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Canadian leader’s role at Bank of England during Brexit vote gives him a key insight as trade war with US escalates
Canadian leader’s role at Bank of England during Brexit vote gives him a key insight as trade war with US escalatesCanadian prime minister Mark Carney is working to minimise the impact of a trade war with the US on his country's economy.
Photograph: Dave Chan/AFP via Getty ImagesWhat about the divisiveness of holding in/out referendums? The UK government was repeatedly advised against it. Seven prime ministers later and they’re still picking up the pieces. Perhaps the most salient lesson of all is that trade – despite all the chatter about globalisation – is still largely a function of geography.
The gravity model of international trade – the notion that countries tend to trade most with their nearest and largest neighbours – is one of the most robust empirical findings in economics. In 2015, the EU accounted for 44 per cent of UK exports and 53 per cent of its imports. A decade later, in 2025, those shares were still 41 per cent and 50 per cent respectively.
Westport Estate CEO: ‘Ireland has to create new product, it can’t just rely on Killarney and the Cliffs of Moher’ After 10 years of Brexit turmoil, Britain’s biggest and most important trading partner remains the EU. It can’t escape the orbit of the single market. And instead of brokering a potentially transformative US trade deal , the UK now finds itself on the receiving end of US tariffs.
One person who was in the engine room of the UK economy during the volatile Brexit period was Canadian prime ministergovernor from 2013 to 2020 and controversially weighed in to the debate to warn that a Leave vote could cause a UK recession.. When he took over from Justin Trudeau as Canada’s Liberal Party leader in 2025, the party was trailing its Conservative rivals in the polls by 25 points and looked destined for electoral defeat.
But Carney successfully rode a wave of Canadian nationalism into office, one whipped up by Trump’s invective about annexing the country. Since Canada-US trade talks collapsed last month, Trump and his administration have unleashed a barrage of tariffs, taunts and personal attacks portraying Canada as weak and dependent, not unlike his attacks on Europe.
This week Canada responded with retaliatory tariffs of its own, on $20 billion of US goods, roughly 6 per cent of the $334 billion the US exports, saying it would match Washington dollar for dollar and rate for rate. Ottawa’s retaliatory tariffs, which focus predominantly on steel, dairy, appliances and agricultural equipment, seek as much to limit the fallout on bilateral trade as to stand up to Trump.
At the last minute, Canada removed dozens of seafood items to avoid unintended consequences for its own fisheries industry. Fish products move back and forth across the Canadian border to be processed and sold in either market. Unlike Brexiteers, Carney has grasped the simple fact that access to the US economy is the biggest show in town - some might argue the only show in town.
The US economy is 13 times the size of Canada’s, and the majority of Canadian exports are sold to the US, underscoring, in grand fashion, the gravity model of international trade. And while Carney talks up trade diversification as a possible remedy to Canada’s deteriorating relations with the US, that won’t compensate for a big disruption to trade with its nearest neighbour. Canada and the US have the world’s largest bilateral trading relationship, valued at nearly $900 billion last year.
That notion got lost in Brexit - or at least Brexiteers were too complacent about it. All the guff about frictionless borders proved to be just that: guff. Trump’s persistent trolling of Canada gives Carney political cover. The first opinion poll in the wake of the trade war put his approval rating at 66 per cent.
At the World Economic Forum in Davos in January, he warned that “great powers” were using economic integration to coerce smaller countries, in a speech that established him as the leading liberal voice standing against Trump. The US president responded a day later by saying Canada “lives because of the United States” and warning: “Mark, remember that next time you make your statements. ”There are obvious differences between Brexit and Canada’s current trade spat with Washington.
Britain chose to exit the EU, Canada did not pick a fight with the US. If anything, it has gone to extra lengths to avoid it.
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