Executive Summary

Subnational governments—provinces, states, and regions—have increasingly shaped international economic diplomacy in the twenty-first century. The Canadian province of Ontario serves as an illustrative case. Although constitutionally barred from signing treaties, Ontario has exerted substantial influence over Canada–United States tariff negotiations, particularly during disputes concerning automotive trade, steel, aluminum, and agricultural products.

This white paper explores the mechanisms, motivations, and implications of Ontario’s involvement, illustrating how subnational actors can affect national trade policy and reshape international economic outcomes.

I. Introduction: Subnational Diplomacy and Global Interdependence

The traditional view of international relations holds that sovereign nation-states are the exclusive agents of diplomacy. However, globalization, regional specialization, and the interdependence of supply chains have blurred these boundaries.

Subnational units—especially economically powerful ones—now routinely engage in “paradiplomacy”: direct or indirect participation in cross-border relations to defend or promote regional interests.

Ontario, with a GDP surpassing many mid-sized countries, plays an outsized role in Canada’s overall trade profile. Roughly 80% of Ontario’s exports go to the United States, and many of these—especially automotive and manufacturing goods—are highly sensitive to tariff changes. Thus, Ontario’s domestic politics and lobbying activities have repeatedly shaped Canada’s international negotiating posture.

II. Ontario’s Economic Profile and Exposure to U.S. Tariffs

A. The Structural Dependence on U.S. Trade

Ontario’s economy is deeply integrated into the Great Lakes industrial corridor. The automotive sector—anchored by General Motors, Ford, Stellantis, and Magna—relies on daily cross-border flows of parts and vehicles. Tariffs on metals and vehicles ripple through Ontario’s employment and revenue base, giving the province strong incentives to intervene politically.

B. The Provincial Government’s Economic Leverage

Ontario contributes over 40% of Canada’s manufacturing output, making it indispensable to the federal government’s economic performance metrics.

As a result, Ontario’s premier—regardless of party—commands attention in Ottawa whenever tariff threats arise.

III. Historical Context: Ontario and Trade Disputes

A. The 1965 Auto Pact and Its Legacy

The Canada–U.S. Automotive Products Agreement (Auto Pact) laid the foundation for integrated automotive production.

Ontario’s policymakers played a crucial advocacy role in ensuring local employment protections and plant investments.

This legacy continues to underpin Ontario’s modern approach: protecting manufacturing as a regional identity and political priority.

B. NAFTA and the 2018–2019 Trade Tensions

During the Trump Administration’s renegotiation of NAFTA and the imposition of tariffs on Canadian steel and aluminum, Ontario’s government acted as a quasi-diplomatic actor:

Ontario’s Premier Doug Ford directly lobbied U.S. governors and business associations. Provincial officials coordinated with Ontario-based automakers and unions to generate U.S. congressional pressure against tariffs. Ontario’s economic ministries produced data briefs used by federal negotiators to justify exemptions and retaliatory measures.

C. The Post-CUSMA Landscape

After the ratification of the Canada–United States–Mexico Agreement (CUSMA), Ontario continued to exert influence through:

Monitoring compliance with rules-of-origin requirements in the auto sector. Advocating for provincial procurement flexibility. Engaging with regional U.S. partners through trade missions, even when national tensions persisted.

IV. Mechanisms of Ontario’s Influence

A. Direct Channels

Intergovernmental Consultations: Federal negotiators routinely consult provincial ministries for sectoral impact assessments. Bilateral Lobbying: Ontario maintains offices in U.S. cities like New York and Chicago to represent provincial interests. Joint Industry Advocacy: Collaboration with industry councils and chambers of commerce to align messaging with U.S. business stakeholders.

B. Indirect Channels

Public Opinion and Media: Ontario’s large population shapes national media narratives about trade. Political Pressure on Ottawa: Premiers use public appeals to influence federal strategies, especially when jobs or investment are at risk. Cross-Border Institutional Networks: Great Lakes Governors–Premiers partnerships serve as para-diplomatic venues for consensus building.

V. Theoretical Implications: Multi-Level Governance in Action

The case of Ontario illustrates multi-level governance in international trade:

National governments rely on provincial expertise and political legitimacy for implementation. Subnational governments exploit their economic indispensability to shape the national position. Cross-border subnational diplomacy softens ideological tensions at the federal level by emphasizing pragmatic cooperation.

This dynamic exemplifies a bottom-up diplomacy model, wherein trade policy emerges from regional realities rather than federal abstraction.

VI. Challenges and Risks

A. Constitutional and Legal Constraints

Canada’s Constitution assigns treaty powers to the federal government, limiting provincial autonomy.

Ontario’s activism risks federal-provincial tension if it is perceived as undercutting Ottawa’s coherence abroad.

B. Fragmentation of National Policy

If other provinces emulate Ontario’s assertiveness, Canada could face a patchwork of regional trade preferences, complicating international commitments.

C. U.S. Perception of Mixed Signals

American negotiators may exploit intra-Canadian divisions, favoring regional stakeholders over federal positions to extract concessions.

VII. Lessons for Other Subnational Actors

Economic Scale Enables Voice: Provinces with major industrial or resource assets can meaningfully influence foreign policy. Institutionalizing Dialogue: Ontario’s semi-permanent liaison offices and industry councils demonstrate sustainable influence mechanisms. Framing as Partnership, Not Opposition: Effective subnational diplomacy frames advocacy as complementing, not contradicting, federal efforts. Leveraging Cross-Border Regionalism: Networks like the Great Lakes St. Lawrence Governors & Premiers serve as durable buffers against political volatility.

VIII. Policy Recommendations

Formalize Provincial Consultation in Trade Negotiations: Establish mandatory provincial impact assessments before major tariff talks. Enhance Subnational Transparency: Require provinces to disclose foreign lobbying expenditures to ensure alignment with national interests. Promote Cross-Border Regional Forums: Use regional partnerships to maintain stability during diplomatic strain. Develop Joint Federal-Provincial Contingency Plans: Coordinate responses to future U.S. tariff threats on metals, autos, and agriculture. Invest in Economic Diversification: Reduce Ontario’s vulnerability by expanding export markets beyond the U.S., including the EU and Indo-Pacific.

IX. Conclusion

Ontario’s experience reveals how subnational politics can no longer be treated as peripheral to international affairs. In the modern global economy, provinces and states are indispensable nodes of economic diplomacy.

Ontario’s strategic behavior—balancing advocacy, cooperation, and self-protection—demonstrates both the potential and the perils of subnational influence on global trade policy.

Future Canadian trade diplomacy will increasingly depend on Ottawa’s capacity to integrate provincial voices without diluting national coherence—a challenge emblematic of multi-level governance in an era of deep interdependence.