When Pamela Ritchie opens by framing Canada as a player in "a game of 3-dimensional chess," she is not reaching for metaphor. She is identifying the operational reality that Richard "Dick" Fadden, former Director of the Canadian Security Intelligence Service (CSIS) and former National Security Advisor to the Prime Minister, spends the better part of thirty minutes carefully mapping1. What emerges from this conversation is not a comfort piece. It is a sober, precise, occasionally unsettling account of where Canada stands, what it actually controls, and what the path forward requires.
The trade talks collapsed. The 50% tariffs are now in effect. And Fadden says, plainly: this is not Canada's fault, and Canadians need to understand that before they do anything else.
The Breakdown: What Actually Happened
Fadden does not dress up the failure of the August negotiations. The Americans arrived late, added demands at the eleventh hour, and among those demands was something Canada would never accept: a requirement to dismantle French-language protections. "We've always considered that to be off the table in terms of trade negotiations," Fadden says. "We consider that a political, a strategic issue, a sovereignty issue." Beyond that, a last-minute change in the American negotiating team, introducing new conditions when a deal was ostensibly within reach, made agreement practically impossible. "You do not at the last minute, when ostensibly you've almost reached an agreement, pop somebody else into the negotiations and add a whole raft of requirements," he says. "You can do it. Very tough. But it's not conducive to finding a way forward."
The international response to the breakdown, Fadden notes, has been instructive. Global financial press coverage has tilted sympathetically toward Canada, and he does not expect that to reverse. The reason is structural. The United States has, across multiple negotiating fronts, made commitments and walked them back. "If two countries as close as Canada and the United States historically can't come to an agreement," he says, "what real hope do we have?" That is not just a reputational problem for Washington. It is a strategic one, and it compounds with every new round.
The "Meanwhile" Strategy: Industry by Industry, Day by Day
Fadden is clear-eyed about the near term. There is no magic policy lever. The federal government cannot blanket-apply tariff relief across sectors that will each absorb the impact differently. "I think we have to take things industry by industry, sector by sector, day by day," he says. The provinces must participate. There are limits to the federal treasury. And critically, the government's leverage is being reduced gradually, not eliminated immediately. The Prime Minister's September investor summit, Fadden suggests, matters precisely because international investment commitments do not just attract capital. They visibly reduce American leverage over time. "Basically they're going to have to acknowledge that their leverage against us is being reduced," he says. "I think it's important." But he is quick to temper expectations about the pace of that return: "It's not all going to go away in 25 days either."
The unity shown by provinces and the private sector during the negotiations was, in Fadden's assessment, genuinely significant. It surprised the Americans, who expected Canada to fold. "I think Mr. Trump in particular believes in bargaining from a position of great strength that will cause his opponents to cave in," he says. "And I suspect they were somewhat surprised when it didn't work."
Defence Cannot Be Weaponized
One of Fadden's most pointed arguments concerns the temptation to link defence cooperation with trade retaliation. He rejects it directly. "Whether we like the United States today or next week or not, if there are North Korean or Chinese missiles susceptible of reaching North America, we need to deal with this together." Cutting back on defence spending as an act of political frustration would, in his view, antagonize the very part of the American administration that might eventually help resume negotiations. The two files must move in parallel, but they cannot be made to punish each other. "You separate the two, but you keep pushing on both."
Diversification: Real, But Not Tomorrow
Fadden is measured about Canada's ability to reduce its dependence on the United States. It is necessary. It is underway. It is not fast. "The government can create an environment that is conducive to diversification," he says. "If the private sector doesn't really push, take risks, and move forward on diversification, it's not going to work. So the public and the private sector here really have to work together." He names Japan as a neglected ally worth far more attention, and Indonesia as an emerging market with structural significance, particularly given its position at the Straits of Malacca. He also flags something the Americans apparently raised in negotiations that Canada refused: any suggestion that Washington would have a say in how and with whom Canada trades. "That's an unacceptable arrangement," Fadden says, "unless you're at war."
On China specifically, Fadden's framing is genuinely useful for investors and advisors trying to think through exposure. China is simultaneously a market, a trading partner, and an adversary in select domains. "We sort of think of China, or many people think of China, as a big market," he says. "Yes, we have a few problems, but in fact, there are some components of Chinese policy that are really, really objectionable." His prescription: be schizophrenic in the disciplined sense. Separate trade from national security, apply more rigorous due diligence to inbound investment, and screen not just above legal thresholds, but below them too. "Better to find out before than after you sign a deal."
Energy and the Long Horizon
Canada's energy assets are, in Fadden's view, a genuine geopolitical instrument, not just an economic one. The capacity to supply Germany with energy so that it never again depends on Russian oil and gas, or to guarantee Japan a reliable supply that insulates it from Chinese pressure, is a form of national security leverage that few countries can offer. "If we can guarantee them an energy supply," he says, "it significantly improves their capability to function in an environment where they're not constantly worried about what China might do." The direction of travel, he believes, is toward renewables and away from fossil fuels. Churchill Falls hydroelectricity, nuclear development in Ontario, and the broader EV trend all point in one direction.
National Unity: Below 50%
Asked directly about the risk of separatism, Fadden puts the probability beneath 50%, and makes the practical case without hedging. An independent Alberta would be landlocked, with roughly 20% of Canada's population. "I cannot see how this improves their situation," he says. The same logic applies to Quebec. When referendums move from political abstraction to lived consequence, the calculus shifts.
His closing message is direct: "This is not of our doing. We need to be patient and we need to hang together. And diversify, diversify, diversify, but mostly patience."
5 Key Takeaways for Advisors and Investors
1 The tariff disruption is sector-specific, not uniform. Fadden's industry-by-industry, day-by-day framing signals that blanket policy relief is not coming. Portfolios and client conversations should be calibrated to sector exposure rather than macro optimism about a single deal.
2 Canada's diversification pivot is credible but slow. The structural shift away from U.S. dependence is real and politically durable. But meaningful trade diversification toward Europe, Japan, and Southeast Asia is a medium-to-long-term project. Patience is not a platitude here. It is the strategy.
3 Canada's energy assets are a geopolitical currency. The ability to supply allied nations with stable, secure energy is a form of leverage that goes beyond commodity pricing. Investors with exposure to Canadian LNG, hydroelectricity, and nuclear build-out are positioned at an intersection of economics and geopolitics that is increasingly valuable.
4 Inbound foreign investment screening is tightening. The Investment Canada Act's national security provisions are being used more frequently and with broader scope. Fadden's call for greater transparency around screening criteria is a signal that the current regime is active and consequential for deal-making, particularly in IT, financial services, and resource extraction in sensitive regions.
5 The Canada-U.S. relationship remains the centre of gravity. Even in a diversification scenario, the United States does not become irrelevant as a trading partner. The relationship will resume. The question is when, under what political conditions, and with how much of Canada's leverage intact. Waiting until after the U.S. midterms is the working assumption. Advisors should plan for a multi-year normalization arc, not a near-term reset.
Footnotes:
1 Development, PodBean. "Canada's advantage: Defining our place on the global stage – Richard Fadden | FidelityConnects." 4 Sept. 2026, fidelitycanada.podbean.com/e/canadas-advantage-defining-our-place-on-the-global-stage-%e2%80%93-richard-fadden.
This editorial is based on the FidelityConnects podcast conversation between Pamela Ritchie and Richard Fadden, recorded August 24, 2025. The views expressed by Dick Fadden are his own and do not represent those of Fidelity Investments Canada ULC or its affiliates.
