Canada says no thank you

Katie Martin (0:09)

Everybody needs good neighbors. But the US and Canada, which share a border stretching 5,500 miles, have fallen out big time. Donald Trump has been needling Canada throughout his second term in office, making constant references to the country as a bolt-on US state and complaining that Canada is ripping America off. In retaliation, Canadians, supposedly quite hard to annoy, have been backing away from buying US stuff, conspicuously booze. But it's all got really messy now with the total breakdown of trade talks between the two countries. Canadian Prime Minister Mark Carney told his team to pack their bags and walk away from negotiations altogether, saying the US asked too much and they offered too little. It's not a pause in talks, it's not a negotiating tactic. It is over. We're in full on tit for tat tariffs. Team Canada is elbows up.

So today on the show, trade wars. What are they good for?

This is Unhedged, the markets and finance podcast from the Financial Times and Pushkin. I'm Katie Martin, a markets columnist at FT Towers in London. Joining me down the line from New York City representing Team America is Mr. Robert Armstrong. Rob, say hello.

Robert Armstrong (1:28)

Hello.

Katie Martin (1:29)

But also, joining me from Leefy Cheshire is FT Trade Nerd, Alan Beattie. Trade Nerd, say hello.

Alan Beattie (1:36)

Hello.

Katie Martin (1:38)

Alan, tell me please, what on earth is going on here? I thought the US, Mexico and Canada already had a trade agreement forged by some fella called Donald Trump. So why were they in Trade Talks in the first place?

Alan Beattie (1:53)

So obviously, it would be far too simple just to have a trade deal and leave it.

Where you are, because this is Donald Trump. So they do have a trade deal, and it's a long-standing trade deal called the North American Free Trade Agreement, which Trump then changed into the US, Mexico, Canada deal. But since he cannot leave well alone, he keeps layering sort of new types of tariff on top of that. So he layered the kind that was supposed to do with national security, he layered the kind which are supposed to do with unfair trade. And this latest set he's layered on top is a whole new, brand new for him, tariff authority, which goes all the way back to the smoot, Hawley tariff as immortalized in Fairest Bueller's Day Off. And so essentially because he can't stop messing about and he can't stop picking fights, every time he does, he adds new twists, new wrinkles, punches new loopholes on top of the architecture that's already there.

Katie Martin (2:49)

So they went into a whole new set of negotiations and eventually, I mean, you've written about this, obviously, but it just reached a point where there was no way Canada could sign this stuff, right? They were asking for them not to use French in documents, which is like a big no-no for Canada. There was just no way that Canada could agree to this stuff, right?

Alan Beattie (3:11)

Yeah. I mean, if you thought Donald Trump and his administration were rational, which obviously we don't, you would conclude that they meant for this to break down. Because if we believe the Canadian side, the US disputes some of this, they were asking, as you say, for French labeling to be reduced or taken away, for French language content, and for other things like trucks to be exempted from tariff cuts, all sorts of stuff, and also to stop Canada signing trade deals with other countries, to make sure Canada gave all their critical minerals to the US.

Carney having until then faced a difficult situation, because these are difficult situations negotiating with the US, it's not straightforward. In a sense, at that point, his task became really easy, because there's no way he could have accepted this. And everyone in Canada accepts this. Even if you get hit by these tariffs, everyone in Canada accepts, you cannot mess with Quebec, you cannot just start, you know, riding across French language. So at that point, you know, he said no, and the country united behind him. I mean, it is almost like wartime, you know, if you feel yourself threatened, and the country unites, and that's what's happened.

Robert Armstrong (4:18)

Let me ask you this, Alan. You've described it as simple personal inability to leave well enough alone. But do you have, or does anyone have a working theory of what Trump and his trade negotiators, the Jameson Greers of the world, are up to here?

Is there more to be said than, you know, these people are just irrational on this topic?

Alan Beattie (4:49)