00:00Canada and the U.S. are escalating their trade fight with new retaliatory tariffs, import bans, and a threat to
00:06block Canadian companies from U.S. government contracts.
00:09Joining us now for more on this ever-evolving story is Ari Hawkins, trade reporter at Politico. Ari, thank you
00:15so much for joining us.
00:17Thanks for having me.
00:18Yeah, now let's jump right in. How significant is this latest escalation between the U.S. and Canada?
00:25So the Trump administration has again moved to expand tariffs. It's another escalation of this tit-for-tat trade war.
00:32It's in line with this back-and-forth that's been happening at this point for months.
00:36And while it only does target about $20 billion worth of goods, it has expanded beyond that.
00:42But that is still overall a small fraction of the overarching U.S.-Canadian trade relationship.
00:48What's most critical here is the foundation that this sets going into broader North American trade negotiations, including over the
00:57free trade agreement between the United States, Canada, and Mexico.
01:00That is worth roughly a trillion dollars worth of trade.
01:04And this is a signal that these talks are trending in a negative direction.
01:07If it does not resolve and talks between the U.S. and Canada remain paused as they are now, that
01:15could spell doom for a wide range of industries, from automotives to really anything that crosses the border between the
01:22United States and Canada, which is a vast majority of goods that we trade.
01:26Right. And, you know, in this back-and-forth, Trump is threatening to restrict Canadian access to U.S. government
01:32procurement.
01:33How much leverage could that actually give the administration?
01:37So it's clear that the Canadian response has been pretty coordinated in support of Prime Minister Mark Carney.
01:45It's not clear that these types of bans and restrictions, particularly at a sensitive electoral and political moment in the
01:52United States, is going to boost that leverage from the U.S.
01:56We've already heard quite a lot of chatter among Republican lawmakers, particularly in swing states, that are very concerned about
02:04this deteriorating relationship and are wary of the declining support from the United States.
02:10On the flip side, the Canadian public, including Prime Minister Mark Carney's opposition, has praised the Prime Minister for his
02:18resilience here.
02:18And it is clear that even though the United States' economy is more powerful, the Canadian support for this will
02:26go quite a long way.
02:27If you could talk a little bit more about how the Prime Minister has been responding and is there any
02:33sign that Ottawa is willing to back down?
02:37So the Canadian Prime Minister quickly retaliated tit for tat.
02:42Just yesterday, another province in Canada announced a similar procurement ban, clearly a reference to Trump's comments here.
02:50We can see a pretty coordinated, firm response with not a clear indication that they are willing to back down,
02:57at least at this moment.
02:58But it's worth noting here that the strength of the United States' economy does remain paramount in all of this.
03:04It is a bit of a waiting game on both sides.
03:07And if it was purely down to the economy, the United States might be able to outlast that Canadian resistance.
03:13However, as we get into midterm elections, 2028 is also on the mind.
03:19These types of dynamics are really what is putting a bit of a boost for the Canadian side in all
03:26this.
03:26Right. How could this trade fight become a political liability for Trump and Republicans when we're just, you know, less
03:35than two months away from the midterm elections?
03:39We're seeing a lot of Republicans express these sort of muted concerns, particularly in Maine.
03:44We see Suzanne Collins taking credit for certain targeted tariff reductions from this latest update, which, while it did expand
03:53some tariffs to hit more commodities, it also backed off some select goods that were aimed at sort of giving
04:00Republican lawmakers a bit of a boost.
04:01That include cement in Maine, as well as fishing rods, which is a significant industry in Maine and Iowa.
04:09So we can clearly see that Republican lawmakers are concerned that they know that this is a political liability.
04:15There were, in fact, multiple lawmakers that leading up to this announcement from Trump were putting pressure on both the
04:22president as well as U.S. Trade Representative Jameson Greer because of the risk, particularly to these right-leaning agricultural
04:30hubs in the United States, which ultimately will be what decide both the House race as well as the Senate.
04:36To speak a little more about the products and industries that could feel the biggest impact, what are those, and,
04:44you know, in particular with that $20 billion of U.S. goods that Canada has imposed tariffs on?
04:52So it is a bit of a scattershot of goods that account for that $20 billion.
04:59It is worth noting here that because of the interconnected nature that these tariff hikes on select products will have
05:07a bit of an outside impact.
05:09We saw that these latest expansions also hit cheese, dairy products, as well as other agricultural goods.
05:17And it was also aimed at certain Canadian cultural artifacts, for instance, hockey sticks.
05:24And things that are not necessarily as most closely traded with the United States, but still put a little bit
05:31of a pinch on the Canadian sort of mentality.
05:35That is part of the approach here rather than purely that economic impact.
05:40On the flip side, we see a bit of a much more targeted response from Canada, targeting agricultural goods and
05:47industrial machinery designed to put the pressure on these red-leaning agricultural and industrial hubs.
05:53It's an interesting dynamic here where both sides are looking at this headline number, although Canada is taking a bit
05:59closer of a look at who exactly to hit and for what purpose.
06:03Among the bans that Trump announced, they include Canadian dairy, alcohol, and motorcycle imports.
06:12Why those products and how much do they matter economically?
06:17So those products tie back to certain national security concerns that the Trump administration has long raised.
06:24They also tie into goods that were already targeted by the legal provision that he used to impose this, known
06:31as Section 338.
06:32That law enables an escalation from items that were already hit with tariffs to also receive this type of more
06:40powerful import ban.
06:41So it is a legally complex maneuver that took advantage of some of the pre-existing curbs that were on
06:48the table.
06:49At the same time, these industries are significant.
06:53Agriculture has been a longstanding focus to expand the market from Canada and make trade easier.
06:59Both Democrats and Republicans have raised the need for more free-flowing trade with dairy products in particular.
07:06That is a significant concern, and it's longstanding.
07:08As are motorcycles, even though that is a select sort of feature within the broader automotive industry, that industry requires
07:15quite a lot of back and forth.
07:17There are certain parts targeted that will go into larger vehicles, and that will be quite a big escalation as
07:23we see those bans to come through as well.
07:26Now, we've seen the two sides go back and forth for months now.
07:30Is there a realistic path to a deal, or are we looking at a much longer trade war?
07:36At this point, we are looking at a much longer trade war.
07:40USMCA negotiations, that's the North American free trade deal, is starting to ramp up with a bit more focus.
07:48But at the same time, these talks are formally not ongoing.
07:52Well, what that means is that there are talks behind the scenes to try to get this back on track.
07:56We see negotiators going to Mexico and Canada to try to resolve some of these issues.
08:02But at this point, there's no indication that Canada, Mexico, and the United States are on the same page.
08:09Yeah, and finally, Ari, what should we be watching for next?
08:12And what would the biggest signal be that this conflict is about to escalate even further?
08:19I think a big focus here will be the results of the midterm election.
08:23There have been lawmakers on both sides of the aisle that have moved to capitalize on some of the instability
08:29associated with these tariffs.
08:31We see James Tallarico in Texas focusing on this.
08:34And again, Suzanne Collins in Maine, that race, Republicans that are running have taken a careful approach to try to
08:41criticize these.
08:41If this dynamic is overblown and Republicans do do quite well, that could be in a much longer, more complicated
08:49path towards a resolution.
08:51This midterms threat the Trump administration is chiefly aware of.
08:55And it will be a source of congratulations for the president if Republicans hold on to the Senate or the
09:04House as well.
09:05It will be quite an interesting dynamic to watch if the Trump administration is not forced to maneuver on this
09:12from Republican lawmakers that are at this point putting pressure.
09:15After the midterms, of course, that pressure will subside.
09:18Yep, a lot still to watch while this trade fight continues to unfold.
09:22Ari Hawkins, trade reporter at Politico, thank you so much for joining us.
09:26We appreciate it.
09:28Thanks for having me.
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