Mark Carney, Canadian Prime Minister:
Our government understood before many that America would transform all of its commercial relationships, that it would put a series of tariffs on its closest allies and use economic integration as a weapon. We recognize that sometimes its signature was written in pencil.
Geoff Bennett:
The breakdown threatens to deepen the economic fallout on both sides of the border and raises new questions about the future of North American trade.
For a view from Canada now, we’re joined by Peter Armstrong, senior business correspondent for the CBC.
Thank you for being with us.
Peter Armstrong, CBC Senior Business Reporter:
Thanks for having me, Geoff.
Geoff Bennett:
And President Trump, as you well know, has long argued that Canada takes advantage of the U.S. when it comes to trade. What does the data actually show?
Peter Armstrong:
Yes, I mean, it it’s an argument that really infuriates Canadians, because, for the most part, that trade deficit that the U.S. runs is only because America decided to buy more safe, friendly, next-door-to-them oil from Canada.
Were it not for oil, there wouldn’t be a trade deficit at all. And, in fact, if you look at it and include services, so everything from consulting to software to digital streaming, that trade deficit shrinks to basically nothing. I think it’s $40 billion at that point.
So the argument that the trade deficit is what’s behind all this, economists will tell you, I run a trade deficit with my dentist. It doesn’t make him a bad guy that’s trying to rip me off. It means I use the services he provides and he spends my money somewhere else in my community, and it all kind of works out well.
Geoff Bennett:
When the president writes, “We don’t need Canada, they need us,” economically, how accurate is that? Is Canada more vulnerable in this trade war than the U.S.?
Peter Armstrong:
I mean, yes, Canada is more vulnerable, but that doesn’t mean this isn’t being felt already by American producers, American businesses, American households, and consumers, right?
Like, just take the auto industry. The automakers in North America have paid out something to the tune of $110 billion in the last 18 months alone in tariffs and costs due to the disruptions. And we’ve seen a pretty significant drop-off in U.S. made cars coming to Canada. Canada is the number one export market for everything in the United States.
It’s the number one export market for cars as well. And a 27 percent drop-off has meant, like, I think it’s a $7 billion loss for U.S. automakers. And you look at what else do they need, we provide an awful lot of the oil that gets turned into gasoline for American consumers, right, 25 percent of refinery throughput.
Put another way, the oil that goes into refinery to become gasoline, 25 percent of that comes from Canada. And so it’s been this really helpful, really reliable, really friendly relationship for 60, 70 years. And the undoing of that, if that’s in fact the goal is to undo the economic ties between these two countries, is not going to come without pain for people on both sides of the border.
Geoff Bennett:
And that remarkable phrase from the prime minister that America’s signature was written in pencil, given the depth of the U.S.-Canada relationship, what does it say when a Canadian prime minister is now publicly questioning whether the U.S. can be relied upon?
Peter Armstrong:
Well, a couple of things.
You have to take into account the ferocious anger and sense of betrayal that I think a lot of Canadians are feeling right now. And it’s not just this round of tariffs. It’s not just the last round of tariffs, and it’s not just the constant berating of, we’re going to turn Canada into the 51st state, or that they refer to the prime minister as governor, and these other sort of just disrespectful ways of treating your closest trading partner.
But the cumulative effect of all of that really has weight. And then you have to think about the fact that what we’re undoing here is the USMCA agreement that was signed into effect during Trump’s last term. It’s not like this was a deal that was made 40 years ago by some other — a Democrat or somebody that he disagrees with.
This was made by Donald Trump, by Jamieson Greer, by American officials that are still part of this administration. And they said at the time this is the greatest trade deal in history and it was going to benefit everybody on both sides of the border.
And then literally on day one of the administration, they came in and said, well, that deal’s no good anymore. We want to restart everything. So you do have to wonder how much an agreement that we might have made would have been worth and whether at the last minute or in six months or in a year from now the terms of that agreement would have been torn up.
So I do feel some sympathy for the prime minister trying to carve a way through all of that uncertainty to find a deal that’s good for both economies, but especially for Canada for his constituents.
Geoff Bennett:
The ferocious anger that you speak of, when Carney describes what’s happening in terms approaching an economic war, is that how Canadians broadly see this rupture with the U.S.?
Peter Armstrong:
They do, absolutely.
And to put it very plainly, again, it’s not just the tariffs. And it’s not just the threats of economic annexation or this — like, today, the vice president of the United States referred to Canada as a state. This is not something that I think anybody in the United States would accept from any other country talking about your country.
Nobody here is accepting it as something that should be reasonable or taken reasonably here in this part of the country. And they have taken lots of measures to push back, but the ones that seem to get under the skin of the administration the most are the two that have nothing to do with the federal government.
It’s the provinces that have taken American alcohol off the shelves of liquor stores in eight of 10 provinces. And it’s been a really grassroots move by Canadian consumers and households to not travel to the United States while these tariffs are in place. Both of those have come with enormous costs to tourism-heavy regions and to California wines and Kentucky bourbons.
And the more this goes on, I think the less likely it is that Canadians, even when those things go back on the shelves and even when tourism is back to Canadians say it’s OK to travel there again, I’m not sure how many will actually take up a glass of American bourbon or travel to the United States, given how disrespected and how angry and how upset they are with the way this administration has treated Canadian trade, Canadian businesses, and I think Canadian citizens.
Geoff Bennett:
Peter Armstrong, senior business correspondent for the CBC, thank you for being with us.
Peter Armstrong:
Oh, you bet.
