Carney, Canadian Sovereignty; US Power, and NATO Defense Spending

 

 

Mark Carney’s Leadership Amidst Structural Constraints

Mark Carney assumed leadership at a time when Canada’s long-standing, deeply integrated relationship with the United States was under unprecedented strain due to Trump’s transactional, coercive trade policies. Carney’s mandate was to defend Canadian sovereignty and chart a path toward economic diversification and resilience. Despite his business acumen and diplomatic skill, Carney’s options have been sharply limited by Canada’s structural economic dependence on the US, legal constraints from trade agreements like USMCA, and corporate realities where Canadian firms prioritize shareholder interests over national loyalty.

Carney has been forced to back down on key policies—most notably the digital services tax—under threat of US tariffs and suspended negotiations. His role has largely been defensive, mitigating damage rather than reversing the fundamental power imbalance.

The Abandonment of the Rules-Based World Order

For decades, the US championed a rules-based international economic order, emphasizing multilateralism, predictable trade rules, and mutual benefit. This system allowed smaller economies like Canada to prosper under agreed frameworks that limited arbitrary power.

Under Trump, this order was abandoned in favor of an overtly unipolar, power-based, and transactional economic strategy:

• The US now pursues bilateral negotiations leveraging its economic dominance, imposing tariffs and threats to extract concessions.

• It exploits asymmetries rather than seeking mutual gains, monetizing its power advantage by treating trade deficits as evidence of “unfair” deals.

• The US has undermined multilateral institutions like the WTO, making trade relations unpredictable and subject to US discretion.

This shift has left close allies like Canada exposed to unilateral US pressure, with little recourse.

Why Close US Allies Are More Vulnerable Than Less Integrated Economies

• Deep Economic Integration: Canada sends over 75% of its exports to the US, with supply chains, regulations, and investments deeply intertwined. This integration, once a source of stability, now means US policy changes cause immediate economic harm.

• Legal and Institutional Lock-In: Trade agreements restrict Canada’s ability to diversify or engage with alternative markets, limiting its strategic options.

• Limited Retaliatory Power: Canada’s smaller economy and dependence on the US market mean retaliation risks self-harm.

• Corporate Realities: Canadian companies often relocate or align with US interests if threatened, accelerating economic annexation sector by sector.

• Less Integrated Economies Have More Flexibility: Countries with more diversified trade portfolios can pivot more easily to alternative alliances and markets.

The Waning US Unipolar Order and Its Impact on Allies

• US global dominance is declining amid the rise of China, India, and regional blocs.

• Trump’s transactional diplomacy accelerated the erosion of US alliances and leadership.

• Close allies, deeply tied to the US system, face the greatest risk as the old order fragments.

• Alternatives to US dominance exist but are slow to develop and cannot yet replace the scale of US economic power.

NATO Defense Spending: Economic Leverage Beyond Military Threats

A crucial but often overlooked dimension is NATO’s evolving defense spending commitments:

• NATO members, including Canada, have increased their defense spending targets from 2% to 5% of GDP, with 3.5% dedicated to core military capabilities and an additional 1.5% for broader security-related infrastructure (roads, ports, cyber-security).

• This increase is less about responding to direct military threats and more about channeling hundreds of billions of public dollars into the US economy, primarily through the US Military-Industrial Complex (MIC).

• The “interoperability clause” requires NATO members to align their military infrastructure and procurement with US standards and suppliers, effectively guaranteeing US defense contractors a massive, captive market.

• Canada’s defense spending—though modest compared to the US—is part of this broader economic funnel, representing a significant transfer of public funds into the US economy beyond tariffs and trade policies.

• This dynamic reinforces Canada’s economic dependence and limits its sovereignty, as defense commitments become another lever of US economic and political influence.

Final Synthesis

Mark Carney’s leadership reflects a struggle for Canadian sovereignty in an era where US power is exercised through economic coercion and institutional leverage rather than direct confrontation. The US’s abandonment of the rules-based order in favor of a transactional, power-driven approach has left Canada and other close allies exposed and constrained.

The deep economic and institutional integration that once underpinned prosperity now limits Canada’s ability to resist or diversify. This vulnerability is compounded by NATO defense spending commitments that funnel vast public resources into the US Military-Industrial Complex, further binding Canada economically and politically to the US.

As US unipolar dominance wanes, the closest allies—Canada foremost among them—face the greatest uncertainty and risk. Carney’s challenge is to navigate this complex landscape, defending sovereignty where possible while managing dependence and seeking new partnerships in a shifting global order.

--with the collaboration of Perplexity  AI 

1. https://www.visualcapitalist.com/charted-nato-defense-spending-as-a-share-of-gdp/
2. https://www.reuters.com/business/aerospace-defense/what-is-natos-new-5-defence-spending-target-2025-06-23/
3. https://www.nato.int/cps/en/natohq/topics_67655.htm
4. https://www.nato.int/cps/en/natohq/topics_49198.htm
5. https://www.wilsoncenter.org/article/criticism-nato-ignores-its-economic-benefit-us
6. https://www.atlanticcouncil.org/blogs/new-atlanticist/nato-us-interest-washington-summit/
7. https://www.visualcapitalist.com/breaking-down-1-3t-in-nato-defense-spending/
8. https://www.aljazeera.com/news/2025/6/25/nato-countries-budgets-compared-defence-vs-healthcare-and-education