alignment.
Intelligence still moves between the two countries. Canadian officers remain inside shared planning structures, and NORAD has carried on through recent political confrontations. These are the restraints that matter most, though they attract less attention than presidential threats and tariffs.
A tariff can be lifted with a signature, and an insult can vanish with the news cycle. Restricting intelligence or excluding Canadian officers from shared planning would mean altering systems both governments rely on to defend the continent. That would tell us far more about the direction of the relationship than another reference to the 51st state.
The fighters flew together in August. The question is whether they still do in the spring.
ABOUT THE AUTHOR
Robert Muggah
Reading Time: 4 minutesMuggah is a co-founder and research director of the Igarapé Institute, a leading think tank in Brazil. He is also the co-founder of the SecDev Group and SecDev Foundation, digital security and risk analysis groups with global reach.
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