Canadian Economist: Trump’s Tariffs Are A Gift To Mark Carney

SPEAKER_1 (0:01)

In the AI era, you have to stop cyber attacks where they start. So security has to be fused into the infrastructure itself. That's why the network that connects everything is also your best defense.

Cisco, the critical infrastructure for the AI era.

SPEAKER_2 (0:24)

What's driving the markets this week?

SPEAKER_3 (0:27)

What's on investors' minds as they look ahead?

Mike Moffatt (0:30)

Find out on the Markets Podcast from Goldman Sachs.

SPEAKER_3 (0:34)

A breakdown of market moves and macro signals in 10 minutes or less.

Mike Moffatt (0:38)

The Markets Podcast from Goldman Sachs.

SPEAKER_2 (0:51)

Support for the show comes from BCX, the public ticker for private tech. The US stock market started history's greatest wave of wealth creation. From factory workers in Detroit to farmers in Omaha, anyone can own a piece of the great American companies. But today, our most innovative companies are staying private longer, which means every day Americans are missing out. Until now. Introducing VCX, the public ticker for private tech, now available wherever you buy stocks. Visit getvcx.com for more info. That's getvcx.com. Carefully consider the investment material before investing, including objectives, risks, charges, and expenses. This and other information can be found in the Funds Prospectus at getvcx.com. This is a paid sponsorship.

If money is evil, then that building is hell.

Ed Elson (1:51)

Welcome to Prof G Markets. I'm Ed Elson. It is September 9th. Let's check in on yesterday's market vitals.

The major indices declined on tensions in the Middle East. Brent crude rose above $99 per barrel. The yield on 10-year treasuries climbed. And finally, SpaceX rose 4% amid reports that its weighting in the NASDAQ 100 may increase this month when the index rebalances.

Okay, what else is happening? Canada is striking back against the US with tariffs of its own. The new levies range from 15% to 50%, covering around $20 billion worth of American goods. Tariffs on US steel, aluminum, and iron products doubled to 50%.

And other targeted products include furniture, clothing, appliances, and dairy. The move is payback for the 50% tariff that Trump levied against Canada last month. Trade talks between the two nations fell apart at the end of August. And now Mark Carney is pledging to quote hit back against Trump's bullying, quote, dollar for dollar, rate for rate. Joining us to discuss what this escalation means for the US and for Canada, we're speaking with Mike Moffatt, Canadian economist and founding director of the Missing Middle Initiative. Mike, it's great to see you again. Thanks for joining us. I'd love to just start at the very beginning. We haven't talked about the Canada-US trade war for a while, but it's an ongoing situation. How did this all begin? How did it flare up again over the summer? How did we arrive at this moment?

Mike Moffatt (3:34)

It's a great question. I think Canadians are asking themselves that question. What do we do to deserve this? But this has been happening before Trump was elected the first time, or at least before he was inaugurated the first time in 2017

There have been these flare ups from time to time. We've seen the US put additional tariffs, particularly under the second Trump administration, on a variety of goods. There was negotiations over the summer, and Canada walked away from those. It's not entirely clear what the sort of tipping point was. Part of it is Canada not wanting to negotiate through the media. But it sounded like there were some last minute changes that the Trump administration put on a deal between Canada and the US that the Carney administration just couldn't abide to. So we find ourselves here today.

Ed Elson (4:28)

So those negotiations break down, Mark Carney walks away from them because something that we're not totally clear on wasn't going correctly, at least in his view. And then Trump's decision is tariffs.

Mike Moffatt (4:42)

The negotiations were basically to take those tariffs off. So the Trump administration had threatened these $20 billion in tariffs. We had gone, Canada had gone to the administration to try and work out a deal. Then we walked back.

Again, it's kind of unclear why. There's stories around what was in the deal in terms of automotive or Canada's ability to sign other trade deals.

Like any other country, Canada wasn't just going to sit there when it had tariffs put on it. So the Carney administration kind of matched dollar for dollar. Some of those tariffs are basically reciprocal. So you put 50 percent on us, we'll put 50 percent on you. But others are a little bit more targeted towards swing states, towards areas where Canada often buys not 100 percent of its imports from the US, where we have a little bit of choice to buy from, say, the US or Japan or the EU. So the idea is that we don't want to raise Canadian prices as much, but instead if Canadians can buy from Japan or EU instead, that should dampen the effect of these tariffs.