It may be how to become harder to constrain — and what the United States risks when leverage becomes pressure
For decades, Canadians have been accustomed to thinking about the United States through a fairly stable set of facts.
The United States is larger.
Its economy is larger.
Its population is larger.
Its military is larger.
Its domestic market is vastly larger.
Canada, meanwhile, has built industries, infrastructure and supply chains around one of the closest economic relationships in the world.
On those measures, the geometry seems obvious.
The United States has scale. Canada has dependency.
And if geopolitics were simply a contest of size, that might be the end of the analysis.
But the confrontation unfolding between Canada and the United States in 2026 raises a more interesting question:
What happens when a powerful country repeatedly uses an existing dependency as leverage?
The intuitive answer is that the weaker country becomes more compliant. Sometimes it does.
But there is another possibility.
The pressure begins changing the relationship that created the leverage in the first place.
Canada and America are no longer behaving as though this is the old relationship
On August 21, Prime Minister Mark Carney suspended Canada’s trade negotiations with the United States.
What caught my attention wasn’t simply that negotiations had failed. It was how the Canadian government described what it was trying to protect.
Canada wanted continued tariff-free access to the American market for most Canadian businesses, greater stability, reduced tariffs on strategic industries, and protection for small and medium-sized businesses.
But it also explicitly identified maintaining Canada’s “flexibility, independence, and sovereignty” as an objective.
Carney said last-minute changes to the proposed American terms were unfair and uneconomic and called the reliability of an agreement into question.
The following day, U.S. tariffs of 50 per cent took effect on $27.6 billion of Canadian goods.
Canada subsequently announced that it would match the new measures dollar for dollar and rate for rate. Beginning September 8, Canada is scheduled to impose tariffs of 15, 25 and 50 per cent on $27.6 billion of U.S. imports.
This sequence matters:
August 21: negotiations suspended.
August 22: U.S. tariffs take effect.
September 8: Canadian counter-tariffs scheduled to take effect.
But beneath the tariffs and negotiating positions lies a larger question.
Is this simply another trade dispute?
Or are we beginning to watch the structure of the relationship itself change?
Size and relationship are not the same thing
This is where a distinction that appears repeatedly in my work on the Tang Papers becomes useful.
I find it helpful to separate the scalar view of a system from its relational view.
The scalar view asks:
How large is the actor?
How much wealth does it possess?
How much military capacity?
How large a market?
How much energy, capital, technology or industrial capacity?
By virtually every relevant scalar measure, the United States overwhelmingly exceeds Canada.
But the relational question is different:
Who depends upon whom, for what, through which pathways — and how difficult would those relationships be to change?
The distinction can be reduced to something simple:
Size tells us something about how much power an actor possesses.
Relationship tells us something about how that power can be exercised.
This isn’t a claim that international-relations scholars somehow overlooked dependency.
Quite the opposite.
Albert Hirschman’s classic work examined how asymmetric trading relationships could become sources of national power.
Robert Keohane and Joseph Nye later distinguished between sensitivity and vulnerability in interdependence: being affected by another country’s actions is different from being unable to adjust to them without substantial cost.
More recently, Henry Farrell and Abraham Newman developed the idea of weaponized interdependence — examining how states occupying advantageous positions within global networks can exploit those positions strategically.
The Canada–U.S. confrontation gives us an unusually visible live case through which to think about those established ideas.
The Tang Papers ask a somewhat different representational question:
What becomes easier to see if we separate the size of the actors from the changing structure of the relationship between them?
Canada does not have to become bigger than America
Canada cannot diversify its way into becoming larger than the United States. Nor can clever diplomacy erase geography.
The American market will remain enormously important. But becoming larger may be the wrong strategic objective anyway.
Canada doesn’t have to become more powerful than the United States. It may instead need to become harder to constrain.
Imagine two smaller countries with economies of exactly the same size.
Country A relies overwhelmingly on one country for exports, financing, technology, transportation and security.
Country B has viable pathways through several different partners.
Their economic scale could be identical. Their vulnerability would not be.
But even here there is an important trap.
Having alternatives on paper isn’t the same as being able to use them.
Keohane and Nye’s distinction between sensitivity and vulnerability already points toward this problem because the cost of adjustment matters.
For the Canada case, I find it useful to turn that into an almost brutally practical question:
Can you actually use the alternative, at sufficient scale, within the time available?
Canada may have trade agreements around the world. But can a Canadian producer actually move its goods to another market?
At sufficient scale?
At a competitive price?
Through existing ports, railways, pipelines and distribution networks?
Can a manufacturer replace an American supplier quickly enough to keep a factory operating?
Can a new defence supplier integrate with systems already in use?
Can an energy producer reach another customer without infrastructure that will take a decade to build?
This gives us a useful rule of thumb:
An alternative isn’t an option merely because you can see it.
It has to remain available when you actually need to use it.
Or, more simply:
The important question isn’t how many alternatives Canada can name. It’s how many constraints Canada can actually escape.
Movement is not transition
One of the easiest mistakes in analysing a fast-moving geopolitical confrontation is to see several dramatic events and declare:
Everything has changed.
But countries don’t change all at once.
Politics can change in weeks.
Consumer behaviour can change in months.
Companies may take longer to change suppliers.
Ports, pipelines and manufacturing capacity can take years to build.
Institutions and treaties may operate on yet another clock.
So there is a crucial distinction between movement and transition.
A Canadian minister visiting Europe is movement.
A new trade mission is movement.
A company announcing that it wants to find non-American suppliers is movement.
Canadians choosing not to vacation in the United States is movement.
None of those, by itself, proves that Canada’s underlying economic relationship with the United States has structurally transitioned.
That requires something harder.
The constraints themselves have to change.
When did the transition actually happen?
In a forthcoming Tang Papers working paper, I refer to this as a Representational Transition Signature, or RTS.
Despite the technical-sounding name, it starts with an almost embarrassingly simple question:
When did the transition happen?
RTS then does something deliberately inconvenient. It refuses to assume there must be one transition date at all.
Political rhetoric might change on one date.
Negotiating behaviour on another.
Trade patterns later.
Infrastructure later still.
Institutions may not change at all.
And sometimes the evidence simply isn’t sufficient to tell us.
In its simplest public form, the discipline is:
Changed.
Didn’t change.
Or we don’t yet know.
Instead of choosing the most dramatic event and declaring it the transition, the representation preserves those differences.
Put another way:
Don’t date the transformation of an entire relationship from the first thing that visibly moves.
That discipline has already complicated my own interpretation of Canada.
The tempting story is straightforward:
American pressure rises.
Canada resists.
Canada diversifies.
Dependency falls.
The relationship transforms.
It’s a compelling narrative. It may eventually prove correct. But the evidence does not yet allow us to finish that story.
Canada has clearly changed its negotiating behaviour.
That does not establish that its underlying economic structure has changed to the same degree. And that distinction may become one of the most important things to watch.
Now Trump has put the Canadian dollar into the argument
On September 6, President Donald Trump introduced another variable. This time, it wasn’t steel, autos or dairy.
It was the Canadian dollar.
Trump described Canada’s currency-dollar “imbalance” with the United States as “unacceptable,” saying it had existed for years — “but no longer.”
What exactly that means remains unclear.
Trump did not identify the exchange rate he believes Canada should have. He did not explain how he believes the Canadian government is responsible for the current rate. And he did not announce what the United States intends to do about it.
That uncertainty matters.
Canada does not peg its dollar to the U.S. dollar. The Canadian dollar floats in foreign-exchange markets.
On September 4, the Bank of Canada’s daily rate was C$1.3840 for one U.S. dollar — meaning one Canadian dollar bought about 72.25 U.S. cents.
At first glance, that looks like another scalar imbalance:
US$1 ≠ C$1.
But currencies don’t work that way.
Parity between two currencies does not mean their economies are equal, and a Canadian dollar worth less than one U.S. dollar does not by itself establish an unfair trading practice.
Currencies respond to relationships among interest rates, economic growth, inflation expectations, commodity prices, investment flows and demand for financial assets.
That makes Trump’s statement particularly interesting.
A tariff changes the economics of a particular product crossing the border. An exchange rate touches almost everything crossing it.
A weaker Canadian dollar generally makes Canadian products less expensive for American buyers while making American products more expensive for Canadians. A stronger Canadian dollar reverses some of those effects.
Consider a deliberately simplified example.
Suppose a Canadian business sells something in the United States for US$100.
At approximately C$1.38 per U.S. dollar, that US$100 translates into roughly C$138. At parity, it would translate into C$100 — before considering costs, hedging, pricing responses and other complications.
That illustrates why the deeper question isn’t whether 72 U.S. cents is the “right” value for Canada’s dollar.
It is:
What would Canada have to change to produce the exchange rate Washington wanted?
The Bank of Canada influences financial conditions through monetary policy, but it does not set a fixed Canada–U.S. exchange rate.
Interest rates can influence currency values. But raising Canadian rates simply to support the dollar could create consequences elsewhere: higher mortgage costs, more expensive business borrowing, weaker investment, housing pressure and slower economic growth.
Canada could conceivably reduce one external constraint by creating another domestically.
And there is a paradox.
American pressure intended to address a weak Canadian dollar could potentially contribute to forces that weaken it.
If tariffs reduce expectations for Canadian growth or investment, Canadian assets could become less attractive. If weaker growth eventually contributed to lower Canadian interest rates relative to U.S. rates, that too could affect the currency.
So we cannot simply write:
American pressure → stronger Canadian dollar.
There are intermediate relationships, and they can push in opposing directions.
For now, however, none of this establishes another transition.
Trump has made a statement. Canada has not changed its monetary policy in response. No new currency regime has been established.
So the September 6 statement gives us something more useful than a conclusion:
a prospective signal.
Does the currency issue disappear?
Does it enter formal trade negotiations?
Does Washington demand a currency commitment?
Are future tariffs explicitly connected to the Canadian dollar?
Does the U.S. Treasury become involved?
Does Canada alter policy in response?
Those outcomes would mean very different things.
For now:
Something moved.
Whether anything transitioned remains unknown.
And that gives us another discipline to add to the others:
Don’t mistake a number for an explanation.
The paradox of leverage
Now consider the situation from Washington rather than Ottawa. The United States possesses leverage precisely because access to its enormous market matters so much to Canada.
Using that leverage may produce concessions. There is nothing mysterious about that.
But repeated use creates a strategic question for the stronger country.
Imagine the sequence:
Dependency → Leverage → Pressure → Search for alternatives
If those alternatives remain too expensive, too slow or too impractical, American leverage survives. Canada may complain while the underlying structure remains largely intact.
But suppose pressure becomes large enough that Canada becomes willing to absorb costs it previously considered unjustifiable.
New infrastructure gets funded.
Supply chains move.
Capital changes direction.
Defence procurement changes.
Export markets deepen.
Businesses redesign themselves around the possibility of a less predictable American relationship.
Then something interesting could happen.
America hasn’t necessarily become weaker. But one particular source of American leverage may become less effective.
This isn’t a newly discovered geopolitical mechanism. Hirschman’s work and the later literature on asymmetric and weaponized interdependence provide much of the intellectual foundation for understanding it.
What makes Canada interesting is that we can now watch the problem unfold rather than merely reconstruct it afterward.
The currency question potentially takes the same problem one level deeper.
The question is no longer simply:
What does it cost Canada to resist this tariff?
It becomes:
What does it cost Canada to remain this exposed to decisions made in Washington?
Power belongs to the actor. Leverage lives in the relationship.
The United States possesses tremendous national power regardless of what Canada does.
Its GDP doesn’t shrink because Canada builds another port.
Its population doesn’t decline because Canadian companies find customers in Europe or Asia.
Its military doesn’t become smaller because Canada purchases equipment elsewhere.
But leverage over Canada depends partly upon the way Canada is connected to the United States.
That means we should distinguish the resources an actor possesses from the influence those resources create within a particular relationship.
Put very simply:
Power belongs largely to the actor.
Leverage lives in the relationship.
And relationships can sometimes be reconfigured.
Now reverse the problem
A useful analytical framework shouldn’t know in advance which country we want to win. So imagine the same situation from Washington.
The American strategic question isn’t: How can we help Canada become less dependent on us?
It is: How much leverage should we use?
One answer is: As much as possible.
If the United States can obtain a better trade arrangement by exploiting Canada’s limited alternatives, doing so might be perfectly rational from an American bargaining perspective.
But there is another possibility.
The United States could win today’s negotiation while weakening tomorrow’s influence.
Because every additional use of dependency as leverage can change Canada’s calculation about the value of reducing that dependency.
That produces two mirror-image questions.
For Canada:
When does the cost of dependence become greater than the cost of building an alternative?
For the United States:
When does exploiting dependence make Canada’s expensive alternatives worth paying for?
Neither question tells us what will happen.
But both tell us what to watch.
And the currency issue introduces another:
What happens when leverage begins reaching beyond individual trade concessions and toward the economic relationships through which a country conducts its domestic policy?
That is where the question of sovereignty becomes considerably more interesting.
A proposition for any country in Canada’s position
Canada is hardly unique.
Around the world, smaller countries depend heavily upon larger countries for combinations of trade, energy, finance, security, technology, food, transportation, industrial inputs or access to markets.
The usual advice is: Diversify.
But that word is too easy.
A country can sign twenty agreements and remain dependent. It can announce ten partnerships while every critical piece of infrastructure still points in one direction.
So perhaps the more useful questions are:
What essential function can another country constrain?
What would we lose if it did?
Is there another pathway capable of preserving that function?
At what scale?
At what cost?
And how long would switching pathways take?
That last question matters enormously.
An alternative available ten years from now provides little protection during a six-month crisis.
The objective for the smaller state therefore isn’t necessarily independence. Complete independence may be impossible, inefficient or undesirable.
The objective is to reduce the number of essential functions for which one relationship represents the only viable pathway.
And a proposition for the larger country
Now reverse every question.
What dependency gives us leverage?
How difficult is it for the other country to escape?
What alternatives exist?
How expensive are they today?
And most importantly:
Does exercising our leverage increase the other country’s willingness to pay the cost of escape?
That is a different way of thinking about power. The strongest possible action isn’t necessarily the strategically optimal action.
Sometimes preserving an advantageous relationship may produce more long-term influence than extracting the maximum possible concession from it today.
But that is a hypothesis — not a geopolitical law.
The world will provide cases in which overwhelming pressure works. And others in which pressure contributes to reconfiguration.
The useful research question is determining the conditions separating the two.
So what should we watch in Canada?
Not just speeches. Watch flows.
Where are Canadian exports actually going?
Where are Canadian businesses actually sourcing components?
Where is capital actually being invested?
Which infrastructure projects actually get built?
Where does energy physically flow?
Which defence systems actually get purchased?
Which technology relationships become operational?
Do consumer changes persist after the immediate political confrontation subsides?
Do non-U.S. markets become large enough to replace meaningful portions of American demand?
And now:
Watch the Canadian dollar — but also watch what is moving it.
A falling Canadian dollar could look like evidence of Canadian weakness. But the number alone doesn’t tell us why it moved.
Likewise, a rising Canadian dollar wouldn’t by itself prove that American pressure had succeeded. The exchange rate is an outcome of many interacting relationships.
Don’t mistake a number for an explanation.
And perhaps most importantly, watch which changes persist if political relations improve again.
Because there are several plausible futures.
Canada and the United States could reconcile and substantially restore the previous relationship.
Political relations could remain hostile while deep economic dependence changes relatively little.
Canada could gradually diversify while retaining the United States as its overwhelmingly dominant economic partner.
Or this confrontation could contribute to a deeper structural reconfiguration.
We don’t yet know. And we shouldn’t award ourselves prediction credit after discovering which path occurred.
If these ideas are eventually to become predictive, the pathways and the conditions distinguishing them have to be written down before the outcome is known.
Then reality gets to decide whether the representation was useful. That is part of the larger research experiment.
A different way of looking at geopolitics
The Canada–U.S. confrontation is therefore about more than tariffs. Trump’s September 6 currency statement may have made that clearer.
A larger country can possess vastly greater resources while a smaller country can still alter how vulnerable it is to those resources.
A smaller country can announce diversification without actually becoming less constrained.
A dominant country can extract concessions while potentially creating stronger incentives for the weaker actor to develop alternatives.
An exchange rate can appear to be a simple number while actually reflecting relationships across trade, capital, monetary policy and expectations.
And different parts of the relationship can move on completely different clocks.
This is where the Tang Papers keep returning to the same underlying discipline:
Don’t confuse size with relationship.
Don’t confuse movement with transition.
Don’t confuse an available alternative with one you can actually use.
Don’t mistake a number for an explanation.
And don’t finish the story before the evidence does.
The United States is unquestionably more powerful than Canada. That isn’t the interesting question.
The interesting question is whether Canada can make particular forms of American leverage progressively harder to use without destroying the enormous value Canada receives from the relationship.
And Washington faces the mirror image:
How much leverage can the United States exercise before Canada decides that the cost of building alternatives is lower than the cost of remaining vulnerable?
Those questions travel well beyond North America. They apply whenever a smaller country depends heavily upon a larger one.
They apply to energy relationships.
Technology networks.
Defence alliances.
Financial systems.
Currencies.
Supply chains.
And perhaps even relationships far outside geopolitics.
The deeper question is not simply:
Who is stronger?
It is:
Who can reconfigure the relationship when the relationship becomes constraining — and how long will that reconfiguration take?
Canada and the United States are now giving us an opportunity to watch that question unfold in real time. Trump’s currency statement gives us one more thing to watch.
We should resist deciding what it means too soon.
About the Author
Robert (Lit Meng) Tang is an independent researcher, writer and entrepreneur based in Ontario, Canada. He holds a B.Sc. in Mathematics from McMaster University and an MBA from the Schulich School of Business at York University.
His professional background spans research, marketing and strategic communications. He previously served as Research Manager with the Society of Management Accountants of Canada and later co-founded danceScape with his wife and business partner, Beverley Cayton-Tang.
Tang is the author of the Tang Papers, an independent research program exploring representation, relational structure, information, coordination and transition across complex systems.
His current work investigates whether alternative ways of representing complex change can improve explanation, preserve uncertainty and, ultimately, demonstrate predictive value when tested prospectively against simpler approaches.
This essay is part of the Tang Papers, an independent research project exploring whether complex changes become easier to understand when we separate what is changing in scale, what is changing in relationship, and what has actually transitioned.
The larger experiment is not simply whether these representations can explain events afterward. It is whether clearer representation can eventually help us identify consequential changes before their outcomes are known — and whether those representations perform better than simpler alternatives when tested.