The United States’ trade war against its closest ally has escalated again, with the Trump administration invoking Section 338 of a notorious 1930 law to impose 50% tariffs on a wide range of Canadian imports.

The provision, which allows duties of up to 50% on countries deemed to discriminate against American commerce, has sat essentially unused since the Smoot-Hawley era — a chapter of history whose retaliatory tariff walls are widely blamed for strangling global trade and deepening the Great Depression.

The sticking points in the dispute are both economic and cultural, with Quebec’s French-language laws even coming under attack. Canadian Prime Minister Mark Carney is being praised for his response, while Trump has been criticized, even by members of his own party.

The assessment laid out in Fortune’s CEO Daily newsletter is that this is not a war that America, or American business, is likely to win. Here is why.

Trump’s options are limited

There is a reason the latest measure only impacts 5% of Canadian imports. The Supreme Court has already decided that the president cannot invoke emergency powers to impose tariffs. Walmart is now using its tariff refund to lower prices. The Iran war has increased demand for Canada’s oil, aluminum and fertilizer; Saskatchewan, known as the Saudi Arabia of potash, accounts for more than a third of global supply. Canada already ships more crude to U.S. refineries than any other country — roughly four million barrels a day, most of it moving by pipeline.

Trump’s priority is to lower costs for inflation-weary consumers ahead of the midterms — he just suspended tariffs on imports of up to 300,000 metric tons of ground beef to bring cheaper foreign meat into the market. As Eurasia Group founder Ian Bremmer said over the weekend: “There’s still time to walk this back … Trump not taking a public victory lap makes last-minute resumption of talks possible.”

Canada is becoming more resilient

The Canadian government is diversifying trade, letting in companies such as Chinese EV giant BYD, and can borrow money at 4.2% for 30 years while comparable U.S. Treasury yields have risen to 5.3% — a reversal of the decades in which Canada routinely paid more to borrow than its southern neighbor.

The biggest shift may be psychological. Canadians now see the U.S. as a greater threat to their security than Russia or China, according to a survey by Nanos Research Group. “Canadian opinion has turned largely on the direct attacks from Donald Trump,” founder and chief data scientist Nik Nanos said. “At the same time, a very strong majority of Canadians want to have a trade deal.”

Attacks have consolidated support for Carney

Just as the Luftwaffe’s bombing of London during the Blitz of 1940 strengthened British resolve in World War II, Washington’s repeated attacks on Canada have consolidated support for Prime Minister Mark Carney, who ran central banks for more than a decade — first the Bank of Canada, then the Bank of England — before turning to electoral politics. Carney’s approval rating now hovers around 60%, while Trump’s approval rating has sunk to around 35%. From his fiery speech in Davos to his comments this weekend, the prime minister has turned each assault into a rallying cry.

“America is trying to break us so that they can own us,” Carney said at a press conference on Saturday. “That will never, ever happen.”

A “dumb trade war”

From Florida tourism operators to automakers with integrated supply chains, most U.S. companies view Canada as a partner in prosperity. The Canadian American Business Council estimates that a successful renegotiation of the United States-Mexico-Canada Agreement — the 2020 successor to NAFTA, which is due for its scheduled joint review this year — could create an additional 137,000 U.S. jobs and 98,000 Canadian jobs next year. Business Roundtable CEO Joshua Bolten said in a statement that “new tariffs and retaliation risk raising costs for American businesses and families.”

Canada used to be America’s best friend. Despite Trump’s claims, the world’s longest undefended border is not a pain point for illegal immigration, drug traffic or security threats — with bilateral cooperation, it is the opposite. The economies remain intertwined: Canada is America’s second-largest trading partner after Mexico, with two-way goods trade running above $700 billion a year, and the Gordie Howe International Bridge between Detroit and Windsor officially opened just days before the latest rift. U.S. officials were not invited.

As one Canadian CEO put it recently: “In a dumb trade war, you eventually work out the trade but you never regain the trust.”