Wendong Zhang

Associate Professor

Wendong Zhang, professor of applied economics and policy at Cornell University, notes that broad retaliation is the one strategy Canada cannot afford.

Zhang says:

“In our published modeling of the 2025 trade wars, Canada is the economy with the most to lose in every scenario. Retaliating across the board raises Canada's welfare loss to roughly seven times of the loss if it holds fire. It is important to note that now Canada-China have a more normalized trade relationship.

“Targeted retaliation is a different story. Canada's most effective move last year was not a tariff at all. Our ongoing research on the provincial liquor boards' ban on U.S. wine shows the cost landed almost entirely on U.S. exporters, in effect on California, while Canadian consumers barely noticed. The test for today's package is the same: where Canada can source elsewhere, mostly from France and Italy, U.S. exporters on the contrary saw a 90% decline in wine sales to Canada; where it cannot, as with auto parts feeding Ontario plants, Canadians pay too.

“The hidden cost is that trade is easy to switch off and slow to switch back on, and consumers do not need a ban to walk away. Where Canadian provinces lifted their wine bans, U.S. sales took months to start recovering. Canadian demand for U.S. fresh fruit, which faced no ban at all, fell by about a third in the spring of 2025, and Canadian travel to the U.S. dropped alongside it. That is conscious consumer aversion, and no trade negotiator can switch it back on.”