America Is Changing the World — But Is America Ready for the Consequences?

18th September 2026

Something rather important is happening around the United States, and it may be bigger than the individual tariff announcements, political arguments or daily movements in the oil price.

America is changing the way it deals with the rest of the world.

The Trump administration's "America First" approach is using tariffs, trade restrictions and pressure on other countries to try to reshape international trade in America's interests. But the rest of the world is not standing still.

Canada, America's closest trading partner, is already looking for ways to reduce its dependence on the United States. Europe is talking about stronger economic and strategic relationships with Canada. Countries elsewhere are looking at their own supply chains and markets.

At the same time, the war involving Iran has produced another shock, this time through energy.

The question is whether the average American household can see the bigger picture, or whether these developments are being experienced simply as another rise in the cost of filling the car, buying food or paying the mortgage.

Canada is a particularly important example
The relationship between the United States and Canada has been extraordinarily close for generations. Companies on both sides of the border have built supply chains around the assumption that goods can move relatively easily between the two countries.

That assumption is now being tested.

The United States has imposed 50% tariffs on some $20 billion of Canadian goods, while Canada's retaliatory tariffs on US goods range from 15% to 50%. The dispute is already causing difficulties for industries in American states which depend heavily on Canadian trade.

Canadian consumers and businesses are also being encouraged to look elsewhere.

Prime Minister Mark Carney has been particularly active in developing closer relationships with Europe. Speaking to the European Parliament this week, he backed greater Canada-EU cooperation in areas including critical minerals, artificial intelligence, defence and energy security.

The European Commission has even proposed a new form of "associate membership" for Canada, although the idea is still at an early stage and its precise form has yet to be established.

This matters because trade relationships are not necessarily switched back on like a light after being switched off.

Once companies find alternative suppliers, customers and investment opportunities, some of those relationships can become permanent.

Tariffs have a price
The theory behind tariffs is relatively simple. Make imported goods more expensive and American producers may become more competitive.

But there is another side. If an American manufacturer buys Canadian steel, components, timber or other materials, a tariff raises its costs. The company then has to decide whether to absorb the cost, reduce its profit or pass some of it on to customers.

That is one reason tariffs can become an inflationary force.

The latest American inflation figures provide some evidence of a wider problem. Consumer prices rose 3.4% in the year to August. Energy prices were up 16.3%, while petrol prices were 27.4% higher than a year earlier.

That does not mean tariffs caused all of the inflation. They did not.

But they are arriving at a particularly awkward time.

Then came Iran
The Middle East has added another layer of uncertainty. The conflict involving Iran has pushed oil prices sharply higher and increased the cost of gasoline, diesel and heating oil. US inflation rose 0.4% in August alone, with gasoline accounting for more than one-third of the monthly increase.

For an ordinary household, the distinction between the causes may not matter very much.

If petrol costs more, groceries become more expensive because transport costs rise and household budgets are squeezed, the economic effect is the same.

And energy costs can spread through almost everything.

A delivery company pays more for diesel. A farmer pays more for fuel and fertiliser. A factory pays more for energy and transport. A supermarket pays more to move food around the country.

Eventually some of those costs reach the consumer.

The interest-rate problem
This creates a particularly awkward problem for the Federal Reserve. When inflation is being pushed up by strong domestic demand, higher interest rates can help cool the economy.

But what happens when inflation is being pushed upwards by tariffs and an international energy shock?

Higher interest rates do not produce more oil or make Canadian goods cheaper. They can, however, make mortgages, business borrowing and other forms of credit more expensive.

That is already becoming visible. US mortgage rates have moved towards 7%, while the latest reports describe rising petrol prices and renewed inflationary pressure as major concerns for American households.

The danger is that households can therefore be squeezed from both directions: higher prices on one side and more expensive borrowing on the other.

Is America losing something it cannot easily replace?
The United States remains an extraordinarily powerful economy. It has a huge domestic market, enormous financial influence, advanced technology, major energy resources and some of the world's largest companies.

There is no suggestion that America is suddenly becoming economically isolated.

But there is a difference between being powerful and being able to dictate how the rest of the world behaves.

Other countries have choices.

Canada can seek more trade with Europe and Asia. Europe can develop alternative sources of energy and critical minerals. Companies can diversify their supply chains. Countries can reduce their dependence on any single market.

The more this happens, the more the world could gradually become less dependent on the United States.

That may be one of the most important unintended consequences of the current American approach.

And what does the ordinary American see?
Probably not a geopolitical revolution. They see the price at the petrol station. They see the grocery bill. They see a mortgage rate approaching 7%. They see whether their wages are keeping up with prices.

That is why the next few months could be important. The economic consequences of tariffs and the Iran conflict will eventually be judged not by economists but by millions of households deciding whether they can afford the same lifestyle they had a year ago.

America may be trying to reshape the world economy.

The interesting question is whether the world is simultaneously reshaping itself around America.

If Canada succeeds in developing stronger European and Asian relationships, if companies permanently diversify their supply chains and if energy insecurity continues to push prices higher, the result could be a world in which the United States remains enormously powerful but is no longer quite as central to international trade as it once was.

And that would be a change felt far beyond Washington.

It could eventually be felt at the petrol pump, in the supermarket and around the kitchen table.