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.
While Carney stopped short of outlining specific sectors or goods that would be affected, his comments indicate a shift away from the longstanding principle of absolute free trade between the two neighbors. Instead, he highlighted a potential need for “smart tariffs” or selective trade barriers designed to protect strategic industries, respond to carbon emissions, or ensure supply chain resilience—especially in critical areas such as energy, manufacturing, and clean technology.
This perspective reflects a broader global trend in which countries are reassessing traditional trade liberalization models in favor of more nuanced economic partnerships that prioritize national interests, climate goals, and economic security. Carney’s remarks, delivered at an economic forum focused on North American competitiveness, underscore how both Canada and the United States are navigating a more complex global trade environment shaped by challenges such as inflation, climate change, digital transformation, and geopolitical tension.
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 remarks imply that a future revision or renegotiation of the USMCA—or a completely new bilateral agreement—might need to consider changes in industrial strategy. For instance, both Canada and the U.S. are making significant investments in clean energy technologies, such as electric vehicles (EVs), essential minerals, and renewable energy systems. Tariffs might be utilized strategically to promote domestic manufacturing, decrease dependence on non-allied nations, and achieve ambitious environmental goals.
Also, worries about labor standards, environmental safeguards, and online commerce have led to demands for a trade framework that emphasizes values. Instead of concentrating just on reducing expenses and removing tariffs universally, contemporary trade policy might aim to align with wider national goals, like equitable labor practices, climate resilience, and data governance. In this scenario, thoughtfully implemented tariffs could function as instruments to equalize competition and secure economic justice.
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, a shift toward accepting certain tariffs in trade negotiations may represent a strategic balancing act. On one hand, it remains deeply committed to open trade and multilateralism, having signed agreements with the European Union and Pacific nations in recent years. On the other hand, the economic influence of the United States, as Canada’s largest trading partner, means Ottawa must stay closely aligned with U.S. trade policy shifts—especially under administrations that prioritize domestic manufacturing and energy security.
Carney’s comments also hold significance for trade mechanisms related to climate, including carbon border adjustments. These instruments, which levy tariffs on goods based on how much carbon is emitted during their production, are becoming more popular in Europe and are under discussion in North America as a means to stop “carbon leakage”—the practice of transferring pollution to nations with more lenient environmental rules. In these scenarios, tariffs would function not as methods of protectionism but as measures to enhance global responsibility for the environment.
In the months ahead, policymakers, industry leaders, and trade experts in both countries are likely to explore how selective tariffs might be integrated into future trade frameworks without undermining the overall flow of goods and services across borders. Transparency, predictability, and collaboration will be essential to avoid sparking trade disputes or retaliatory measures.
From a political viewpoint, the notion that tariffs might resurface within North American trade policy is likely to generate diverse opinions. Free trade supporters could perceive this as a regression, whereas champions of economic nationalism and strategic independence might regard it as an essential advancement. For lawmakers, the task will be to find an equilibrium between economic integration and national interests—especially in industries deemed crucial for 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.
