"And the rockets' red glare, the bombs bursting in air,
Gave proof through the night that our flag was still there;
be it in victory, be it in defeat our value will preserve it;
we'll continue the fight with courage and gallantry
so that our star spangled banner will continue to wave
O'er the land of the free and the home of the brave"
-"The Fall of Fort M'Henry", later adapted to the American National Anthem.
The consequences of the War of 1814 have been underestimated. While it's true that it ended with minimal territorial changes, its effects are still felt today. Not in a world changing scale like the effects of the Napoleonic Wars, but in the culture, national identity and mindset of several nations. To the British, it only reinforced the Pax Brittanica. To the Americans, it was a second war of independence, a war they lost but through which they fought with valor. To the Canadians, it was the start of Canada as a separate being and would go on to have consequences in the formation of the Confederation and the Northern Defense during the First Great War.
The year is 1812. The British are forcefully conscripting American sailors and putting barriers into American trade. They, as the most powerful nation in the world, don't care nor respect the American government, which is widely seen as a loose union of rebellious British Americans with a joke army and a navy that can't even float. However, there is something going in the United States.
The Americans were eager to "finish" the Revolutionary War and "liberate" the rest of British North America, that is, the actual Canada. They also had ambitions over Spanish Florida, and had the perfect chance to attack it as the Spanish Empire seemed to be collapsing under the Latin American Revolutions. This jingoism, supported by a new generation of young people who didn't live during neither the Revolutionary War nor its aftermath, got the "War Hawks" into office.
Also, the native tribes in the Great Lakes were being gathered by a charismatic leader, Tecumseh, and the Americans thought it was a British conspiracy against American westward expansion. The creation of the British Militias (which were sent to Colombia) only ignited the debate, as some people considered that if there was a conspiracy they wouldn't be sending soldiers to other countries, but yet others thought that it was a plot to gain experienced soldiers and wanted to attack right then. The government would finally create its own voluntary regiments, the American Militias, and sent them to Colombia as well, though it was more because of Miranda's friendship with Madison than a belief in some British plot.
There was a fierce debate between those who supported the war and those against it. The Cabinet finally decided to declare war, but then news arrived from Europe. The British forced conscription of American sailors had ended, thus letting the US with no casus belli. Moreover, trade and loans to the new republics in the Americans had become a lucrative enterprise, and people were afraid it would end if a war started. Warmongers calmed after that, but the debate continued.
As 1813 passed by, Madison felt more and more pressed by the War Hawks, who wanted to annex British North America in what they considered "a simple question of marching". They were arguing that it was better to strike while Britain was busy with Napoleon, and with the only significant British force, the British Militias, deep in the jungles of Peru.
In late 1813 an important incident happened as an American ship was sunk by the Royal Navy. The captain of the British vessels was looking for some deserters who has mutinied, and demanded the right to inspection the American ship. When it didn't allow the captain, he ordered fire, causing heavy damage to the old ship, which sank immediately. This caused outrage all around the United States, who wanted war and wanted it as soon as possible. President Madison finally obliged, thinking that war was inevitable and that if the two countries had to be at war, it was best to do so while the British were fighting Napoleon. In the thirteen of January, 1814 American troops moved into Canada. The war had started.
As the first battles of the war were being fought, terrible news arrived from Europe. Napoleon was death, and with his death the Napoleonic Wars were over as well. This caused panic in the American leadership, since most of the staff though a victory was only possible if Britain wasn't able to respond effectively. The blow to morale was huge, as suddenly the American troops were afraid of having to face the entire might of the British Empire.
The truth was that the British didn't care that much about the war, but they decided that being defeated by a bunch of disloyal colonials would be a huge blow to the prestige they had just earned. Over thirty thousand troops were transported from the Iberian Peninsula to Canada then.
Meanwhile, and even when it's role in the war was almost non-existent, Colombia was facing a dilemma. Both the British militias and the American militias were fighting under Colombian banners, but after the war started the governments requested their return. Finally, Colombia decided to get in the good side of Perfidious Albion and sent the British militias to Canada while keeping the American militias there. The British militias were experienced troops, and were commanded by experienced officers who were sent to Canada as well.
The Colombian decision, sometimes called a prelude to the Colombian foreign police, outraged the United States. The Colombians used the fact that the American militias were volunteers, and thus were "submitted" to Colombia until the war was over, while in contrast the British militias were normal soldiers sent to help by the government in London, and thus still had to answer to it.
The first phases of the war were marked by American victories at land, but the arrival of both the British militias and even more experienced troops from the Iberian Peninsula soon caused this to change. The British, though outmanned, had managed to increase their numbers by recruiting Native Americans and people loyal to the British crown in the United States.
The war is also important in the development of the Canadian national identity. French-Canadians and Anglo-Canadians had finally a common enemy to fight, and the numerous victories helped to unite the country. It also created a national identity in the United States, as they became less of a loose confederation and more of a true Union.
In the seas, the Royal Navy considered the American Navy easy pickings. A good fraction of the RN was needed to blockade the entire American coast, but once it was done, the Royal Navy started to actively chase the Americans, who mostly fled trying to evade engagement with it. Still, the Royal Navy lived perhaps its finest hour in the Americas as the American Navy was crushed in battle after battle, disrupting the American economy to almost the point of collapse. The situation was so bad that American ships fled in terror at the sight of the British, and the morale was on the grounds.
The situation was not better in land, as the British defense had expulsed the Americans from British North America and took control of some disputed areas in what was then Northern Maine. The main bulk of the fight happened in the interior, though, in the zone around the Big Lakes where the Americans and British clashed several times. The British slowly started to gain the upper hand, invading upper New York, taking Miching and Detroit. The British offensive towards New York itself was stopped, but the United Kingdom had managed to get control of the Great Lakes nonetheless.
It took a long time, however, and the British had grown tired of the war. They adopted a more aggressive strategy, staging invasion all through the United States. Washington D.C. fell and was occupied by the British around the middle of 1816, and was burnt down. With the Northern United States threatened, and having accumulated defeat after defeat, morale reached bottom down and finally, even when the government had managed to flee, the Americans surrendered.
In the subsequent Treaty of Gent, the United States lost the disputed territories (and had to recognize British ownership over them), had to drop their claims in Michigan, Upper Illinois (which promptly joined the Empire) and were forced to pay heavy reparations. Just like with France, the American Navy had to be disbanded and the areas near the border with British North America demilitarized. Unlike France, those demands were not really enforceable, both due to the massive size of the United States, the distances and because the US would eventually become more populated and industrialized than British North America. Other British demands like a Native American state or control over the Great Lakes were just impossible, and even the American government in surrender told them that.
Peace finally came, but the cost was great. The United States were in shambles, bankrupted and with their army and navy all but destroyed. Their losses in both casualties and territories weren't high, but the defeat had profound psychological effects in the young nation. The war it's even called the American transition from childhood to teenager years, just like the American Civil War is defined as the transition from teenager years to early adulthood. The defeat finally joined the nation together; as the Americans thought that a re-conquest by the UK was likely, even though it was, in fact, impossible.
The American anthem, the Star Spangled Banner, was written during this time as the poem "Fall of Fort M'Henry". Its lyrics were about hope in times of war, union in times of hardship and dignity in the face of defeat. It quickly became a symbol of national pride, not for victory, but for the union and bravery the Americans demonstrated after clashing with the most powerful country in the world for second time.
Another consequence of the war was the change of the system of how officers were chosen, the system of militias (even then, the American army remained tiny) and a reformation of the navy. The government also started to focus on westward expansion, posing their hungry eyes in the territories of Mexico. Nonetheless, the United States held a grudge against Britain for a long time, being especially envious of their position as the dominant world power, their control of vast territories they wanted to "liberate" and what they defined as arrogance. This would have important consequences in the future, especially around the time of the First Great War.
Also of note is the fact that the final American humiliation came after the war was over and the Treaty of Peace signed, as Major General Andrew Jackson tried to attack a British army which had landed in New Orleans, only for him to lost and the city be occupied by British forces. This disastrous defeat had almost no meaning overall, as the city was left shortly after, but it's an interesting fact nonetheless.