When “Deal” Becomes “Annexation”: What the US–Canada Trade Collapse Tells Us About Coercive Diplomacy

President Donald Trump greets Prime Minister of Canada Mark Carney, Tuesday, May 6, 2025, at the West Wing entrance of the White House. (Photo: Official White House Photo/Gabriel B Kotico)

Last week, the United States and Canada came within an hour of finalizing a new trade agreement. Then the deal collapsed. Washington imposed 50% tariffs on billions of dollars of Canadian goods, and Ottawa promised to hit back “dollar for dollar.” Canadian Prime Minister Mark Carney said he walked away because the United States asked “too much, offered too little.” Leaked details of the American demands read less like a compromise between allies and more like a blueprint for economic domination.

This is not just a North American story. The US–Canada breakdown shows how great powers are turning trade agreements into instruments of coercion, using market access to extract concessions on culture, resources, and foreign policy. If this becomes normal, the era of rules-based trade is over. What we are seeing instead is annexation by contract.

A deal that looked like surrender

For days, negotiators had been racing to avoid new US tariffs on Canadian steel, aluminum, autos, and other products. A tentative framework was on the table: US duties on Canadian vehicles would fall from 25% to 15%; steel and aluminum tariffs would be cut from 50% to 25% with quotas; a recent tariff on softwood lumber would be removed. In return, Canada offered to drop its retaliatory measures, end provincial boycotts of American alcohol, and make changes to dairy licensing and “Buy Canadian” procurement language.

Then, according to multiple reports, the United States added last-minute demands that changed the character of the deal. Ottawa was asked to scale back rules that require streaming platforms like Netflix and Amazon to promote Canadian and French-language content, and to reduce subsidies for Canadian publishing and film. Washington also pushed for limits on Canada’s ability to make trade deals with other countries, including an obligation to mirror US trade restrictions against third states. On top of that came demands on critical minerals, defence purchases, and industrial policy: a US “right of first refusal” on Canadian critical minerals, commitments to buy American hardware for missile defence, and pressure to increase oil exports to the United States.

Prime Minister Carney’s government concluded that these terms went far beyond ordinary trade bargaining. As one Canadian official put it, the US was asking for control over sectors that Ottawa sees as core to its economic sovereignty and cultural identity. When Canada refused, the talks fell apart and the 50% tariffs kicked in on about $20 billion worth of Canadian goods.

One question hangs over the whole episode: if this is how Washington treats its closest neighbour, what does it mean for everyone else?

Annexation without borders

In international law, annexation usually means one state forcibly taking another’s territory. But the US–Canada episode points to a different, increasingly common phenomenon: economic annexation. Here, a dominant power uses trade terms to lock a weaker partner into a subordinate position, eroding its ability to set independent policies on culture, resources, and foreign relations.

The reported US demands fit this pattern. Requiring Canada to align its external trade restrictions with Washington’s effectively gives the United States a veto over Ottawa’s relationships with other countries. Insisting on a right of first refusal for critical minerals turns a strategic resource into a US sphere of influence. Pressuring Canada to water down French-language and cultural promotion rules strikes at policies that many Canadians see as essential to their national identity.

An unverified list of US demands circulating in Canadian media goes even further, alleging proposed vetoes over Canadian port, telecom, and energy infrastructure, price caps on critical minerals, and extended patent protections that would delay generic drugs. Neither government has confirmed this document, but its very existence, and the label some commentators have given it, “the annexation papers”, shows how the negotiations are perceived on the ground. When a trade draft reads like a set of surrender terms, the line between agreement and coercion has already been crossed.

A warning for the rest of the world

If the United States can treat Canada this way, no allied relationship is safe. Canada is a G7 member, a NATO ally, and one of America’s closest partners. Yet the logic on display in these talks is brutally transactional: use tariff threats to extract maximum concessions, even on issues that have little to do with market access.

This should worry governments from Europe to Southeast Asia to Africa. The tools used against Canada—sectoral tariffs, snapback clauses, linkage of unrelated issues like pipelines and defence purchases to trade—are easily replicable. Smaller and middle-income countries that depend on access to the US, EU, or Chinese markets could face similar pressure: accept terms that lock in policy subordination, or lose market access and investment.

The broader lesson is that “free trade” is increasingly conditional on political loyalty. The promise of predictable, rules-based commerce under agreements like the USMCA/CUSMA is giving way to a model where the strongest party can unilaterally reshape the deal at the last minute. When that happens, trade agreements stop being mutual commitments and become instruments of leverage.

What international law can and cannot do

International law offers limited protection against this kind of coercion. WTO rules and USMCA dispute mechanisms exist, but they are slow and often ill-suited to respond to rapid, unilateral tariff moves. Even if a panel eventually finds violations, the economic and political damage may already be done.

That gap between legal norms and power politics is precisely what makes the US–Canada case so significant. It exposes how easily a powerful state can use “agreements” to erode another state’s sovereign policy space, with few effective legal brakes. The normative question is whether the international community should start treating overtly coercive trade terms—those that amount to economic annexation—as incompatible with the principle of sovereign equality.

Drawing a line

The collapse of the US–Canada trade talks should be a wake-up call. Trade agreements are necessary, but they must preserve each party’s ability to make independent choices on culture, resources, and foreign policy. Clauses that give one side a unilateral veto over the other’s core policies, or that turn strategic sectors into spheres of influence, should be treated as suspect.

For now, North America is heading into a full-blown trade war, with Canada promising retaliatory tariffs on US steel, dairy, appliances, and electronics. The bigger risk is that this becomes the new normal: a world where “deal” is just a euphemism for domination, and where economic annexation replaces the old, discredited kind.

If foreign policy is to mean anything, it must defend the right of states—large and small—to say no to agreements that turn them into vassals. The US–Canada crisis shows what happens when that line is not drawn.

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This article written by Mohamed Ali Amri, a Tunisian human rights professional, shaped by years of civic engagement and of work within the UN human rights system and regional and national institutions. He holds an LLM in International Law and an MA in Criminology & Criminal Justice.