This article originally appeared in Policy Options.
By Jerome Gessaroli, March 3, 2026
Recent actions and national security rhetoric from the United States and President Donald Trump have made clear a new desire for U.S. control in the Western Hemisphere that poses significant challenges to Canadian sovereignty. In response, the Canadian Armed Forces (CAF) have modelled what a hypothetical U.S. invasion of Canada could look like and how the CAF could best respond. This does not imply that such an event is expected, but it shows our institutions are testing behaviour that was once considered off the table.
The Trump administration increasingly cites national security rationales to press large, consequential demands on countries, often with short timelines. Canada may soon encounter more of these high-stakes, security-framed pressures from the U.S. in more severe forms and a key question to consider is whether our decision-making system can anticipate and respond to them.
To this end, Canada needs to put in place a standing cross-government decision-making process that weighs trade-offs across sovereignty, economic risk, and alliance obligations and enables departments and provinces, where jurisdiction applies, to co-ordinate quickly enough to act.
Old processes give way to new pressure
Historically, Canada has managed challenges from the United States through established bureaucratic channels. For much of the postwar period, serious disagreements tended to follow familiar paths. Sector-specific issues moved through established diplomatic or trade channels, over time, with room for consultation and compromise. Even when tensions ran high, those processes, rather than immediate pressure, shaped outcomes.
Recent U.S. actions and rhetoric point to a different kind of challenge, defined less by process and more by speed, leverage, scope, and security framing. This includes security-driven claims over allied territory and threats of sweeping tariffs tied to border or economic security concerns.
What matters now is whether Canada could effectively respond under pressure, rather than what it should do in any single case. Three scenarios could test that capacity:
Scenario 1: The Arctic
One such scenario could arise in the Arctic, where the two countries have unresolved territorial disputes over the Beaufort Sea maritime boundary and the legal status of the Northwest Passage. In this scenario, Washington demands that Canada settle both at once by accepting the U.S. equal-distance claim in the Beaufort Sea and recognizing the Northwest Passage as an international strait, framing the package as necessary for continental security. The demand has a short deadline and private warnings that refusal would prompt a reassessment of defence, trade, and intelligence cooperation.
Does Canada concede long-standing Arctic claims to preserve the broader relationship, or refuse to negotiate under pressure and accept uncertain security and economic consequences?
Scenario 2: Sanctions enforcement
The second scenario combines historical elements from past extraterritorial sanctions disputes. Canadian companies operate in a U.S.-sanctioned jurisdiction that supplies critical manufacturing components used in Canadian production. Following a sanctions enforcement move, Washington demands winding down/exit within a set timeframe and warns that refusal will trigger escalation.
When the firms cite Canadian law, such as the Foreign Extraterritorial Measures Act, and refuse, the U.S. administration directs relevant agencies to pressure banks, insurers, shippers, and other major service providers to withdraw support from the supply chain. Within days, financing tightens, insurance is pulled, and logistics providers cancel contracts to avoid U.S. penalties. Ottawa is forced to confront an abrupt disruption to Canadian manufacturing and a direct challenge to Canada’s ability to sustain its own commercial policy choices.
Does Canada defend the firms’ position under Canadian law and accept fast-moving damage to manufacturing output and investment confidence, or press for de-risking to contain a wider economic and sovereignty crisis?
Scenario 3: CUSMA leverage
A third scenario could emerge in the 2026 Canada-U.S.-Mexico Agreement review and its built-in sunset mechanism. In this scenario, Washington conditions extension of the agreement on changes to Canada’s foreign-ownership and control rules in several protected sectors, including telecommunications, air transportation, and parts of financial services.
The U.S. frames the demand as fairness and reciprocity and proposes a phased package with binding milestones and short timelines. U.S. officials warn that refusal would trigger restrictions on new licenses and acquisitions by Canadian firms in those same sectors, along with tighter regulatory approvals where U.S. discretion applies.
Does Canada accept changes that reduce Canadian control over key sectors to secure CUSMA’s extension and access to U.S. markets? Or does it refuse and accept targeted retaliation against Canadian firms and greater uncertainty in its most important economic relationship?
These scenarios are not predictions. They show the type of pressure Canada could face, short timelines, demands across security, trade, and regulation, and decisions that carry long-term consequences.
If this kind of pressure arrives, Canada needs a standing, cross-government way to respond that makes clear who leads, what trade-offs matter, how jurisdictions align, and how decisions get made quickly and coherently.
Preparedness is about being ready to decide in the best interests of the country, not about provoking conflict. The time to build that capacity is before real deadlines are on the table.
Ensuring response capacity before pressure arrives
Canada’s governance system was shaped for gradual disputes and long consultations. Today’s high-pressure demands require routine integration of information before deadlines arrive.
Building on existing federal co-ordination capacity, two steps would help close this gap:
First, strengthen the Privy Council Office’s ability to collect, combine, and reconcile economic and security information as a regular function, rather than pulling it together during a crisis. A small interdepartmental secretariat could meet regularly, stress-test scenarios like those above, and keep decision-ready inputs so ministers receive coherent options quickly.
Second, set a clear federal–provincial way of working when dealing with sensitive files involving provincial authority. This matters when retaliation hits one region or sector harder than others—for example, China’s targeting of Canadian canola following Canada tariffs, which created uneven provincial exposure. A designated contact point and a clear escalation route would bring provinces in early, reduce friction when time is tight, and support a consistent national response.
Preparedness assumes pressure may be leverage-based and sometimes time-compressed, making rapid co-ordination and clear trade-offs essential. Canada already has crisis co-ordination structures in place. The challenge is ensuring routine, decision-ready integration for fast-moving economic-security demands.
Without this preparation, Canada risks reacting case by case under deadline pressure, absorbing avoidable economic disruption, and facing higher pressure to concede on core interests.
Jerome Gessaroli is a senior fellow at the Macdonald-Laurier Institute and the Center for North American Prosperity and Security, and leads the Sound Economic Policy Project.
