Follow the Money. It's Heading to Europe

Dr. Gary Kellner began this episode of Fair Game with a deceptively simple observation: Canada is retaliating against American tariffs by strategically targeting U.S. industries where the economic pain will be concentrated in specific states, and where that pain will carry political consequences; Wisconsin cheese, Michigan automobiles, Georgia carpets and Maine lobster gave him plenty to work with. But the larger significance of the episode became clear the day after filming, when Canadian Prime Minister Mark Carney flew to Europe. Carney’s trip suggested that the issue has become larger than tariffs. If Canada cannot match the economic power of the United States, perhaps the more consequential Canadian response is not learning where to hit back. Perhaps it is learning how to become harder to hit. Strengthening Canada’s economic ties beyond the United States by taking that strategy to Europe, the Prime Minister may have made the concept less theoretical.

North America Is a Continent, Not a Country

There is an elementary geography lesson lurking beneath one of the most complicated economic relationships in the world. North America is a continent, not a country.

That distinction may sound too obvious to deserve 4,000 words. Give us a moment.

Americans have an understandable tendency to look at a map of North America and see the United States in the middle, Mexico underneath it and Canada stretched across the top like an exceptionally large hat.

Canada is close enough to be familiar, different enough to be interesting and historically reliable enough that Americans rarely spent much time worrying about what Canadians think of us.

That is now changing.

Canada shares our continent. It shares our long, undefended border. It shares enormous portions of our economic infrastructure. It shares lakes, rivers, air-defense responsibilities, professional sports leagues, families, businesses, popular culture and what may be the world’s longest-running argument about which country has the better beer.

What it does not share is sovereignty.

Canada is not the 51st state. It is not a United States economic district. It is not obligated to organize its national interests around ours.

And suddenly that matters.

Because while President Donald J. Trump has been talking about tariffs, Canadians appear to have begun talking about something much larger.

Choices.

The Difference Between Fighting Back and Looking Elsewhere

Our Fair Game episode on Canada examined the first part of this story. Canada cannot overpower the United States in a trade war. The disparity in economic size makes that obvious. Ottawa has looked for leverage.

Retaliatory tariffs can be concentrated on industries that matter enormously to particular USA communities. Dairy. Automobiles. Steel. Carpets. Appliances. That is the clever part of the story, and it is worth understanding. You watched the episode. You know about the cheese.

The deeper question landed after our cameras stopped and Prime Minister Mark Carney flew to France, and then to the United Kingdom. The significance underlined that Canada is aggressively looking beyond the United States for ever greater economic room to maneuver.

If you are Canada, how much of your economic security should depend on a country whose economy matters far more to you than yours does to it? There is an asymmetry hidden inside the Canadian American relationship.

Canada is important to the United States. The United States is indispensable to Canada.

Those sentences sound similar. They aren’t.

In 2024, about 76 percent of Canadian merchandise exports went to the United States. During the trade disruptions of 2025, that proportion fell to 71.7 percent. Meanwhile, Canadian merchandise exports to countries other than the United States rose 17.2 percent.

Seventy-one-point seven percent is still enormous. Nobody in Ottawa should be packing up the furniture. But something interesting has begun happening around the edges.

The number of Canadian companies exporting to non-U.S. destinations increased in 2025. More Canadian businesses exported to Europe, Africa and the Middle East. According to Statistics Canada, exports to the United States declined while exports elsewhere expanded substantially.

That is not an economic divorce. It may be the beginning of something subtler.

Canada is looking around the room.

Then Europe Looked Back

On September 16, European Commission President Ursula von der Leyen proposed something Europe has never done before. Canada, she suggested, could become the European Union’s first “associate member.”

There is a wonderfully European complication. No such membership currently exists.

There is no established treaty category called EU Associate Member waiting patiently for Canada to join. The idea would have to be defined, negotiated and accepted, and European governments have already raised questions about precisely what it would mean. But perhaps the label is less important than the conversation.

Von der Leyen was improvising.

Canadian Prime Minister Mark Carney nodded approvingly.

The Commission gave von der Leyen a standing ovation.

The following day, standing before the European Parliament in Strasbourg, Carney called for a much deeper strategic relationship between Canada and Europe. Not merely trade. Critical minerals. Artificial intelligence. Defense. Energy. Digital commerce. Financial systems. Infrastructure. Carney argued that closer cooperation could give both Canada and Europe greater strategic autonomy in a world increasingly dominated by larger powers.

Suddenly Wisconsin cheese seems rather small. This was no longer simply:

You tariff us, we’ll tariff you.

It is:

You have reminded us how dependent we are upon you. Perhaps we should do something about that.

That is a very different conversation.

Geography Is Destiny. Until It Isn’t.

There is an old geopolitical maxim that geography is destiny.

Geography has unquestionably shaped the Canadian-United States economic relationship. Geography handed Canada a customer stretching across thousands of miles of its southern border.

U.S. Americans had capital. Canadians had resources. Both had industrial capacity. Roads connected. Railroads connected. Pipelines connected. Power grids connected. Eventually factories connected so thoroughly that the nationality of a finished product became increasingly difficult to explain.

The automobile is the classic example.

The 1965 Canada-U.S. Automotive Products Agreement began integrating automobile manufacturing across the border decades before the broader free-trade agreements that followed. Parts could be manufactured in one country, assembled into components in another, cross the border again and eventually become part of a vehicle whose nationality depended largely upon which government form you happened to be filling out.

Then came the Canada-U.S. Free Trade Agreement. Then NAFTA. Then the USMCA. Each layer made the relationship more efficient. And each layer made disentanglement more difficult.

That was largely the point.

For decades, economic integration was treated not merely as a source of prosperity but as a source of stability. Countries that make money together have something to lose by fighting.

There is just one problem. Economic interdependence is comforting until it is used as leverage.

The House With One Front Door

Imagine owning a beautiful house. It is comfortable, prosperous and well located. There is only one problem. Everything you need comes through one door. For years this presents no difficulty because you have an excellent relationship with the person standing outside. Then one morning that person says: Things are going to work differently now.

Suddenly the architectural flaw becomes apparent.

Canada’s problem is not that trading with the United States was a mistake. It has been a success for both countries. The problem is that success itself produced concentration. When three-quarters of your merchandise exports are headed toward one country, access to that country is not merely a commercial advantage. It is a national vulnerability.

This does not mean the United States behaves improperly by recognizing its economic power. Governments use leverage. But the exercise of leverage teaches the other side where they are vulnerable. And once a country has identified a vulnerability, its leaders usually begin looking for insurance.

Insurance Is Not Divorce

This is where much of the rhetoric around Canada and Europe risks becoming overheated.

Canada is not joining Europe tomorrow. It is not abandoning the United States. It is not relocating Toronto to Belgium. Carney himself had been talking about a “unique alliance” with the European Union rather than conventional EU membership. The new “associate member” concept came from von der Leyen and remains undefined. And the physical facts remain brutally simple.

Detroit is across the river from Windsor. Brussels isn’t.

No European agreement can eliminate the economic advantage of having an enormous wealthy market immediately next door. Shipping matters. Distance matters. Existing infrastructure matters.

Canada could spend the next generation diversifying its economy and the United States would remain one of its most important economic partners. Canada cannot replace the United States market. But it can make the United Stated less indispensable.

There is a country of difference between those ideas.

The Revolution Will Be Itemized

We tend to imagine great geopolitical shifts cinematically. Presidents at podiums. Flags lowered. Treaties signed with seventeen ceremonial pens. Ships sailing dramatically into harbors.

History enjoys a trumpet. Economic history prefers Excel.

Suppose a Canadian mining company signs a long-term agreement with a German manufacturer, or a Canadian defense company becomes part of a European procurement system. Nobody even reads the press release. But do this hundreds of times, and ten years later, look at the percentages. That is diversification.

The revolution will be memorialized on a spreadsheet.

And Canada is already moving in directions that go beyond conventional trade.

On September 16, Carney’s office announced that Canada had formally applied to join the British-led Joint Expeditionary Force, a ten-nation military coalition composed of northern European NATO members. Canada has also been exploring greater participation in European defense-industrial arrangements.

The American Canadian defense relationship isn’t disappearing. Diversification is not replacement.

But it can be.

“We Will Decide”

One sentence from Carney’s European trip may ultimately matter more than the phrase “associate member.” Asked about American criticism of closer European ties, Carney said Canada would decide for itself with whom it makes agreements. Strip away the diplomatic language and there is the issue.

Sovereignty.

This is why our geography lesson matters.  North America is a continent.  Not a political union. Not a federation. Not a country. Neighbors can be close without belonging to one another. And perhaps familiarity occasionally causes countries to forget that.

The Long Art of Staying Canadian…

We promise not to turn this into a Canadian history seminar. Although Dr. Gary Kelkner would probably enjoy that. But one piece of history matters enormously here.

Canada did not simply happen to remain separate from the United States.

Its political identity developed beside an expanding American republic, and the question of how to remain distinct while living next to a much larger power runs deep in Canadian history.

The War of 1812 matters partly because American forces invaded British North America, the territory that would eventually form part of Canada and burned York, the capital of Upper Canada.

Confederation in 1867 was driven by several forces, including economic concerns, political deadlock and security anxieties in a continent transformed by the American Civil War. Canada’s subsequent history involved an ongoing balancing act: building an independent national identity while recognizing that geography made an intimate relationship with the United States unavoidable.

There is the historical thread worth carrying forward. Not anti-Americanism. Not separation.

Proximity without absorption.

Canada has been working on that problem, in one form or another, for more than a century and a half. Carney did not invent it. He inherited the latest version.

The Friend You Depend Upon

Dependence has a peculiar psychological effect on both sides of a relationship. The dependent party worries about vulnerability. The dominant party can begin mistaking dependence for permanence.

Markets don’t always work that way. Customers adapt. Suppliers adapt. Countries adapt.

Canada’s 2025 trade numbers offer an early glimpse of this process, although they should not be exaggerated. Merchandise exports to the United States declined 5.8 percent from the previous year, while exports to non-U.S. destinations rose 17.2 percent. Some of the non-U.S. increase came from strong precious-metals exports, so it would be misleading to call the entire shift structural diversification. Still, businesses were moving. Markets were changing. And Canadian companies were discovering customers elsewhere.

That is the danger of using dependence as leverage. Sometimes leverage produces compliance. Sometimes it produces a search for alternatives.

Europe Has Its Own Reasons

It would also be a mistake to tell this story as though Europe were waiting romantically at the train station for Canada to arrive.

Europe has interests.

The European Union wants secure supplies of critical minerals. Canada has them. Europe wants reliable energy relationships. Canada has energy. Europe is trying to expand defense production. Canada has industrial capacity. Europe wants technology partnerships that reduce excessive dependence upon either the United States or China.

Canada is the pretty girl at the dance.

Donald Trump does not seem to understand that Canada has suitors waiting in the wings.

Von der Leyen’s proposal arose in a Europe wrestling with its own questions about strategic independence and economic security. She described the international environment as increasingly hostile and argued for stronger ties among countries that share broad institutional and economic interests.

This is not Europe rescuing Canada. It is Europe looking at Canada and seeing something useful. That may be exactly why the relationship has potential. Alliances based entirely upon affection make wonderful movies.

Durable alliances usually contain a healthy amount of self-interest.

The Great Canadian Escape?

No.

And that is what makes the story interesting. Canada isn’t escaping. It can’t. The country has approximately 5,500 miles of border with the contiguous United States and Alaska.

You don’t diversify that. You live with it.

The United States will remain Canada’s neighbor regardless of who occupies the White House or the Prime Minister’s chair. Americans and Canadians will continue visiting one another, marrying one another, and selling things to one another. The relationship is too large to reduce to the personalities of two political leaders. That is why “Canada versus The United States” misses the point.

The interesting tension is:

Canada with The United State—and Canada beyond it.

Can both exist simultaneously? Carney is betting that they can.

Your Neighbor Knows Where You Keep the Ladder

There is a reason Kellner’s Fair Game’s tariff episode works well as the prologue to this larger story.

Nobody knows your vulnerabilities quite like your neighbor.

Canada knows where American industries live because Canada has been buying from them for decades. America knows where Canadian vulnerabilities lie because American businesses have been trading across the same border. This isn’t intelligence gathering in the sinister sense. It is intimacy. Your neighbor knows you own a ladder because he borrowed it last summer. He knows your basement floods because he helped you carry the boxes upstairs. He knows you leave town every August because he feeds the cat.

Now imagine having an argument with him.

The intimacy that once made cooperation easy suddenly makes pressure easier too. That is the uncomfortable paradox of economic integration. The better we know each other, the more precisely we know where it hurts.

What Is Carney Actually Doing?

We should resist pretending we know everything about a political leader’s motives. But we can describe the strategy visible in his government’s actions and statements. Canada is responding to United States economic pressure. Canada is simultaneously seeking greater economic and strategic relationships beyond the United States.

Carney has emphasized critical minerals, defense, AI, energy and digital trade in his European discussions. He has welcomed deeper institutional ties with the EU while stopping short of saying Canada seeks conventional EU membership.

That looks less like revenge than risk management.

And risk management is much more consequential. Revenge ends when everybody calms down.  Risk management changes budgets. It changes procurement. It changes the next decision and the one after that.

The Most Important Tariff May Be the One Never Imposed

Imagine, five years from now, that the current dispute is over. The tariffs are gone.

What remains?

If Canadian businesses have developed new customers, those customers remain. If Canada has become more integrated with European defense production, those relationships remain. If investors think of Canada as part of a broader transatlantic economic space rather than as the northern half of an American supply chain, that perception remains. The long-term consequences of a trade war are difficult to measure while the trade war is happening.

The tariff gets the headline. The adaptation gets the history.

There Is a Warning Here for Canada Too

Diversification sounds magnificent in a speech. It becomes more complicated when somebody has to ship the merchandise. Europe is not next door. Detroit is.

A European customer may be attractive. An American customer who can receive your product tomorrow morning is attractive in a different way. That is the stubborn fact beneath all of Canada’s new enthusiasm for alternatives. The United States is not merely Canada’s largest trading partner because generations of politicians made it so. Geography had a vote.

A prime minister can diversify markets. He cannot diversify geography.

The Price of an Insurance Policy

Canada’s European turn should not be mistaken for a divorce proceeding.

It looks more like an insurance policy. And insurance is something people buy precisely because they hope they will never desperately need it. Carney’s larger proposition is that Canada can remain deeply connected to the United States while becoming less exclusively dependent upon it.

That sounds self-evident. It isn’t. Diversification costs money.

New supply chains require infrastructure. An exporter who can put a truck on the road for Michigan faces a very different proposition when the customer is in Germany. Relationships take years to build. Defense procurement systems do not merge because two leaders enjoyed lunch.

And Europe has its own interests. It wants alternatives in a world increasingly organized around competition among major powers. That is why the developing Canada-Europe relationship deserves attention. This is not Canada finding a charitable organization. It is two parties looking across the table and discovering that each may possess something the other needs.

That is how relationships begin.

Trade without the United States is unrealistic for Canada.  Trade without quite as much United States is a different proposition.

The United States Also Has a Problem

If American economic pressure produces concessions from Canada, Washington will regard that pressure as successful. If the same pressure persuades Canadian governments to spend the next decade building alternatives to the American market, that pressure was less so.

That is the strategic question raised by what is happening.

Economic coercion works best when the other party believes it has nowhere else to go. Use it often enough and the other party acquires a very powerful incentive to start building somewhere else to go.

That brings us back to the map.

North America Still Has Three Countries

Canada can deepen its relationship with Europe. It can sell more to Asia. It can build new defense partnerships. And tomorrow morning it will still wake up next to its southern neighbor. North America remains a continent containing three large sovereign countries, not an American economic estate with two outbuildings.

That distinction sounds mischievous. It is also serious.

For most of the modern era, the extraordinary accomplishment of the United States and Canada has been their ability to make sovereignty and integration coexist. They behaved as economic partners. They did not have to share a political system to build supply chains that treated the border almost as an administrative inconvenience.

That achievement is worth remembering precisely because it is so easy to take for granted. The border became boring. That was a triumph.

Boring borders are generally excellent for business.

The Neighbor You Know Too Well

Perhaps that is why the current argument has such a peculiar quality. This isn’t simply a spat between trading partners. It is an argument between neighbors who know where each other keeps everything. Canada knows where American dairy products come from. It knows where American cars are assembled. America knows Canada’s vulnerabilities as well. They have spent generations becoming economically intimate.

Interdependence is often discussed as though it prevents conflict. But interdependence can also provide an extraordinarily detailed instruction manual for conflict once the relationship deteriorates.

The closer you are, the better you know where the other guy’s toes are.

No One Is Moving

There is a temptation at this point to become melodramatic.

Canada is “turning away” from America. Europe is “taking” Canada.

Canada isn’t moving. America isn’t moving.  Ontario and Michigan will continue looking at each other across the water. Hockey teams will continue crossing the border with considerably less geopolitical anxiety than prime ministers. The question isn’t whether Canada can leave the American relationship. It’s whether Canada now needs more relationships around it.

As an alternative to having no alternative.

Which Brings Us Back to Follow The Money

Near the end of the Fair Game episode, Dr. Kellner reached back to Watergate and Bob Woodward’s famous instruction from Deep Throat:

Follow the money.

As historical purists will point out, the exact phrase belongs to the 1976 film All the President’s Men, not to Woodward’s original notes of his conversations with Mark Felt. Woodward has acknowledged that while the filmmakers created the wording, it accurately captured the direction Felt was giving him. Sometimes Hollywood improves history’s dialogue. And the line survived because it is useful.

When politics becomes confusing, follow the incentives. Follow who pays. Follow who benefits. Follow where the money stops. Kellner followed it into Wisconsin dairy farms, Michigan automobile plants, Ohio manufacturing, Georgia carpet mills, Kentucky appliances and Maine seafood.

Now keep following it. Across the Atlantic. Into European defense procurement. Into critical minerals. Into energy, technology, investment.

Not where Canada can make the United States hurt. But to where Canada can make itself harder to hurt.

And There Is Our Trade War

No one is going to shoot anybody. No surrender ceremony. No victorious Canadian army marching down Pennsylvania Avenue.

The casualties in this war will appear on invoices. A cheese order that doesn’t arrive. A machine that costs more. A factory investment postponed. A customer who finds another supplier.

Those aren’t cinematic casualties. But they will be durable ones.

Which is why the most important question eventually becomes the simplest:

What is the objective?

If tariffs are intended to create leverage for a negotiated agreement, then at some point the negotiation has to arrive. If retaliation is intended to demonstrate that pressure carries a price, someone has to decide that the price has been demonstrated.

Otherwise, the means quietly become the end.

And two countries that spent generations learning how profitable it was to depend upon one another become skilled at learning how not to.

The Border Lesson

Borders mean something.

On one side, Americans decide what is in America’s interest. On the other, Canadians decide what is in Canada’s. For decades, those interests coincided to a remarkable degree. The genius of the relationship has never been that the two countries were the same. It was that they learned how profitable—and how peaceful—it could be to remain different together. Carney’s European turn does not erase that history. It may be an attempt to rebalance it.

So perhaps Kellner’s borrowed Watergate instruction needs one small amendment.

Follow the money.

Absolutely.

But this time-

Don’t stop at the border