00:00Last month to impose 50% salaries on $20 billion worth of Canadian goods.
00:06Both sides insist they are open to reaching a deal,
00:08but no new talks have been scheduled since negotiations collapsed in August.
00:13Canada and the U.S. have the world's largest bilateral trading relationship,
00:17valued at nearly $900 billion last year.
00:22Let's bring in Sambit Bhattacharya, Professor of Economics at the University of Sussex.
00:28Professor, great to have you.
00:29So, first of all, Canada has responded to U.S. tariffs with the dollar-for-dollar measures.
00:36How much further could this trade dispute go?
00:39Thank you for having me.
00:41I guess it's anybody's guess.
00:45But that said, as we can see from the current administration, U.S. administration,
00:52instinctively, there is a tendency towards weaponizing trade and commerce
00:58for international relations.
01:00So, it's quite likely, and also from the rhetoric that's coming out from President Trump,
01:05it's quite likely that U.S. would like to have the last laugh.
01:10So, as a result, there could be another round of reply from the U.S. and so on.
01:16So, it's anybody's guess.
01:18So far, you know, the initial U.S. tariffs and then the counter-tariffs are fairly moderate.
01:26But that said, you know, if I'm to make a guess, I would say that there would be a reply
01:31from the U.S.
01:32So, this could further escalate.
01:34But we are already seeing signs of Canadian trade being diverted away from the U.S.
01:39So, could this dispute accelerate a longer-term shift in Canada's trading relationship?
01:46Well, that's a very good question.
01:48Let's take a step back and think about, you know, the factors that actually influence trade.
01:56Distance plays a huge part in international trade.
01:59That's largely due to transport costs and things like that.
02:03And then, obviously, price.
02:06Trade is a price-sensitive economic interaction, and tariff adds to that price.
02:13So, that plays a role.
02:14And the third thing is local regulatory environment, investment climate, et cetera, et cetera.
02:20So, what you see from this type of trade war and tariff back and forth is that, you know,
02:27often international trade, you know, gets diverted into other locations.
02:33So, often what will happen is Canadian producers involved in U.S. supply chains and likewise,
02:40they will look for alternatives and reroute their trade through third countries.
02:46You know, Mexico is obviously nearby.
02:48Brazil seems to have a lower tariff from the U.S. at this point in time.
02:53Australia, a bit further, but also has lower tariffs.
02:56So, there are options.
02:58Only time will tell.
03:00But, you know, I mean, whether this will accelerate...
