‘A whack-a-mole response’: Is a Canada-U.S. sectoral trade deal imminent?

Rudyard Griffiths and Sean Speer discuss recent reports from the Globe and Mail of a potential Canada-U.S. trade deal that could come before the upcoming APEC summit. They discuss how this sectoral trade agreement would likely cover steel and aluminum through quota systems, rather than tariff elimination, while notably excluding major industries like autos and lumber. They explore potential concessions Canada may make to secure this trade deal, and question how these compromises align with Prime Minister Carney’s rhetoric about Canadian independence. You can listen to this episode on Amazon, Apple, and Spotify. Program Transcript This is an automated transcript. Please check against delivery. RUDYARD GRIFFITHS: Rumors of a limited trade deal with the United States in the works. What could it look like and what does it mean for Canada’s high stakes negotiations with Donald Trump and his White House? To help break it all down, I’m joined by Sean Speier, co founder and editor large. Hey, Sean. SEAN SPEER: Hey, Rudyard. How are you doing? RUDYARD GRIFFITHS: So what are we hearing in terms of again, these are rumors, reports out in the national press about a, it seems like, Sean, something sectoral, something not a big deal, but possibly a deal nonetheless. What was your takeaway from the reports? SEAN SPEER: Yeah, this is in keeping Rujard with things that you and I were hearing when we were in Ottawa a few weeks ago that even, even that week there was talk we might have an announcement from the prime minister and American representatives about some type of reprieve on the sectoral tariffs with respect to aluminum steel in the absence of some broader comprehensive agreement between the two countries. That announcement ultimately didn’t come to pass. But the Globe and Mail is reporting this morning that by the month’s end, as Prime Minister Trudeau, Prime Minister Carney Rather and President Trump meet at the APEC conference, we may have some kind of sectoral announcement on, on the margins of these broader meetings. And of course that will have big implications for those sectors, but continue to, to pose serious questions for much of the rest of the economy. RUDYARD GRIFFITHS: Yeah. So it sounds like what’s not in this deal are probably the industries that have borne the biggest brunt of tariffs to date. That’s autos and lumber. So what do you make of that, Shawn? It seems obviously that with steel we have a problem. We’ve got to solve that with the Americans. Aluminum we have a little more leverage because the Americans, I think, have very limited smelting capacity in the US because of decades of under investment and reliable on safe, secure Canadian aluminum. So what would this mean, Sean, to get maybe steel and aluminum down to a quota system and explain to us what that would mean? It seems again, if the leaks are to be believed, that this isn’t about getting rid of tariffs necessary necessarily and it’s not about going back to free trade. SEAN SPEER: Yeah. It would ostensibly permit some flow of Canadian exports into the American market at a lower or possibly zero rated tariff until it hit some threshold, a quota as you say, and then thereafter exports would be subject to a graduated tariff regime. But, but just on your, your bigger question, because I think it’s an important one and again reflects something that we’ve been hearing through our conversations in Ottawa, some of the private conversations that we’ve had with U.S. officials that autos and lumber seem to be bucking up against a closed door on the American side. You know, you’ll recall, for instance, Rudyard, in recent weeks that the Carney government quietly shelved ongoing litigation against U.S. tariffs on softwood. Howard Lutnick has been pretty clear that the US Plan with respect to autos is not a version of the auto pact. It is a version in which the US Becomes solely or at least dominant when it comes to continental auto production. And so obviously, until we know the facts, with speculation. But one can’t help but read in the reporting from the Globe and Mail that the Carney government has made possibly the excruciating decision to essentially forego trying to advance the case of Canada’s auto and lumber industries and secure the deal that it can in steel, aluminum. If so, that may be a reasonable trade off given the circumstances, but that will not be comforting to those affected by what amounts to the normalization of ongoing tariffs for autos and lumber. RUDYARD GRIFFITHS: Yeah, and before we get to the quid quo pro, because I want to talk about this because there’s nothing in these reports that suggest, well, what have we had to give up in return? I’ve got some ideas, but before we get to that, I just want to get to the bigger picture here, Sean. I mean, this seems like kind of small beer, right? Like we’re not talking even about a comprehensive resolution of the various sectoral tariffs. We’re not talking about a grand bargain, which is what again, the prime minister campaigned upon on the election was a security and economic agreement with the United States, ostensibly to provide tariff free access for Canadian goods into the U.S. we seem a long, long way from Kansas, so to speak. What’s happened here? SEAN SPEER: Yeah, my fear, Rudyard, again, without knowing all of the intricacies of what’s gone on between the two sides, you worry that this is a case of whack a mole where we try to get to the table on the part of Canada and negotiate some type of comprehensive settlement to these trade issues and instead the US Raises tariffs in a particular industry. We have to divert our attention to trying to address that problem. We finally do in exchange for, as you say, some kind of compromises on Canada’s part. And on and on we go with the with a comprehensive deal further and further in the distance. A whack a mole response to the Trump administration’s protectionism may in the short term help those sectors that would that it would otherwise be affected by its tariffs, but it continues to leave the underlying uncertainty looming over Canada’s economy. And at this point, Rudrad, as we’ve talked a lot, the average tariff on Canadian exports entering the US Market isn’t that high. I think one can persuasively argue that the uncertainty is having a much greater effect on investment and economic output in Canada than the tariffs are. And so I worry a bit that in a way that the Carney government understandably is maybe taking the short term win here, but in so doing validating a kind of modus operandi on the part of the Trump administration that will continue to do harm to Canada’s economy. RUDYARD GRIFFITHS: Yeah. So key point, key takeaway for listeners and viewers is that Kuzma looms out there, right? These sectoral deals, whatever they are, do nothing to prevent the inevitable, which is a no doubt sweeping renegotiation of Kuzma, probably on fundamentally different terms, terms that are not those that we’ve experienced in the past and probably will not look like anything approaching the previous two free trade deals with the Americans. Let’s talk about the quid quo pro though, Sean, because I, I don’t think the Americans are just gonna give us relief on aluminum and steel for the sake of Mark Carney’s winning smile or handshake. What do you think could be the concessions that we’ve had to put on the table here to secure these agreements? Any idea what that might be? I mean, maybe it’s too premature to think that supply management, for instance, is up for grabs, but I don’t know, are there some other low hanging fruit there, maybe that the Trump administration wanted to pluck out of the proverbial basket of Mark Carney’s goodies going into the big budget that’s coming down on November 4th. SEAN SPEER: Well, before we get to some of those, there are the ones we know about. We know, for instance, that this is involved giving up the digital services tax. It’s involved giving up retaliatory tariffs. It’s involved giving up continuing to litigate US Protectionism vis a vis Canadian softwood lumber exports. And so we’ve already made major concessions to get what, as you say, are rather narrow and technical compromises on the part of the Trump administration. And then there is this whole other universe, as you say, of the unknown. And we’ve talked a lot about supply management on this podcast. You’ve made the case, and I think have been been affirmed by the facts that we’re going to see some signal on participation in the Golden Dome and a deepening integration of Canada, U.S. continental defense. What’s Interesting. In the Globe and Mail story we’re referring to here in our conversation, Rudyard, there’s some references to energy. Are we going to commit ourselves, for instance, to the US Continuing to have kind of first rated refusal as a customer? And if so, does that put an end to aspirations around building a pipeline to Canada’s to West Coast? One of the most frustrating things of all of these conversations for the past several weeks is that we’re left speculating because of the Prime Minister’s approach, at least thus far, has been to mostly keep Canadians in the dark on the the trade offs that him and his government are grappling with as they seek to bring some relief to Canada’s economy. RUDYARD GRIFFITHS: Yeah, I’ll just end with Sean. It’s just, it’s kind of delicious. And you can see why it’s necessary that if you are doing deals, those deals are furthering integration. But in furthering integration, they run counter to a political narrative that the Prime Minister initiated during the election. We knew it as elbows up, but then it’s continued in a variety of shapes and forms since then about talking about Canadian independence and sovereignty and again framing of the budget as a major investment in Canada’s resiliency and its ability to stand on its own two feet. And all that makes sense. But if we’re talking, for instance, about selling energy to the Americans through a new Keystone XL pipeline, back on track, well, we’re selling that energy at a discount versus what it would sell for at Tidewater if we could take it to the B.C. coast. If we’re going into the Golden Dome, we’re actually integrating our security interdependence, you might just say outright dependence on the Americans. So I leave it with you. Final question. I mean, how does one square the circle here between the reality of these deals, especially if we’re going to be chunking this in little bite sized pieces as opposed and waiting probably until Kuzma, until there’s something more comprehensive. How do you square with voters, with the public, with a Canadian population that’s still really pissed off with the Americans that you’re effectively orienting trade north, south, not east, west, you are going deeper into the American security umbrella for the continent. You can go on and on and on through all these different industries, all these different sectors. I’m just feeling like a little bit of case of whiplash here in terms of the rhetoric versus the reality. Understanding that maybe the reality is the reality. I get it. But the rhetoric certainly has not adjusted yet. SEAN SPEER: I don’t have a substantive answer to your question, because I don’t know how one reconciles the kind of cognitive dissonance between, on one hand, refusing to travel to the US as a kind of personal expression of one’s aversion to the Trump administration, and on the other hand, supporting what I think have to be understood as a series of compromises. They may be compromises towards the proper end for Canada, but they have to be seen as they are. The more practical way. To answer your question, though, Rudyard, is something we. We talked a bit about during our pub tour, and that I think is starting to find more momentum in the world of political punditry in Canada, and that is the prospect of. Of an election sooner rather than later. One way for the Carney government to create some distance between having to make these compromises and eventually presenting themselves to Canadian voters would be to have that election happen before a deal is reached. And in that sense, there is speculation, Rudyard, from well placed political observers, that local Liberal riding associations are starting to ramp up. We had an announcement this week from the Conservatives about party nominations. You know, one gets the sense that. That the notion that this minority Parliament is for all intents and purposes a majority, one that has a long shelf life, might not be proven, might be proven wrong. And what we’ve been talking about here may be the impetus for the Prime Minister and his team. Yeah. RUDYARD GRIFFITHS: And just to clarify, when Sean says a deal, he doesn’t mean this sectoral deal. We’re talking about Kuzma and the advantages of having an election before Kuzma where the Prime Minister might convince himself that he has a good shot at a majority. So he makes probably what would be a very difficult deal politically with the Americans, but he has the chance to survive politically because he has a majority. He’s got four years to show that that was the right deal to make. And I think you should. Sean and I have sympathy for the Prime Minister. And if it was Pierre Poliev who’d won the election with a minority, we’d have sympathy for him, too. It’s very difficult for any political leader of a minority government right now, probably, to do the things that have to be done in order to get some kind of deal out of this administration in the next 18 to 20 to 24 months. Is that right? SEAN SPEER: Yeah, precisely. And as I say, you were more bullish on this hypothesis of an election. You’ve gradually persuaded me that for a whole host of reasons, it arguably makes sense for the government. And what’s fascinating, Rudyard, is you’re now starting to see that speculation pop up in other places that when you consider the complexity of the trade negotiations and the compromises, that they’ll necessarily involve a deteriorating economy, probably one that is in recession or close to recession. This may be the high point for the prime minister. And in that sense, the temptation to go back into to the polls and try to secure that elusive majority may be too hard for him to resist. Yeah. RUDYARD GRIFFITHS: Well, we will continue to follow it all here at the Hub each and every step along the way towards the November 4 budget, a key test and maybe some big political reverberations coming out of that. Sean Speer, thanks for coming on the program. SEAN SPEER: Yeah, great to talk to you Rudyard. RUDYARD GRIFFITHS: Ladies and gentlemen. Thanks for tuning in. We’ll do this again for you next time. More Hub hits on the big economic and political stories driving the public conversation.