The rupture of the world order is going much better than expected.
At first there was rage at America’s betrayal, when President Trump called for the annexation of Canada, threatened Greenland, imposed tariffs on its friends and began his campaign to undercut NATO, which continued at its latest meeting this week, in Ankara, Turkey. Now, a strange feeling is emerging in some of the countries that used to be known as America’s allies: Optimistic determination. There’s an established principle in chess that applies to geopolitics as well: “The threat is stronger than the execution.” The possibility of U.S. abandonment of the world order was terrifying. The reality turns out to be a new beginning.
Canada, America’s neighbor, was the first to see it, naturally. Since the beginning of Mr. Trump’s second term, American bullying on trade has been ferocious. As a result, Canada has had to consider what American favor or disfavor is worth. The Bank of Canada recently ran a scenario in which the United States imposed a 25 percent tariff on everything Canada exports to the United States. Canada’s growth of its gross domestic product would slow by about 2.4 percentage points, which over a period of adjustment is well within Canada’s capacity. A disaster, to be sure, but not the end of the world. That’s the worst-case scenario.
A recent study by economists at the Canadian Shield Institute, commissioned for the podcast “Gloves Off,” which I host, found that Canadian merchandise exports to the United States last year fell by over 30 billion Canadian dollars, (21 billion U.S. dollars), or over 5 percent of exports to the United States. But that loss was offset by nearly 29 billion Canadian dollars in new demand from the rest of the world. When services were included, total exports from Canada increased by almost 7 billion dollars. America can make whatever threats it likes, but if you have the aluminum or oil or potash, somebody will buy it.
It’s not just Canada. European equities outperformed American equities in 2025, and surged in the first two months of 2026. The European Defense Industrial Strategy, put in place in 2024, is keeping more of Europe’s rapidly expanding military spending within the continent. And after the threat of the European Union’s anti-coercion instrument, the so-called trade bazooka allowing rapid counter tariffs, forced Mr. Trump to back down from his early round of Greenland threats, the Europeans now know that they have their own Strait of Hormuz — their own pain point that can make America flinch.
