On: Trump says Canada wants 'benefits of being a state' as trade war deepens

24 August 2026.

The President of the United States has discovered that Canada enjoys “the benefits of being a State, without being one,” and finds this intolerable. One might as well complain that a neighbour draws water from a shared well without paying rent on your side of the fence. Sovereignty is not a subscription service, whatever the tariff schedule suggests.

Carney has answered with retaliation, and the negotiations are dead. I note the familiar choreography: each side describes its tariffs as reluctant necessity, imposed by the other’s intransigence. But a tariff is never an act of God. It is signed by a hand, and the hand belongs to someone who expects to gain from it - politically if not economically. The American consumer will pay more for Canadian goods; the Canadian producer will lose his largest market; and both leaders will explain that this suffering is the price of principle. The price, as usual, is paid by persons other than the principals.

What strikes me is the confidence game beneath it all. Trade wars are conducted largely in expectations: firms postpone investment because they cannot price the next announcement, and the postponement does more damage than the duties themselves. The animal spirits of two continents are being rattled for the amusement of a press cycle. Uncertainty is a tax with no treasury to receive it.

And there is the deeper absurdity: the complaint that Canada receives benefits without paying for them describes rather accurately every alliance, every shared border, every division of labour since men first traded flint. The gains from trade are precisely that one need not be a state of the counterparty to profit from it. To resent this is to resent arithmetic.

The long run may favour free exchange. In the short run, there are mill towns on both sides of that border, and they do not eat theory.