The direct effects of President Donald Trump’s tariffs on Canada are well known: the North American economy will suffer on both sides of the border, deeply integrated and productive industries such as energy and autos will be upended, and America will thwart its ambitions to bring about a manufacturing renaissance by cutting off the primary inputs from Canada (steel, lumber, and critical minerals) that would enable such onshoring. 

Despite all this, the indirect costs of Trump’s threats may be higher than the direct costs. Trump’s tariffs, because of the real increased cost of doing business with the U.S., as well as the perception that the U.S. is no longer a reliable ally, are driving Canada closer to China.