‘Use a baseball bat to get the mule’s attention’

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While many Canadians may find it difficult to remember a Canada-U.S. relationship that wasn’t defined by free trade between the two countries, it’s a relatively recent development.

For most of the history of our two nations, tariffs and trade barriers were a fact of life.

Canada’s special relationship with the United States may have helped it secure exemptions and trade pacts to make both countries more prosperous, but U.S. presidents have, at times, been happy to step out on that relationship in the name of nation-building.

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In recent history, before U.S. President Donald Trump’s threats of annexation or punishing tariffs, the most notable example is Richard Nixon’s shock policy decisions of 1971, made in secret at Camp David.

In August 1971, then-president Nixon withdrew the United States from the gold standard and levied a 10-per-cent tariff on imports, including on Canadian goods. He also looked to end exemptions Canada had secured on (some) aspects of U.S. trade policy at the time.

The parallels are obvious: A U.S. president using dubious economic policy to bolster its domestic economy; Canada shocked that its next-door neighbour would treat it so poorly; an intense cross-border diplomatic effort to avert catastrophe; an American analysis of its own trade relationships; and a domestic political conversation about insulating the Canadian economy from America. It sounds familiar, though the context was different.

For starters, Canada had few other available trade options — China and the global south were non-entities in the early 1970s. And there was much more happening south of the border than just tariffs. Nixon also instituted a wage freeze and price controls across the United States and, in a bid to correct the overvalued greenback, removed the U.S. from the gold standard, bringing an end to the Bretton Woods System that had backed worldwide currencies since 1944.

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Canadians, then, as now, reacted with bafflement. Americans were, at least initially, wildly supportive, until all Nixon’s ideas proved ruinous when coupled with a handful of international crises.

The background to the story is that towards the late 1960s, the United States was struggling economically with inflation that, while low compared to what would follow in the mid-1970s, was creeping towards five per cent. Wages had risen in conjunction with inflation and government spending was growing rapidly due to a combination of the quagmire of the Vietnam War and the exorbitant spending necessitated by Lyndon B. Johnson’s Great Society social security plan. The U.S. also suddenly had competition from growing economies — West Germany and Japan, for example — and there was a growing perception that America was producing junk while other countries were producing quality goods.

This appalled John Connally, a Florida politician who became Nixon’s treasury secretary. He had the goal to shake things up by taking America off the gold standard and imposing tariffs. Connally, for whatever reason, seemed to reserve special ire for Canada.

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“He told some people that he wanted to ‘use a baseball bat to get the mule’s attention’ — and we were the mule,” said Bruce Muirhead, a historian at the University of Waterloo. “For some reason, he identified us, almost above any other country at the time, as being the source of all their issues.”

We fought back, and we absolutely stood our ground. We’ll see how it works out with Trump this time around

Canada, which had secured some exemptions on trade from John F. Kennedy, and under Johnson, weren’t so lucky this time around.

“Much to their surprise, Canadians found themselves no different in American eyes than Western Europeans and the Japanese,” Muirhead wrote in the American Review of Canadian studies in 2004.

That line could just as easily have been written in 2025.

While the threat of blanket 25 per cent tariffs has been set aside until Tuesday, it could return at the end of the 30-day pause, which was agreed to on Feb. 3. Trump has also signed an executive order levying 25 per cent tariffs on aluminum and steel imports to the United states, which will come into effect March 12.

A more solid climbdown from threats of trade war could be dependent upon Canadian initiatives on border security.

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Trump has argued that tariffs will make the United States rich, and expressed frustration that the country has a trade deficit with Canada. While it’s a minuscule deficit — about three per cent of America’s overall international trade deficit — Trump has complained that the United States is “subsidizing” Canada and that to avoid tariffs, he would like to see Canada become the 51st state, something Canadian leaders have rejected outright. While the U.S. has a $32-billion trade deficit with Canada, if energy is removed from the equation, it’s actually a trade surplus in favour of the U.S.

Fifty years ago, it was much the same: the U.S. had a trade deficit on merchandise, specifically, but a commanding surplus when it came to non-merchandise trade, Muirhead recounts in his research, an account that informs much of what we know about how Canada responded to those tariff threats, what their impact was feared to be and how negotiations shook out in the end.

Back in 1971, Connally argued on NBC News that Canada would get no exception to new American rules.

This wasn’t just about trade, although Connally certainly hoped the play would improve American manufacturing and that Canada dismantling its own trade barriers could lead to the end of a surtax. The issue in 1971 also had a lot to do with how countries valued their own currencies. This isn’t a factor in 2025.

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There were also defence-sharing factors and — in another echo of 2025 — Canada mused about restricting supplies of oil and gas to the United States.

Connally had a particular grievance dating back to 1962, when then-prime minister John Diefenbaker’s had leveraged a surtax to increase Canadian revenues and improve domestic production, which then-U.S. under-secretary of state George Ball called “pure protectionism” in a letter to then-U.S. treasury secretary C. Douglas Dillon.

“I must say that I don’t think that their bargaining position is as strong as it might be,” said Connally at the time.

The fear in Canada then, as now, was that the U.S. could, in one fell swoop, cripple the Canadian economy. A 10-per-cent import surtax, Canadians feared, could cost 90,000 jobs and affect about $2.5 billion worth of goods. Then, the tariff excluded certain items that were beneficial to the U.S. economy, such as oil and automotive parts and other goods covered by quotas or treaties.

Nixon’s August 1971 announcement kicked off months of meetings between Canadian, American and officials from other countries around the world. Robert MacIntosh, with the Bank of Nova Scotia, told a CBC television panel that Nixon was using a “nuclear warfare type of tax” and “putting a gun to the head of the world,” The Globe and Mail reported.

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“Almost as soon as the announcement’s out, you know, we have guys going down to Washington to begin the process of talking about our special relationship with them, and (how) we need an exemption,” Muirhead told the Post.

At various points, Canadian officials attempted to point out all the ways that the U.S. benefitted from its relationship with Canada, such as access to natural resources. In the meantime, while these negotiations were underway, the Canadian economy was actually doing fine. Canada’s currency, which had been floating since 1970, had grown in value by eight per cent and the country’s GDP had been growing by roughly six per cent since the third quarter of 1970, according to the Bank of Canada.

This put Canada in a position of rejecting much of what the Americans wanted. Canada’s currency would not be revalued, as Connally wanted, for example. And, Connally himself, seemed to become the problem, conducting himself in a boorish manner during negotiations.

A memo, dated Feb. 4, 1972 from Helmut Sonnenfeldt and Robert Hormats, both members of Nixon’s National Security Council, and addressed to Henry Kissinger, told Kissinger to rein in Connally. The U.S. treasury had rejected the latest Canadian negotiating offer, and it was putting the U.S. at risk because of “anti-Americanism” during the 1972 Canadian federal election and exposed Americans to “economic retaliation with adverse effects on interests and communities in this country.”

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“This memo is to alert you to the problem and to the urgent need to moderate Connally before an unnecessary foreign policy crisis with adverse domestic implications arises,” it states.

However, by that point, Nixon’s promised tariff had basically been lifted. These were just ongoing negotiations.

The fear in Canada then, as now, was that the U.S. could, in one fell swoop, cripple the Canadian economy

In early December 1971, then-prime minister Pierre Trudeau visited the White House. This was the meeting that later became famous because Nixon, speaking to his aides, called Trudeau a “pompous egghead” and a “son of a b—h,” and Trudeau later responded that he’d “been called worse things by better people.” A few weeks later, though, Canada won a major concession: the import surcharge that Nixon had imposed was lifted, although various trade negotiations continued between Canada and the United States.

“We fought back, and we absolutely stood our ground. We’ll see how it works out with Trump this time around,” said Muirhead.

All of this precipitated another trend that Canadians will be familiar with: Wondering what exactly we ought to do about our southern neighbour and our economic options. In 1972, Mitchell Sharp, then Canada’s secretary of state for external affairs, wrote a paper in the journal International Perspectives. Almost every word of it could be re-published today. Other than the allusions to the Cold War, not a whole lot would look out of place.

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Sharp argued that Canada had before it three options: a status quo degree of integration with — and dependence upon — the United States; closer integration with the southern behemoth; or a third-rail option of a “comprehensive, long-term strategy” to decrease Canada’s vulnerability to American intransigence.

“(The third option) tries to come to grips with one of the unanswered questions that runs through so much of the Canada-U.S. relationship, and which is what kind of Canada it is that Canadians actually want,” Sharp wrote.

Sharp argued that Canada cannot really escape the continental pull of the United States, but that it could embark upon a deliberate strategy to build its domestic economy, diversify markets and shore up its cultural independence. Weirdly, this is sort of what Nixon himself argued in his April 1972 address to the House of Commons: “No self-respecting nation can or should accept the proposition that it should always be economically dependent upon any other nation,” Nixon told Canada’s parliamentarians.

“Canadians and Americans (must) move beyond the sentimental rhetoric of the past. It is time for us to recognize that we have very separate identities; that we have significant differences; and that nobody’s interests are furthered when these realities are obscure,” Nixon said.

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Canada didn’t end up backing down. And Nixon was furious.

“So, we fought them right into the ground here,” said Muirhead. “Ultimately, we got what we wanted out of the Americans.”

That said, Canada never really did fully explore Sharp’s idea of a “third option,” seeking new markets and reducing our reliance on our economic integration with the United States. Indeed, it wasn’t even all that popular with Canadians: Forty-two per cent of us liked the way things were with the U.S., Muirhead reports, while 30 per cent felt Canada needed to explore other options.

After Connally’s resignation in May 1972 and Nixon’s resignation in August 1974, relations improved considerably with Gerald Ford, but Canadian-American relations may not have fully recovered.

What happened shortly after this trade skirmish was far more important than Nixon’s tariffs. In 1973, a number of Arab nations attacked Israel. The United States opted to arm Israel, which led to the Organization of the Petroleum Exporting Countries slapping an oil embargo on Canada, the United States and other western nations, precipitating the energy crisis of the 1970s.

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The west slid into a recession for a number of years after that. The tariffs, if they mattered at all during the frenzied four months of negotiation in 1971, barely matted by then.

“Anything that went before sort of paled to insignificance,” said Muirhead.

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