ALL dishes on the lunch menu at La Cantine du Centre-Ville, a pop-up restaurant near Parliament Hill in Ottawa, are made from ingredients that annoy Donald Trump. The Mini-Quiche aux Trois Fromages uses Canadian eggs, milk, cheese and chicken “bacon”; the Galette de Saucisse de Dinde is made with turkey. The Cantine pops up every year to publicise Canadian dairy, poultry and eggs, which are protected by import quotas and tariffs. This year’s version, on June 12th, was festive, with banners flapping under a blue sky and diners enjoying free food. But the people wearing “Ask me, I’m a farmer” T-shirts are worried.

They fear that they will be the next casualties in the trade war that Mr Trump is waging against the United States’ allies. With good reason. The 25% tariff the United States slapped on steel this month, and the 10% levy on aluminium, apply to imports from Canada as well as from Mexico and Europe. Canada, like the others, will retaliate by raising tariffs on goods, like toilet paper and lawnmowers, made in regions that matter politically to Mr Trump. The renegotiation that Mr Trump demanded of the North American Free-Trade Agreement (NAFTA), which includes the United States, Mexico and Canada, drags on. The economy is already suffering. To avoid further damage, Canada may have to stop coddling farmers.

Few economies are more vulnerable to Mr Trump’s onslaught than Canada’s. Two-thirds of its trade is with its southern neighbour. The steel and aluminium tariffs affect industries that employ 30,000 Canadians. The C.D. Howe Institute, a think-tank, predicts that the barriers will cost 6,000 jobs and reduce Canada’s GDP by 0.11%. If Mr Trump carries out his threat to impose a 25% tariff on cars the damage will be far greater. Canada’s vehicle industry employs about 130,000 people and ships 85% of its wares to the United States.

In the face of such threats the value of Canada’s dollar has fallen from 80 cents in mid-April to 77 cents. Economists had expected business investment to take over as the main source of growth from spending by consumers, who have record levels of debt. But investors, unsure they will be able to continue exporting freely to the United States, are holding back. The central bank cited this as one reason it did not raise interest rates on May 30th.

At first, Canada’s prime minister, Justin Trudeau, had hoped to win leniency by charming the volatile American president. That tactic failed in spectacular fashion after the G7 summit on June 8th and 9th hosted by Mr Trudeau in La Malbaie, Quebec. When Mr Trudeau defended Canada’s riposte to the steel and aluminium tariffs in a press conference at the end of the summit, Mr Trump tweeted that he was “very dishonest & weak” and accused him of making “false statements”. Canada gamely argues that the United States would also be hurt in a trade war. Canada is the biggest destination for exports from 36 of the 50 American states. Bilateral trade in goods and services is immense: $674bn in 2017. It is also, despite what Mr Trump says, balanced. In 2017 the United States had a small surplus with Canada, of $8.4bn. Yet Mr Trudeau’s bargaining position is weak. “We absolutely need them, but they could live without us,” says Philip Cross, an economist. Mr Trudeau must pick his battles. In the NAFTA negotiations Canada and Mexico are resisting an American demand for a “sunset clause”, which would require re-approval of the accord every five years and thus discourage long-term investment. Mr Trudeau cancelled a meeting with Mr Trump last month because the Americans made acceptance of a sunset clause a precondition. Mr Trudeau is also defending NAFTA’s dispute-settlement rules while trying to roll back the steel and aluminium tariffs and forestall new ones on vehicles.

Playing chicken

But to stop investment and jobs from moving south, “Canada is going to have to make some concessions,” says Laura Dawson, head of the Canada Institute at the Woodrow Wilson Centre in Washington, DC. Among them might be raising the threshold at which Canada taxes purchases of American goods from C$20 to around C$1,000, the American level. Canada might consent to more onerous conditions for a vehicle to be imported duty-free within NAFTA, including on wages and the amount of North American content.

To appease Mr Trump, Mr Trudeau may have to pamper farmers less, which is a good idea anyway but politically perilous. Canada’s system of supply management, which sets limits on the production of dairy, poultry and eggs, has long irritated the United States (and should anger Canadians, who pay more for food than they need to). Canada subjects imports of those products beyond a ceiling to punishing tariffs (298% in the case of butter). Mr Trump has been angry about this since he met dairy farmers from Wisconsin in April 2017. When he repudiated by tweet the agreement with other G7 countries he blamed in part Canada’s “massive tariffs” on American farmers. Pierre Lampron, head of the Dairy Farmers of Canada, says Mr Trump is trying to wipe out Canadian farmers.

Canada points out that American farm subsidies almost match its own (see chart). So far, such arguments have not moved Mr Trump. Mr Trudeau has already indicated that Canada has “flexibility” on dairy, the biggest of the protected sectors. In negotiations with other trade partners, it has offered a bit more access to those sectors and compensated farmers. Canadian negotiators have reportedly offered similar concessions to the United States, which said they were insufficient. Marcel Laviolette, an egg producer from a village near Ottawa, expects Canada to concede more. Although most of the discussion has been about dairy, he fears that poultry and egg producers will also lose protection. “If that train goes by, it’s going to hit us all,” he says.