00:00This is a story about déjà vu all over again.
00:03This week, the White House announced yet another round of tariffs on Canadian goods,
00:08this time charging 50% on imports of a range of items, including milk, hockey equipment, beer, and plywood,
00:15but specifically excluding energy and potash, a critical fertilizer used by American farmers.
00:21Our special contributor, Chrystia Freeland, served as Canada's finance minister and deputy prime minister.
00:28So, Chrystia, we have an announcement now that the Trump administration wants to impose a new round of tariffs,
00:3450% of 50% on certain goods from Canada next month.
00:38What are these tariffs and why does the Trump administration say they need to be put into place?
00:43So, a proclamation has been signed, or three proclamations, and they are due to come into force on August 19th,
00:5230 days after the proclamation.
00:53The official rationale is in reaction to Canadian treatment of U.S. alcohol, U.S. dairy, and U.S. cars
01:05and car parts.
01:06But we have to be careful about believing the official rationale, because just before the proclamation came out,
01:15the complaint was that Canada needed to be punished for the Canadian wildfires,
01:20which is a hard thing to figure out how Canada should stop them.
01:25And I think we really have to recognize that this is happening against a backdrop of what is turning out
01:34to be a very contentious renegotiation of the USMCA,
01:41formerly known as NAFTA, trade agreement governing the U.S.-Canadian and Mexican trade relationship.
01:48Well, you were right in the center of negotiating at USMCA the last time around when you were part of
01:53the government.
01:53What has been announced is on specific categories of goods.
01:57How big a deal is that in terms of the amount of trade between the United States and Canada?
02:01People have calculated that it's about $20 billion worth of goods.
02:07That's not a killing blow for the Canadian economy, but it is significant in and of itself.
02:14And I think the other thing what is really important about this is it shows that this is going to
02:22be a truly contentious negotiation.
02:25It shows that Donald Trump wants to punish Canada and Canada now has to decide how to respond.
02:33Do we think it's punish Canada or use some leverage on Canada?
02:36As I understand it by reports, the United States is farther along with Mexico in negotiating on the USMCA than
02:42is with Canada.
02:43I'm not sure Canada is engaged that much.
02:45Is it possible this is just a way to get Canada to the table?
02:48I actually, David, agree with you about most things, but I don't think that's a fair interpretation at all.
02:53Canada has been ready, willing and able to negotiate any place, any time.
02:59The U.S. did not have to impose tariffs to get Canada to negotiate.
03:03Canada wants to talk. Canada wants a deal.
03:07In fact, Canada has made a number of concessions, sort of bargaining against itself in advance, I guess, to show
03:15willingness to negotiate.
03:17Canada last year dropped the digital services tax.
03:20Canada has dropped most of its retaliation against the illegal and unjustified U.S. 232 tariffs.
03:26One area where I think there's been very specific purposeful discrimination is alcohol.
03:32We've heard a lot about Canadians just not wanting to buy U.S. alcohol.
03:37Does Donald Trump have a point when it comes to alcohol?
03:39Absolutely not.
03:40What has happened on alcohol is at a provincial level in response to the 232 tariffs on Canadian steel, aluminum,
03:53cars and car parts.
03:54And those tariffs, let's remember, are imposed allegedly on national security grounds.
04:01So we have to think that Canada is a national security threat to the United States.
04:06They are being imposed against goods that we should have free trade in, according to the USMCA, our trade deal.
04:14So those were imposed last year and regular Canadians and the premiers of a lot of Canadian provinces were very
04:24angry.
04:24And so the premiers of some of Canada's largest provinces took the decision that provincially owned liquor stores would not
04:34buy U.S. alcohol.
04:36That is a wildly popular decision.
04:39And the premiers of Quebec, Ontario, British Columbia would face a huge public backlash if they backed down.
04:47And in fact, they've been very clear and they've said, absolutely not.
04:50We're sticking with this boycott.
04:52All of which leads us to what do we think the Canadian response is likely to be to this latest
04:57round of tariffs?
04:58Canada is in a challenging position right now, David, because on the one hand, public sentiment is very, very angry.
05:10Canadians feel that they are a good, reliable neighbour, ally and trading partner for the United States.
05:17It wasn't so long ago that we went through the drama of renegotiating our trade deal and we got a
05:23deal with Donald Trump.
05:26And notwithstanding that, we keep on getting hit by wave after wave of punishment.
05:31First, the 232 tariffs.
05:34Now, this round of tariffs.
05:36And even when Canada has sort of tried appeasement, tried to get along, dropped the DST, it doesn't make any
05:44difference.
05:44In fact, the U.S. comes back for even more.
05:47So public opinion is very, very angry.
05:52In fact, something that I never thought I would see in my lifetime is that we are now seeing that
05:58more Canadians see the United States as a threat than China.
06:04Canadians, for the first time in this polling, see China as a more reliable partner than the United States.
06:09Communist authoritarian China, a country that just a few years ago illegally imprisoned two innocent Canadians, ironically, to punish Canada
06:22for honouring our extradition treaty with the United States.
06:25Yet this country, Canadians feel, is more reliable and trustworthy than the United States.
06:33You wrote a piece in the Financial Times about this problem of accommodation versus retaliation in dealing with the Trump
06:41administration on trade.
06:42If indeed the Canadian government decided we have to go the retaliation route, what sorts of levers does it have?
06:48I do think that the lesson that the Trump administration is teaching the world, that the only countries that ultimately
06:59get to a good place with this administration are countries that stand strong.
07:04You know, I think the best approach to this administration is do not escalate.
07:10Don't look for a fight.
07:11If you can find an area to agree on, that's great.
07:16But do not back down.
07:18And if you get hit, you do have to fight back and stand firm.
07:22That's very, very hard, but I think it's the only way to deal with this administration.
07:28If Canada wanted to do that, Canada has a lot of leverage.
07:32Canada is actually the largest export market for the United States.
07:37If you take goods and services, a market of well over $400 billion.
07:45Canada matters.
07:46And as these tariffs themselves demonstrate, some of the things that Canada sells are critically important to the United States.
07:58Things like energy.
07:59Things like potash.
08:02The new tariffs on Canadian goods leave out an important category.
08:06Fertilizers.
08:07The U.S. relies on Canada for potash and other agricultural products made more expensive by the closing of the
08:13Strait of Hormuz.
08:14Earlier this year, we spoke with businesses that were getting a first-hand look at the impact of the conflict.
08:22We have seen a major impact on global nitrogen and phosphate values.
08:27Josh Linville is vice president of fertilizer at financial services firm StoneX.
08:32Most farmers will tell you those prices have skyrocketed, and it's based on the fear of the lack of supply
08:38that's out there.
08:38We have seen, because of the shutdown of the Persian Gulf, the global S&D for nitrogen and phosphate as
08:43well, which isn't getting as much traction, not as much attention, we are seeing both of those get extremely tight.
08:50So everybody is talking about the oil and the gas and everything else that flows through there.
08:53Few people know urea being the most commonly traded nitrogen product of the world.
08:58About a third of the world's product flows through that Strait of Hormuz.
09:01When you look at the top ten list of global urea exporters, three of them sit behind the Strait of
09:08Hormuz.
09:08That's Iran, that's Qatar, and that's Saudi Arabia.
09:11Those three nations represent three of the ten largest anhydrous exporting nations.
09:15And even on the phosphate side, not a lot of people understand this, Saudi Arabia is one of the world's
09:20top five exporting nations for phosphate exports around the world.
09:24And again, all of these products are stacked up and backed up, and production is suffering until the Strait of
09:29Hormuz is reopened to save traffic.
09:30One solution might come from closer to home.
09:33Nitrogen-based fertilizers like urea are not the only options available.
09:39U.S. farmers also rely heavily on fertilizers like potash, much of which comes from western Canada.
09:45Pam Schwan is the president of the Saskatchewan Mining Association.
09:49Potash is one of the main fertilizers that's used to help make crops healthy and grow larger yields.
09:55So as the world grows to 10 billion people by 2050, on less arable land, we need to be able
10:02to grow crops more effectively and more efficiently that have higher crop yields.
10:07So potash is one of those three ingredients, along with phosphorus and nitrogen, that make crop yields much improved.
10:15What is the role of potash in Canada's economy?
10:18It's very significant, particularly in Saskatchewan.
10:21100% of all the potash produced in Canada is produced in Saskatchewan.
10:25Of the potash that is generated in Saskatchewan, how much of it's consumed domestically in Canada?
10:30How much of it's exported and to whom?
10:33Yeah, very little is used in Canada and very little in Saskatchewan.
10:37And so there's probably over 98% of what is produced in Canada and, again, all in Saskatchewan, is exported
10:43to global markets.
10:44So of that, about 50% goes into the United States to help farmers there grow corn, soybean, and oats.
10:51And the rest is exported out to countries like China, India, Indonesia, and Brazil are probably the main customers.
11:00Fortunately for U.S. farmers and for Canada's miners, Canadian potash has been kept free from tariffs,
11:07something former Deputy Prime Minister Freeland considers wise for all concerned.
11:12Two of the world's other leading potash producers after the full-scale Russian invasion of Ukraine.
11:19So I'm going to offer a little Canadian editorial here.
11:23A particularly bad time to have a trade war with Canada.
11:28There are lots of reasons a trade war with Canada is a bad idea.
11:32You need Canadian aluminum, for example, for U.S. manufacturing.
11:37And aluminum is basically electricity in solid form.
11:41But the fact that Canada is such a major producer of potash is another good reason that we're a great
11:47trading partner.
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