In a recent announcement, the former head of the Bank of England, Mark Carney, proposed that any upcoming trade pact between the United States and Canada is expected to include some specific tariffs. Carney, who previously led the Bank of Canada and is currently a leading figure in worldwide financial and economic discourse, highlighted that shifting economic conditions, geopolitical challenges, and strategic industrial considerations might necessitate both nations to rethink the concept of completely tariff-free commerce.
Though Carney did not specify particular industries or products that might be impacted, his remarks suggest a departure from the enduring concept of total free trade between the two countries. Rather, he emphasized a possible requirement for “smart tariffs” or selective trade limitations intended to safeguard strategic sectors, address carbon output, or secure supply chain robustness, particularly in crucial fields like energy, manufacturing, and clean technology.
This view mirrors a wider international movement where nations are re-evaluating traditional models of trade liberalization, shifting towards more sophisticated economic alliances that emphasize national priorities, environmental objectives, and economic stability. Carney’s comments, made at a forum on enhancing North American competitiveness, highlight how both Canada and the United States are dealing with a more intricate global trade landscape influenced by hurdles such as inflation, climate change, digital innovation, and geopolitical stress.
The trade relationship between the U.S. and Canada is one of the largest and most intricate in the world. Each day, goods and services worth billions of dollars flow across the border, underpinning economic growth, job creation, and industrial innovation in both countries. While the United States-Mexico-Canada Agreement (USMCA), which replaced NAFTA in 2020, helped modernize trade provisions to reflect current economic realities, there is growing recognition that new challenges demand updated strategies.
Carney’s comments suggest that a future iteration or renegotiation of the USMCA—or an entirely new bilateral arrangement—may need to account for shifts in industrial policy. For example, both Canada and the U.S. are investing heavily in clean energy technologies, including electric vehicles (EVs), critical minerals, and renewable energy infrastructure. Tariffs could be used strategically to support domestic production, reduce reliance on non-allied countries, and meet ambitious climate targets.
Additionally, concerns over labor standards, environmental protection, and digital trade have prompted calls for a more values-based trade framework. Rather than focusing solely on lowering costs and eliminating tariffs across the board, modern trade policy may seek to align with broader national objectives, such as fair labor practices, climate adaptation, and data sovereignty. In this context, carefully designed tariffs could act as tools for leveling the playing field and ensuring economic fairness.
Carney also alluded to the shifting role of global institutions and the erosion of multilateralism in trade governance. With the World Trade Organization (WTO) facing increasing challenges to its authority, countries are increasingly turning to regional or bilateral agreements to secure their economic interests. The rise of industrial policy in both Washington and Ottawa points to a future where trade is less about blanket liberalization and more about targeted collaboration and managed competition.
While some business leaders and economists warn that introducing new tariffs could disrupt supply chains or increase consumer costs, others argue that such measures may be necessary to support long-term economic resilience. Recent global events—including the COVID-19 pandemic, supply shortages, and geopolitical conflicts—have revealed vulnerabilities in international trade systems that many governments are now seeking to address through domestic investment and selective protectionism.
For Canada, the potential shift towards embracing particular tariffs in trade talks could symbolize a strategic balance. While Canada is strongly dedicated to free trade and multilateral collaborations, evidenced by its recent agreements with the European Union and Pacific countries, it also needs to consider the substantial economic influence of the United States, its primary trading ally. Consequently, Ottawa must carefully align with any alterations in U.S. trade policies, particularly under governments that emphasize local manufacturing and energy protection.
Carney’s remarks also have implications for climate-related trade mechanisms, such as carbon border adjustments. These tools, which impose tariffs on imports based on the carbon intensity of production, are gaining traction in Europe and are being discussed in North America as a way to prevent “carbon leakage”—the outsourcing of pollution to countries with weaker environmental regulations. In such cases, tariffs would serve not as protectionist instruments but as environmental safeguards designed to promote global climate accountability.
In the coming months, regulatory authorities, industry executives, and trade specialists from both nations are expected to examine the potential integration of specific tariffs into upcoming trade agreements, ensuring they do not hinder the overall exchange of goods and services across borders. Clarity, consistency, and cooperation will be crucial to prevent triggering trade conflicts or countermeasures.
From a political standpoint, the suggestion that tariffs could re-emerge as part of North American trade policy is likely to provoke a wide range of reactions. Free trade advocates may view the development as a step backward, while proponents of economic nationalism and strategic autonomy may see it as a necessary evolution. For elected officials, the challenge will be to strike a balance between economic integration and national priorities—particularly in sectors considered vital to future prosperity and security.
Mark Carney’s indication that a future U.S.-Canada trade deal may include targeted tariffs reflects a growing shift in how countries conceptualize international commerce. Rather than relying solely on free-market principles, emerging trade strategies may blend openness with selective protection to adapt to an increasingly complex economic and geopolitical landscape. As negotiations continue and conditions evolve, both nations will need to carefully consider how to use tariffs and other tools to safeguard their interests while maintaining the deep economic ties that have long defined the U.S.-Canada relationship.
