As discussions around trade policy heat up in anticipation of the 2025 political landscape, Canada must proactively assess its economic position with the United States. The prospect of a renewed threat from a second Trump administration—including a 25% tariff on Canadian imports—highlights the urgent need to explore more integrated solutions. A customs union between Canada and the United States offers a pragmatic and forward-looking strategy to secure economic stability while preserving national interests. Here are three compelling reasons why Canada should seriously consider this policy shift.
Mitigating Tariff Threats and Trade Uncertainty
Under a customs union, Canada and the United States would adopt a common external tariff on imports from non-union countries while eliminating tariffs and barriers between each other. This framework would neutralize the looming threat of a 25% tariff proposed by President Trump, which would severely disrupt Canadian industries, particularly in automotive, steel, and aluminum.
The previous US tariffs imposed in 2018 under Section 232 demonstrated the vulnerability of Canada’s economy to US trade policy volatility, despite our deep economic ties. A customs union would guarantee free-flowing trade within North America, providing predictability and long-term stability for Canadian businesses and workers
Strengthening North American Competitiveness
A customs union would allow Canada and the US to better compete as an integrated economic bloc in a multipolar global economy, particularly against rising economic powers like China and the European Union. By harmonizing trade policies and eliminating intra-regional barriers, supply chains across industries such as manufacturing, energy, and technology would operate with greater efficiency.
For Canada, this would translate into improved market access and economies of scale while preserving key industries that are heavily reliant on US trade. In turn, it would incentivize foreign direct investment (FDI) into both nations, knowing that businesses would benefit from a unified North American market.
Safeguarding Canada’s Economic Sovereignty
While a customs union involves closer policy alignment, it does not require the political integration or regulatory convergence that accompanies deeper unions like the European Union. Canada would retain control over critical sectors such as healthcare, natural resources, and domestic policies, while ensuring economic sovereignty in key areas.
By actively shaping the terms of a customs union with the US, Canada can negotiate favorable conditions that protect strategic industries while reducing exposure to punitive trade actions. This approach represents a middle ground that balances national independence with the pragmatic need for economic integration.
The Bottom-line
A US-Canada customs union would stabilize bilateral trade, reinforce North America’s global economic standing, and shield Canada from the turbulence of tariff threats and trade wars. As 2025approaches, Canada must be proactive in negotiating a framework that safeguards its economic interests while capitalizing on the deep integration already in place. Rather than reacting to threats after they materialize, it is time for Canada to lead the conversation and secure its economic future through a strategic and mutually beneficial customs union.
