Canada breaks off US trade talks, citing Venezuela sovereignty fears

Carney cites sovereignty as U.S. and Canadian officials trade barbs

Canada broke off trade talks with the United States this week, with Prime Minister Mark Carney’s government citing sovereignty concerns shaped by the Trump administration’s intervention in Venezuela, according to a Wall Street Journal analysis published Thursday.

The exchange between Ottawa and Washington turned pointed within days. “He’s not doing what’s best for the Canadian people,” Treasury Secretary Scott Bessent said Monday of Carney. Chrystia Freeland, Canada’s former deputy prime minister, framed the Canadian position differently, telling CNBC last week: “No Canadian leader wants to be the Delcy Rodríguez of the North.”

Venezuela under U.S. control

The Journal’s analysis, by chief economics commentator Greg Ip, traces Canada’s posture to what Venezuela looks like under U.S. control. A few months after the U.S. captured Venezuelan leader Nicolás Maduro, Trump mused about making Venezuela the 51st state. Venezuela did not become an American state but, in Ip’s words, “more of a vassal, or protectorate, or a colony.” “Call it what you will, it isn’t sovereign,” Ip wrote.

Its interim president, Delcy Rodríguez, was installed by the Americans and serves at their pleasure, the Journal reported; American troops come and go at will, and Venezuela’s oil revenue flows through the U.S. Treasury. Last week, Trump boasted that the U.S. had taken control of a sizable chunk of Venezuela’s oil reserves at zero cost. The U.S. has said it captured Maduro for drug trafficking.

What Canada feared the U.S. might demand

For Canada, the calculus has shifted from proving itself a secure supplier of resources to worrying about the leverage the U.S. could wield as the dominant customer of those resources. Canada feared U.S. tariffs on autos and trucks were intended to wipe out its industry — a fear Trump did little to dispel. “I don’t want Canadian cars, I don’t want Canadian parts, I don’t want Canadian anything,” Trump said on social media. At the same time, the Trump administration kept tariffs low on Canadian oil and pressed for greater access, including reviving the Keystone XL pipeline from Canadian oil fields to American refineries — a project President Joe Biden killed in 2021 that Canada had long supported.

In January, Bessent appeared to express support for Alberta secession, the Journal reported. The province holds a referendum next month on the question.

The most contentious issue for Canadian negotiators, the Journal reported, was what they interpreted as U.S. demands for a veto over Canadian trade deals with other countries. U.S. Trade Representative Jamieson Greer disputed that characterization, saying the U.S. wanted to ensure cheap aluminum and steel, such as from China, did not enter the U.S. from Canada.

Canada had previously suggested a common approach toward China — “Fortress North America,” as Carney sometimes puts it. But the U.S. envisioned “a ‘Fortress North America’ where one ruler would have dictated what other inhabitants of the fortress could have done with the outside world, while feeling free to impose restrictions at will on them within the fortress,” former Canadian trade negotiator Steve Verheul wrote in a commentary.

Decades of liberalization, now reversed

The current rupture is the product of decades of trade liberalization now in reverse. Since World War II, the U.S. pursued trade liberalization as a goal in itself, a way to generate mutual benefit and strengthen ties with allies. In that spirit, Canada in the 1980s took what it called a “leap of faith” and negotiated a free-trade deal with the U.S. President Ronald Reagan described the resulting pact as a “model for the future of this country and the world.” Mexico joined a few years later, and the North American Free Trade Agreement was followed by bilateral pacts with Colombia, Chile, Peru, the Dominican Republic, and Central America.

In his first term, Trump’s trade representative, Robert Lighthizer, was anti-free trade and pro-tariff, but understood that his counterparts had to sell any deal politically back home. The resulting U.S.-Mexico-Canada Agreement, which replaced NAFTA, and deals with Japan and South Korea favored the U.S. but were nonetheless embraced by its partners.

In his second term, the Journal reported, Trump’s approach changed sharply. He hit almost everyone with steep tariffs and regularly linked the levies to political or territorial goals. He threatened Colombia with tariffs for refusing to take deportees, Brazil for prosecuting his ally former President Jair Bolsonaro, and Europe to make Denmark hand over Greenland. He said Canada could avoid tariffs by becoming the 51st state.

The ‘Donroe doctrine’ and its critics

The Venezuela intervention is the most extreme manifestation of what Ip calls Trump’s “Donroe” doctrine — a reformulation of the 1823 Monroe Doctrine under which the U.S. seeks dominance of the Western Hemisphere. Trump has intervened in Argentina’s markets to help an ally while meddling in elections in Brazil and Colombia in hopes of defeating adversaries, Ip wrote.

The U.S. has a long history of interfering in Latin America, but Venezuelan-born Harvard economist Ricardo Hausmann told the Journal that past interventions often sought to establish free-market institutions and keep out the Soviet Union. Trump’s demands on Venezuela lack any such “moral compass,” Hausmann said, and are simply “an illegitimate power grab.”

Limits on the rupture

Canadian defiance may face limits. Tariffs of some sort are likely here to stay; the Donroe doctrine, not so much, the Journal suggested. Congress did not clamor for control of Venezuela, and it could be years before the U.S. reaps tangible benefits from Venezuelan oil reserves, even as resentment in Venezuela grows. Meanwhile, large majorities of Americans oppose Trump’s tariffs on Canada and his effort to change the name of Lake Ontario to “Lake America,” according to an Ipsos poll cited by the Journal.

Big changes in American trade policy require “some sort of societal consensus,” trade historian Doug Irwin of Dartmouth College told the Journal. “Here it’s one person, Trump, or maybe two, with [Commerce Secretary] Howard Lutnick, that have anti-Canada animus. It’s hard not to see the hope of a reset.”

There is precedent. After being hit with the Smoot-Hawley tariff in 1930, Canada elected a protectionist government that promptly retaliated. Seventeen years, a depression and world war later, Canada joined with the U.S. to create the postwar trading system.