Canada Doesn’t Have the Cards

What happens in Davos doesn’t stay in Davos, Americans have learned to their great regret in recent decades. The mindset promoted and reinforced in the Swiss Alps corrupts the domestic economy and domestic politics, and from there goes on to affect the lives of ordinary Americans. Also, we sent Oren, and he has thoughts. So at the risk of this week’s edition becoming Understanding Davos, we turn our eyes across the Atlantic, where our Canadian friends were making a scene of their own, as Daniel explains:

Last week, Canadian Prime Minister Mark Carney announced a new “strategic partnership” with Beijing, attempting to signal that Ottawa won’t simply accept Washington’s terms as the Trump administration remakes the international trading system. Then, on the first anniversary of President Trump’s return to the White House, Carney took the stage at the World Economic Forum in Davos to make the case for middle-power autonomy. “When we only negotiate bilaterally with a hegemon, we negotiate from weakness,” he argued, warning that middle powers risk “the performance of sovereignty while accepting subordination.” He criticized the habits of great powers, including using “tariffs as leverage” and treating “supply chains as vulnerabilities to be exploited.” He said that when they “abandon even the pretense of rules and values,” middle powers will pay the price.

But no matter how loudly Davos applauds or how warmly a favorable press receives him, Carney doesn’t have the cards. He has geography. And that geography still governs the fundamentals of the Canadian economy.

Carney has marketed his deal with China’s Xi Jinping as a significant pivot. For now, it’s mostly symbolic. Canada’s “agreement in principle” with China is not a comprehensive trade deal but a narrow swap: Ottawa will allow up to 49,000 Chinese electric vehicles per year under its most-favored-nation rate of 6.1%, down from the 100% duty Canada imposed in 2024. That’s about 3% of annual new-vehicle sales. In exchange, China will cut tariffs on Canadian canola seed from approximately 84% to 15%, with limited relief promised for other agricultural exports.