30th October 2026
Canada's Prime Minister warned that the old international order was breaking down. His response has been to challenge American trade pressure, strengthen Canada's domestic economy and build new relationships with Europe and Asia. Could other Western countries, including Britain, learn from the approach?
When Mark Carney stood before the World Economic Forum in Davos in January 2026, he delivered a speech that attracted attention well beyond the usual audience of politicians, economists and business leaders.
The Canadian Prime Minister was challenging a fundamental assumption that had underpinned Western economic policy for decades: that international trade, established alliances and common rules would provide a relatively stable environment in which countries could prosper.
His argument was that this world was changing.
Carney made clear that the growing use of tariffs, economic pressure and control over supply chains by powerful nations was undermining the international system. His remarks were widely understood as a criticism of President Donald Trump's approach to international trade.
Canada is an especially interesting example because it has traditionally depended heavily on its relationship with the United States. Geography, shared infrastructure and decades of commercial integration have made the American market central to the Canadian economy.
Now Canada is trying to change that relationship without destroying the economic benefits it has brought.
The Davos speech that challenged the West
Carney's speech, entitled Principled and Pragmatic: Canada's Path, contained a particularly important message.
He argued that Western countries had been participating in what he described as a convenient fiction about the international rules-based order.
Countries had talked about equal treatment, free trade and international cooperation, while accepting that the most powerful nations could sometimes ignore the rules when it suited them.
For years, that arrangement had broadly worked because American economic and military leadership provided stability.
But Carney argued that the situation had changed. Tariffs were increasingly being used as negotiating weapons, financial systems could become instruments of political pressure and international supply chains could be exploited to force other countries into concessions.
His message to smaller and medium-sized countries was straightforward. They should stop pretending that the old arrangements would automatically protect them.
He called on what he described as the middle powers to work together rather than compete individually for the favour of larger countries.
His memorable warning was that nostalgia for the old international order was not a strategy.
Canada's difficult relationship with America
The scale of Canada's dependence on the United States helps explain why Carney's challenge is so significant.
Before the latest trade dispute, approximately 80% of Canadian exports went to the American market.
Canadian manufacturers, farmers, energy producers and businesses have built their operations around the assumption that they can sell across the border with relatively few obstacles.
The Canada-United States-Mexico Agreement, known as CUSMA, provides the framework for much of this trade.
However, President Trump has increasingly used tariffs to demand concessions from trading partners, including Canada.
The dispute has escalated considerably during 2026.
Following the breakdown of negotiations in August, Washington imposed additional tariffs of up to 50% on a range of Canadian products. Canada responded with tariffs on approximately C$27.6 billion of American imports.
The position is complicated because not all Canadian exports face these charges.
The Bank of Canada's October assessment estimates that approximately 80% of Canadian goods exports to America remain tariff-free. However, the average American tariff rate on Canadian goods has risen to 7.5%, compared with 5% in July.
Some industries face considerably higher charges.
Steel, aluminium, machinery, plastics, furniture and certain manufactured goods have been particularly affected. Canadian energy products, including crude oil and natural gas, remain exempt from the latest additional tariffs.
The result is an uncertain trading environment in which businesses cannot always be confident that the arrangements under which they operate today will remain in place tomorrow.
Carney refuses to accept an agreement at any price
Carney has continued negotiating with Washington, but he has made clear that Canada will not accept an agreement simply to bring the dispute to an end.
Negotiations broke down in August after disagreements over American demands, including restrictions affecting Canada's ability to negotiate trade arrangements with other countries.
Carney regarded this as an issue of national sovereignty.
There have been renewed discussions during October, particularly concerning tariffs on steel and automobiles.
Reuters reported on 26 October that American and Canadian officials were exploring an agreement to ease some of these duties.
However, Carney said on 28 October that Canada was not yet ready to sign a new trade agreement.
There is an important economic consideration here. American manufacturers also depend on Canadian materials, components and energy. Tariffs imposed on Canadian suppliers can increase costs for American businesses and consumers.
The dispute is therefore not simply a matter of Canada losing access to its largest market. American companies also have something to lose.
Looking beyond America
Perhaps the most important part of Carney's strategy is his attempt to diversify Canadian trade.
Canada cannot realistically replace the American market. It is too large, too close and too deeply integrated into Canadian business.
Instead, the objective is to reduce the degree of dependence.
The Canadian government has set itself the ambitious target of doubling non-American trade over the next ten years.
India is one of the countries being targeted. Canadian ministers are working towards a comprehensive economic partnership agreement, with the stated aim of concluding negotiations by the end of 2026.
There are also efforts to increase trade with Southeast Asian countries, deepen relationships with China and develop closer commercial links with Europe.
These are not easy markets to enter. Businesses need distribution networks, reliable transport, compatible regulations and customers willing to buy their products.
Trade agreements can help, but they cannot create those relationships overnight.
Nevertheless, the direction of travel is clear. Canada wants more options.
Canada and Europe move closer
One of the most interesting developments is the growing relationship between Canada and the European Union.
A major EU-Canada summit is taking place in Montreal on 29 and 30 October.
The discussions cover trade, energy, defence, critical minerals, artificial intelligence, research and technology.
Canada already has a comprehensive trade agreement with the EU, known as CETA, which has been provisionally in operation since 2017.
The agreement provides preferential access to markets on both sides of the Atlantic. The challenge now is to make much greater commercial use of that relationship.
There has also been an unusual proposal from European Commission President Ursula von der Leyen for Canada to become the EU's first associate member.
This would not mean full EU membership. Canada is geographically outside Europe, and there are considerable political and legal complications.
Indeed, several European governments have expressed reservations about the proposal.
At the Montreal summit, leaders instead agreed to pursue what they describe as an ever closer association, with further negotiations continuing towards another summit next year.
The important point is that both sides are looking for a much closer relationship.
Canada has energy resources, critical minerals and technological expertise. Europe has a large consumer market, manufacturing capacity and substantial research capabilities.
There is considerable potential for cooperation.
What should Britain learn?
There are lessons here for the UK.
Britain has its own trade agreement with Canada, participates in the Comprehensive and Progressive Agreement for Trans-Pacific Partnership (CPTPP), and has established trading relationships with countries around the world.
However, having trade agreements is not the same as making the most of them.
British businesses need practical support to find customers overseas, develop new supply chains and compete in markets where they may have little previous experience.
There are also opportunities for closer cooperation with Canada in energy, defence, critical minerals, artificial intelligence and advanced manufacturing.
For Scotland, the possibilities include energy technology, engineering, offshore expertise and the supply chains associated with the transition to lower-carbon energy.
The wider question is whether Britain has become too comfortable relying on a relatively small number of important trading relationships.
A new international trading order?
Carney's ambitions should not be confused with an immediate solution to Canada's economic difficulties.
American tariffs are still causing disruption. Canadian exporters cannot simply redirect goods intended for the United States to India or Europe.
There are also risks in becoming too dependent on any other major trading partner. China, for example, has its own economic and political interests, which may not always coincide with Canada's.
Nor is there any guarantee that the United States and Canada will not eventually reach a new agreement that restores much of their previous trading relationship.
But Carney is attempting to change the balance of power by giving Canada more choices.
His argument is that countries which have alternative markets, secure supplies of essential materials and stronger domestic economies are less vulnerable to pressure from larger nations.
That is an important consideration for Britain and Europe as well.
The international trading system is changing, and the assumption that economic relationships will always be governed by predictable rules can no longer be taken for granted.
Carney's Davos speech was not simply a criticism of Donald Trump. It was a warning that smaller and medium-sized countries need to rethink how they protect their economic interests.
Whether Canada can turn that warning into a successful long-term strategy remains to be seen.
But one question is worth asking: if countries such as Canada, Britain, Australia, Japan and the European nations work more closely together, could they collectively become a much more influential force in international trade?
The answer may help determine what the Western economic order looks like over the next decade.
Read he full Mark Carney Speeeech at Davos 20 January 2026
[url=https://www.bankofcanada.ca/publications/mpr/mpr-2026-10-28/tariff-assumptions/]Bank of Canada – October 2026 tariff assumptions[/url]
Reuters US and Canada explore easing steel and automobile tariffs 26 October
[url=https://www.consilium.europa.eu/en/meetings/international-summit/2026/10/29-30/]EU-Canada summit, 29-30 October 2026[/url]