Ex-PMO Adviser Warns Ottawa Against Dropping Tariff Leverage

Diamond Eisinger, a former special advisor on Canada-U.S. relations in the Prime Minister's Office, said dropping Canada's retaliatory tariffs on U.S. goods could "lead to a worse outcome" for Canada by weakening its negotiating position through further concessions.

Canada's remaining retaliatory tariffs on American goods are being framed in Ottawa as a cost to be shed. A former insider is arguing the opposite: that giving them up buys nothing and costs leverage.

Diamond Eisinger, a former special advisor on Canada-U.S. relations in the Prime Minister's Office, warned that dropping retaliatory U.S. tariffs may "lead to a worse outcome" for Canada. His argument, reported by BNN Bloomberg, is that further concessions to Washington would weaken Canada's negotiating position rather than unlock a deal.

The mechanics of the leverage argument

Retaliatory tariffs are counter-duties: a country responds to another's import taxes by taxing that country's exports, usually targeting goods chosen for political sensitivity rather than economic scale. Their purpose is rarely revenue. It is to create a constituency inside the other country's borders that wants the original tariffs removed.

That is the logic Eisinger is defending. A counter-tariff that is voluntarily withdrawn stops generating pressure the moment it disappears, and it does not come back cheaply — reimposing duties after standing them down carries a political cost and invites the accusation of bad faith. In negotiating terms, the concession is spent whether or not anything is received for it.

The counter-case, which any government weighing a rollback has to consider, is domestic. Retaliatory duties raise input costs for the manufacturers, processors and retailers that buy from U.S. suppliers, and those costs land on Canadian firms and consumers regardless of what happens in Washington. A government facing that pressure can reasonably decide the tariffs are hurting the wrong people. Eisinger's warning is that relief bought this way is relief handed over for free.

Why the sequencing matters more than the size

Trade negotiations are sequencing exercises. What each side gives up, and in what order, sets the reference point for everything that follows. Concessions made outside a formal exchange tend to be treated by the other side as the new baseline rather than as a gesture deserving reciprocity — the next round starts from the lower position, not the original one.

That is the specific risk in a unilateral rollback. Canada would move from holding a tool it can trade to holding nothing, while the U.S. measures that prompted the retaliation in the first place remain in force. The negotiating asymmetry between the two economies makes the point sharper: the smaller partner has fewer instruments, so each one it holds is proportionally more valuable.

Eisinger's intervention also carries weight because of where he sat. Advice from a former Prime Minister's Office adviser on the Canada-U.S. file is not an outside critique of the government's information; it is a disagreement about how to use it.

Sector exposure sits on both sides of the trade

Any change to Canada's counter-tariffs redistributes costs rather than simply removing them. The industries most directly affected are the ones that sit closest to cross-border supply chains: autos and parts, steel and aluminum, agriculture and food processing, and consumer goods retail. A rollback lowers landed costs for Canadian buyers of U.S. inputs. It also removes the price protection that some domestic producers have been operating behind, and it does nothing for exporters still facing U.S. duties on the way south.

That split explains why the debate is not a simple free-trade-versus-protection argument. Import-heavy manufacturers and retailers want the counter-tariffs gone. Domestic producers competing against U.S. goods, and exporters hoping the duties eventually buy a negotiated exit from American measures, want them kept. A government cannot satisfy both, which is why the question of timing — concede now, or concede as part of an agreement — has become the whole argument.

Markets are pricing macro risk, not this headline

Equity markets were not reacting to the tariff debate on Tuesday. U.S. benchmarks closed lower across the board: the S&P 500, tracked by SPY, finished at $767.45, down 0.68% from the prior close of $772.67, with a day range of $766.92 to $769.50. The Nasdaq 100 proxy QQQ took the heavier hit, closing at $717.51, off 1.69% from $729.87 and ranging between $715.92 and $722.13. The Dow 30 tracker DIA was the most resilient of the three, closing at $532.91, down 0.24% from $534.19. All figures are as of the last trade at 20:00 GMT on Aug. 18, 2026, with markets since closed.

The pattern — technology down hardest, industrials and blue chips down least — is characteristic of a rates-and-risk-appetite day rather than a trade-policy day. That is worth noting for anyone trying to read the tariff story through share prices: cross-border trade risk in North America is a slow-burning input into corporate margins and capital plans, not something that reprices in an afternoon session.

What would signal which way Ottawa is leaning

Several things would tell investors and exporters more than commentary does. The first is whether any rollback is announced as a standalone measure or bundled into a broader agreement — the former would confirm the unilateral path Eisinger is warning against, the latter would suggest Ottawa held its position and traded it.

The second is scope. A narrow, product-specific carve-out aimed at relieving a particular industry's input costs is a different act from a general withdrawal of counter-duties, and it preserves more of the negotiating structure.

The third is the response from the U.S. side. If a Canadian concession is followed by movement on American duties, the concession worked. If it is followed by silence or by new demands, Eisinger's case is made in public and the political cost of having moved first rises sharply.

For Canadian firms with cross-border exposure, the practical planning question is not which side of the argument is right but how long the uncertainty lasts. Tariff schedules that could change in either direction make it hard to price contracts, site production or commit capital. Businesses generally prefer a settled bad rule to an unsettled one — and on the evidence of this debate, settlement is not imminent.

Key facts

• Who is warning: Diamond Eisinger, former special advisor on Canada-U.S. relations, Prime Minister's Office
• Core warning: Dropping retaliatory U.S. tariffs may "lead to a worse outcome" for Canada
• S&P 500 (SPY) last close: $767.45, -0.68%, as of 20:00 GMT Aug. 18, 2026
• Nasdaq 100 (QQQ) last close: $717.51, -1.69%, as of 20:00 GMT Aug. 18, 2026

Frequently asked questions

What did Diamond Eisinger actually say?

Eisinger, a former special advisor on Canada-U.S. relations in the Prime Minister's Office, warned that dropping Canada's retaliatory tariffs on U.S. goods may "lead to a worse outcome" for Canada. His reasoning is that further concessions to Washington would weaken Canada's negotiating position rather than improve the odds of a favourable trade settlement.

What is a retaliatory tariff?

A retaliatory tariff, or counter-tariff, is a duty one country imposes on another's exports in response to tariffs imposed on its own goods. The aim is usually political rather than fiscal: by raising costs for producers in the other country, it creates domestic pressure there to remove the original measures at the negotiating table.

Why would Canada consider dropping its counter-tariffs?

Counter-tariffs raise input costs for Canadian manufacturers, processors and retailers that buy American goods, and those costs are borne domestically. A government under pressure from import-dependent industries may judge that the duties are hurting Canadian firms more than they are shifting U.S. policy, and choose to relieve them.

Which Canadian sectors are most exposed to a rollback?

The industries closest to cross-border supply chains are most affected: autos and parts, steel and aluminum, agriculture and food processing, and consumer goods retail. Import-heavy buyers gain from lower landed costs, while domestic producers competing against U.S. goods lose the price protection the counter-tariffs provided.

Did markets move on this story?

No. U.S. benchmarks closed lower on broad macro factors rather than trade news. SPY ended at $767.45, down 0.68%; QQQ at $717.51, down 1.69%; and DIA at $532.91, down 0.24%, all as of the last trade at 20:00 GMT on Aug. 18, 2026. The technology-led decline points to rates and risk appetite.

What should observers watch next?

Three things: whether any tariff rollback is announced on its own or as part of a negotiated package; how broad it is, since a product-specific carve-out preserves more leverage than a general withdrawal; and whether Washington responds with movement on its own duties or with silence and fresh demands.

Sources

• Dropping retaliatory U.S. tariffs may ‘lead to a worse outcome,’ for Canada, warns ex-adviser — BNN Bloomberg

Photo: Sukhan Sivia · Pexels Licence — source