00:00Joining us now is Mary Lovely, Peterson Institute senior fellow, joining us to break down the
00:04latest between the U.S. and Canada's tariff strategies. Mary, great to see you. And just
00:10listening to some of that interview that will be playing out later, Mark Carney said that he's
00:14ready to sit down and negotiate with the U.S. and that U.S. officials may understand Canada's
00:20red lines better. What is your understanding about how these various trade disputes, especially
00:27this one, between the U.S. and Canada? Does it reshape at all President Trump's willingness
00:32to hit countries hard when they push back like we've seen from Canada?
00:37Well, I think that remains to be seen. It's a sober morning that we're waking up to here, I think.
00:46You know, Prime Minister Carney's tone was quite somber, serious. I think if we think of what he
00:53says about the past and the future, it's clear that he's looking back and saying that the U.S.
01:00really stepped over the red lines that Canada had drawn by a number of requests that the U.S.
01:06team made of Canada. Nevertheless, looking forward, the Canadians are very much leaving the door open.
01:14They would like a deal. By all reports, we were close to a deal last time. And they certainly hope
01:21that the U.S. returns to the table with something that they can accept. I think they're trying to
01:27show the U.S. that they've reached the limit of what the U.S. can really strong arm out of
01:33a
01:34close partner like Canada. I think we're seeing other countries also start to either slow roll or even
01:43make moves that seemingly, I would say, are not in keeping with the spirit of the agreements of
01:52reciprocal trade that they were forced to sign to get lower tariffs on the U.S. So I think that
01:58yes,
01:59we are beginning to see pushback and the limits of what this Trump administration tactic on resetting
02:05trade is really going to get for us. And you heard that Carney said he doesn't
02:11believe in escalating this fight. Does that sound like a strategy to you or does it sound like maybe
02:15he's just a leader really losing a lot of leverage at this point?
02:21I think that all along the Canadians have not wanted to escalate the fight.
02:27He's trying to say, we have responded to your tariffs basically tit for tat. They matched a lot
02:34of our goods. They matched the total amount of imports that were subject to the new taxes.
02:39They matched the rates in a lot of cases. They were trying to say, we're sending you a message.
02:44We're not trying to escalate this fight. So I think the Canadians have shown that they do have
02:50fire in the belly. Public support for Prime Minister Carney is strong. And I think part of that hinges on
02:57not just what's on the table today, but what they feel they might be subject to in the future.
03:05Canada is our closest neighbor. Their economy is deeply integrated with the United States, as
03:11Prime Minister Carney's comments that you just played indicate. And they know that if they give
03:18in on this one without any pushback, there could just be another one and another one. I think that's
03:22what Prime Minister Carney meant when he said that the agreements that the U.S.
03:28is signed with Canada are signed in pencil.
03:33Mary, it's such a great point on the political one, because we are just off the back of two weeks
03:38ago, Canada's Liberal Party sweeping the elections. And it seems to be that part of that has been
03:44confidence in this prime minister, in his actions of pushing back against this president. We've seen
03:49similar things happen in Mexico, for example, when you see the president there, when she pushes back
03:54against President Trump. Is there an element of this which countries are not necessarily just
04:00taking on tariffs or caving into what the president says, because it's politically advantageous for
04:04them to push back? Well, I think the public is sort of caught up with what is actually going on
04:12here.
04:13And there's a lot of anger in Canada against the United States. I mean, people have to remember that
04:19the baseline was not what other countries received on Liberation Day. You remember that Ambassador Greer,
04:26our U.S. trade representative, said that Canada had turned away from a deal that was better than
04:31all the other deals that they had offered to trading partners. That may be true. But to Canadians,
04:37the deal that they're looking at was the U.S.-Mexico-Canada agreement. And we are very,
04:43very far away from that in terms of U.S. policy. So, you know, voters look at bread and butter
04:49issues,
04:50but they also look at other issues. And part of that is emotion and whether they feel that their
04:55leaders are actually standing up for them or are selling them down the road. If you, Mary,
05:01were advising Carney, would you tell him to keep deescalating? Or does your research say that the
05:06language will only really maybe trigger the White House to retaliate and hurt them more?
05:11I think right now the best course of action would just be to stay the course,
05:15continue to do what he is doing, which is to signal that Canada is open for renegotiation,
05:21that they want to settle this, but they're not going to back down. I think backing down hasn't
05:26gotten anybody anywhere with the Trump administration. Mary, just quickly, what if they
05:29joined the EU as an associate member? That's something that was reported by the Wall Street Journal.
05:33How would that change things? Yeah, Canada has replied that an official kind of docking is still
05:41far off. But there is no doubt that what has happened in the last year and a half,
05:49so since January 2025, has fundamentally changed how other countries look at the U.S. as a long-term
05:56partner. Canada has been pivoting to look for new trade partners. It has signed many new trade
06:02agreements. It's looking now for deeper integration with the EU. This will continue. They understand
06:09now that they need to diversify. We talk a lot about diversifying away from China,
06:14China, but you're going to see countries diversifying away from the United States as well.
06:18Right.
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