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In Dr. Seuss’s The Sneetches and Other Stories, the character Sylvester McMonkey McBean uses uncertainty to get his way and make more money – reminiscent, some say, of U.S. President Donald Trump’s approach to tariffs. Sneetches without belly stars get ostracized by those with stars, so McBean convinces the starless ones to use his “star-on machine” to gain acceptance. Then, he convinces the original star-bellied group that “belly stars are no longer in style” and they need a trip through his “star-off machine.”

In the end, the Sneetches go broke using the machine to put on and take off stars, until no one knows whether “this one was that one … or that one was this one … or which one was what one … or what one was who.”

Canadians can relate to Sneetches these days, with on-again, off-again tariffs keeping everyone guessing about what will happen next. Although the constantly shifting threats seem to mirror the silliness of a children’s book, the unpredictability pushes the stakes much higher. 

At �ʹ�����’s, several experts are following these developments through the lens of different disciplines, helping us make sense of what the New York Times has described as the widening “rift between the United States and some of its closest allies.”

“Businesses like certainty: it doesn’t necessarily even have to be a rule or regime they like; as long as they know what it is, they’ll make their decisions on investments or not,” says Dr. David Detomasi, professor and Distinguished Teaching Fellow of International Business at Smith School of Business. “The whole idea of free trade was not just about the actual figures going across the border: it’s about the confidence it gave in businesses to invest, develop supply chains and accounting practices, and relationships with financiers that were all very smooth and predictable.”

It’s anecdotal, but many at �ʹ�����’s are very purpose-driven young people who have great opportunities, but they’re a little bit scared of the future.

The good news is that free trade up to this point does make Canada more resilient to the impact of new tariffs; the bad news is that increasingly integrated global supply chains and intertwined economies mean shocks to the system can be more pronounced, something seen during the COVID pandemic.

“It is difficult to assess the counterfactual, but suppose we had not signed the U.S.–Canada Free Trade Agreement in 1989 and we maintained trade barriers, trading less with the U.S. and possibly other countries. Then, current trade frictions might be less destabilizing, but would the Canadian economy have been more or less stable over the last 30 years?” asks �ʹ�����’s department of economics professor Dr. Beverly Lapham. “We do know that dismantling those trade barriers contributed to higher growth and productivity in Canada.”  

Today, that predictability seems almost irrelevant. Even if deals get reached and hands get shaken, the possibility of yet another sudden 180-degree turn in Washington makes it unlikely that things will go back to normal any time soon. 

“History is full of contingencies; you can have all the plans, all the order in the world, and then an archduke gets shot, things spiral out of control, and there you are,” says Dr. Daniel Woolf, �ʹ�����’s history professor and Principal Emeritus, referring to the assassination of Austrian Archduke Franz Ferdinand that led to the start of the First World War. “I think we’re in that kind of very dangerous space right now where a lot of things can happen.”

But there are additional factors at play in 2025. In previous financial crises, political and policy stability seemed to be a given in working to solve issues, but today’s world can no longer count on predictability from the U.S. in many different areas. 

“It’s not just economic uncertainty, it’s all kinds of policies – immigration, military, defence, the North Atlantic Treaty Organization and its future – all of those can impact Canadians’ concerns about the future,” says Dr. Lapham, who specializes in international trade, international finance, industrial organization, and macroeconomics. “Anytime that you have that kind of instability, it terrifies market participants and all of that uncertainty goes into the mix in terms of people making day-to-day decisions in economic transactions, whether they are consumers, households, workers, or firm owners.”

Those who think Canada should counter the uncertainty by simply walking away and shifting its trade focus to the rest of the world need to consider the experience of the United Kingdom post-Brexit. Although some outside-the-box thinking did occur, the U.K. experience dumped cold water on the idea that a country can simply abandon its traditional partners for fertile ground elsewhere. 

this may be a great opportunity. It really depends on the way we perceive or the way we react as a country to this instability in our big trading partner.

Nicolas Lamp, associate professor in the �ʹ�����’s Faculty of Law, pointed to the “gravity model,” which essentially predicts that a country will inevitably trade with partners that are closer and large.

“It’s not just a theory – that’s the economic evidence of how countries trade – there’s just no way around it. It’s a delusion to think that you would be able to somehow make up for loss of trade with your largest market, which is right in front of your doorstep, by somehow boosting trading relationships with other parts of the world,” says Dr. Lamp, whose research focuses on competing narratives about the winners and losers from economic globalization. “Brexit is another example of a country suddenly facing barriers to its biggest market and trying, with limited success, to diversify its trade. The big difference, of course, is that Brexit was self-inflicted. I don’t think Canada has done anything to deserve this.”

Zooming out even further reveals an even bigger shift in the fundamental relationship between the two countries that will play out as the next four years unfold.

“I think a lot of damage will have been done, such that there may be a new normal for a while, but I don’t think it’s going to be the same as what we’ve had for the last 80 years,” says Dr. Woolf, whose two main areas of research are early modern British intellectual and cultural history and the global history and theory of historical writing. “I think we’ve become so used to thinking that we were just completely immune from hostile powers, especially in our nicely insulated country with oceans on three sides and good old Uncle Sam on the fourth.”

That long period of stability coupled with increasingly open trade created the certainty and predictability that saw companies on both sides of the border push production boundaries due to increased confidence and the constant sharing of ideas and know-how. Now, businesses will likely hit the pause button in many areas because they don’t know what will happen in the short term or the impact on the longer term. 

“If you’re coming from free trade with some exceptions, like dairy in our case and softwood lumber on their side, and then you put up a 25-per-cent tariff, or even a 10-per-cent tariff, you can do a lot of damage,” Dr. Lamp says. 

Even a short period of high tariffs would have an effect, especially when it comes to hiring younger, less experienced workers, which is something Dr. Detomasi feels may be happening already. 

“The people that will suffer the most initially will be young people – by nature someone’s taking a chance on them when they hire them. One of the concerns I have more broadly than just economics is the attitude of young people about optimism in the future,” he says. “It’s anecdotal, but many at �ʹ�����’s are very purpose-driven young people who have great opportunities, but they’re a little bit scared of the future. They’ve dotted every “I” and crossed every “T” to make their lives good when they leave and they’re still having trouble. I do worry about the mental health and the attitudes of young people towards their futures.”

It’s a delusion to think that you would be able to somehow make up for loss of trade with your largest market… by somehow boosting trading relationships with other parts of the world.

On the other hand, the old adage about never letting a good crisis go to waste also applies. In short, Canadians need to use the crisis to look for ways to insulate the country against ongoing and potentially long-lasting unpredictability. 

“My version of long term is that there’s a positive effect to the extent that it’s forcing us to do things I think we should have done long ago that would have helped solve these problems. And if that’s true and we do things that we couldn’t even have contemplated weeks ago that are good for the economy, then I think that’s OK,” says Dr. Detomasi, whose research interests include globalization, geopolitics, and corporate and non-profit governance. 

In addition, Canada’s relative political stability, as well as certain policy shifts, may also see people and investment flow north in some sectors. For example, funding cuts to universities and to research in the U.S. could be a way for Canada to attract new scholars and researchers to its universities, and new investment in education and research and development. 

“We’ve had a brain drain problem in Canada and this might help reverse it. If people are concerned about the political instability in the U.S., this may be a great opportunity. It really depends on the way we perceive or the way we react as a country to this instability in our big trading partner,” Dr. Lapham says.

While Canadians and businesses need to stay calm and make decisions based on facts rather than emotions, they also should not lose sight of some of the bigger implications of the policy shifts happening in the U.S.; the chaos only serves to mask an underlying philosophical shift that will bring far-reaching consequences, Dr. Lamp contends.

“Trump has this very clear and consistent sense that the United States should essentially be self-reliant, just produce its own stuff, and keep all the manufacturing jobs to itself. It’s so scary because it’s not a product of chaos or spur-of-the-moment craziness; it’s a firm belief,” he says. “I think that is the most serious challenge for Canada: it means there’s no place for a healthy trade relationship with Canada in this vision for the future of the American economy.”

In the end, this may actually be good for us, because if there’s one thing history teaches us, it’s that nothing lasts forever.

Dr. Woolf looked to Athenian historian Thucydides’ Melian Dialogue as a parallel to explain the nature of the U.S. threats. The passage, part of the History of the Peloponnesian War, centres on the Athenians’ demand that Melos become an ally in its war with Sparta or suffer the consequences: join us or we’ll invade Melos, kill the men, and enslave the women and children. “It’s incredibly arrogant, and basically a ‘might makes right’ view that’s become a kind of core doctrine in some schools of international relations: smaller countries are always going to be, to some degree or other, prey for the bigger ones,” he says. 

The end result of this “epochal moment” might return the world to a pre–First World War political model with spheres of influence, empires, and regimes, Dr. Woolf says. This would bring a huge shift for Canada, which had Britain as a protector until the end of the Second World War before it gave way to the U.S. and a very pro-Canada North American alliance that has lasted until now. “It was a great system of friendship and alliance and one of those things that works perfectly, or near perfectly, until it doesn’t. In the end, this may actually be good for us, because if there’s one thing history teaches us, it’s that nothing lasts forever,” says Dr. Woolf, whose sabbatical project is a book about learning lessons from the past.

And past experience will come in handy while the country navigates this somewhat erratic time, as Canadians need to remember that they faced previous crises and emerged stronger, Dr. Detomasi says.

“It’s not as if we in Canada haven’t made tough decisions and met tough challenges before – this is part of the deal of being Canadian. We’ve been pretty fortunate to live next to a benign kind of neighbour for a long time and we kind of assumed it would continue. The wake-up call is that this may not always be the case: being under threat may be normal.”