Nobel economist has a theory about Trump's new feud with Canada

During the 2026 World Economic Forum (WEF) in Davos, Switzerland, U.S. President Donald Trump and Canadian Prime Minister Mark Carney exchanged public criticism over trade and foreign policy.

Carney delivered a speech arguing that Trump's foreign and economic policies are undermining global alliances. He stated that this is causing a "rupture" in international relationships.

The Canadian prime minister told attendees, "For decades, countries like Canada prospered under what we called the rules-based international order. We joined its institutions, we praised its principles, we benefited from its predictability. And because of that, we could pursue values-based foreign policies under its protection. Even an imperfect system had profound benefits — as long as America remained both strong and virtuous."

Following Carney's speech, Trump withdrew Canada's invitation to join his Board of Peace.

Economist Paul Krugman published a column on January 27 criticizing Trump's Canada policies. Krugman argues that the U.S.-Canada relationship has deteriorated since Trump returned to power.

"We are talking about a rupture with a neighbor that was, until Trump returned to power, one of our closest allies and remains our second most important trading partner," Krugman writes. "Trump has been criticizing Canada since early last year, claiming that Canada had a $200 billion trade surplus and arguing that getting energy and auto parts from Canada constituted a U.S. subsidy to the country."

Krugman states, "For the record, trade between the U.S. and Canada is roughly balanced, and cutting off this trade would be severely damaging to both economies."

Krugman attributes Trump's approach to personal and geopolitical factors. He argues that by making a trade deal with China, Canada is reducing its dependence on the United States, which Trump opposes.

Paul Krugman's full Substack column is available at this link.

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