World Economic Forum

Kevin Lynch and Paul Deegan

January 28, 2025

The annual meeting of political and financial elites at the World Economic Forum in Davos may be out of vogue in today’s increasingly populist world, but its annual Global Risks Report is sobering.

The risks in today’s polarized and unstable world seem more complex and urgent than ever before, and governments and the post-war multilateral institutions seem ill-equipped to deal with both the known threats and the ‘unknown unknowns’, as the late Secretary of Defense Donald Rumsfeld would put it.

The report captures insights from more than 900 experts worldwide, and it is worth noting this global survey was completed last fall, not long after the U.S. election. Overall, optimism is down as conflicts, extreme weather events, political polarization, and the spread of false or misleading information are all on the rise. In terms of immediate risks for 2025, state-based armed conflict tops the list of risks by a healthy margin.

Looking out two years, the Global Risks report details the top five global risks in ranked order.

They are:

1. Misinformation and disinformation
2. Extreme weather events
3. State-based armed conflict
4. Societal polarization
5. Cyber espionage and cyber warfare

The broader global concern it highlights is the danger of escalating tariffs and other trade-related protectionism, which would accelerate broader decoupling between the United States and China, and among their respective allies. This could lead to a pattern of progressively rolling protectionism spreading worldwide, at different speeds in different sectors, and going well- beyond bilateral tit-for-tat tariffs. The result would be weaker growth, fewer jobs, and lower income everywhere, including the United States and Canada.

The report notes Donald Trump intends to implement higher tariffs on imports from all trading partners, and has singled out China, Mexico and Canada as early targets. Looking at the vulnerability of 173 countries to restrictive U.S. trade measures, South Korea, China, Japan and Canada top the list. Not great news for our export-dependent economy, with Trump’s threat of tariffs is now far and away the number one clear and present risk to Canadians.

Despite Trump’s tariff threats now occupying the top of the risk pyramid for many countries, the other key risks identified in the WEF report have not diminished. If anything, the risk of misinformation and disinformation has actually increased as President Trump and Elon Musk spew misleading propaganda and tactical fabulism (a trade deficit is a subsidy, for instance) and major American tech platforms dismantle content oversight in favour of free speech no matter how misleading or vile it might be. So, too, will social polarization rise, and not only in the United States, as the Trump agenda unfolds – social media echoes of it can be heard in other countries.

How should we react to these risks? Passivity is not the answer, as lessons from our recent history indicate. Lester Pearson stood up to a bullying President Lyndon Johnson who did not like Canada’s views on the Vietnam War. Brian Mulroney confronted Margaret Thatcher and Ronald Reagan on their approach to apartheid in South Africa and persuaded them of its injustice, madness and unsustainability. Mulroney stared down James Baker at the 11^th hour and secured the FTA. Jean Chrétien refused to go along with George Bush on Iraq and was proved right.

But what about today and Trump’s denigrating bullying and economic threats? Why not a mass advertising campaign to reach the MAGA faithful on FOX News, the Wall Street Journal and the Super Bowl and flood the zone with facts about the U.S.-Canada relationship. Why not announce plans to expedite shipping LNG to Europe and Japan and oil to Asia? Why not reward companies that build new foreign markets through the tax system with credits? As part of our retaliation to Trump’s tariffs, why not targeted export taxes on Canadian exports where American importers have few alternative sources of supply to maximize the U.S. pain, and combine this with government support for these sectors? Why not coordinate tariff retaliation with like-minded Western countries rather than allow Trump to pick countries off, one-by-one? It is time to be bold and inventive.

Steely leadership is also needed. In 1982, Canada’s then-trade minister Ed Lumley, a pro-business rarity in Pierre Trudeau’s cabinet, met the Japanese trade juggernaut head on with a ‘border action’ which slowed down the entry of Japanese cars. The Japanese blinked first and two years later, Honda announced plans to build a factory in Alliston with Toyota, following suit a year later in Cambridge.

As we careen through a Liberal leadership campaign and towards a federal election, the ballot question is no longer the carbon tax but which federal leader can best de-risk us from the threat of Trump’s tariffs and annexation so we can get on with growing Canada for Canadians.

Kevin Lynch was Clerk of the Privy Council and vice chair of BMO Financial Group.

Paul Deegan is CEO of Deegan Public Strategies and was an executive at BMO and CN.