Special Edition
“So He Looks at Me and Says, ‘I Need an F-Tree Fiddy.’ Well It Was About That Time That I Noticed the Prime Minister Was About Eight Stories Tall and Was a Crustacean from the Palezoic Era, and I Said, ‘Dammit Loch Ness Monster Get Off My Lawn!”
Yes it’s another Special Edition heading into the week since we have news on retaliation, plus some public and anonymous comments on where things went wrong.
But we’ll start with retaliation. Prime Minister Mark Carney gave some details on Canada’s promised dollar-for-dollar retaliation. It will apply to $20 billion worth of American imports, effective September 8. I haven’t seen a full list yet, but items mentioned include “steel, dairy, appliances, agricultural equipment, pulp and paper, and electronics.” PM Carney also told provincial and territorial premiers that the government will unveil an aid package to help workers and businesses impacted by the tariffs.
Most premiers gave public statements backing the retaliation and aid, including from British Columbia, Manitoba, Newfoundland and Labrador, Northwest Territories, Nova Scotia, Ontario, Québec, Prince Edward Island, and Saskatchewan. But there remain divisions on what should be on that retaliation list, especially as it pertains to natural resources like oil, gas, and minerals. Ontario Premier Doug Ford released a letter he had sent last week to PM Carney urging, if talks failed, to target Alabama, Arkansas, Florida, Iowa, Missouri, Montana, Texas, and Wisconsin.
It’s worth adding that retaliation by Canada could be met by counter-retaliation by the U.S., per an anonymous U.S. official. And on that note, one person who was relatively quiet through the weekend was President Donald Trump, save an early-morning truthSunday. That changed this morning, when he truthed that, effective January 1, 2027, the Section 232 tariffs on “all Cars, Trucks, both large and small, Automotive Parts, and Steel” will be 50%. Why he specifies “both large and small” will be a clear shortly.
At any rate, the optimists may look at the September 8 retaliation date and say, “Hey! That’s…[counts fingers] over two weeks away!” And yes, there’s some thinking that this could give a little runway for cooler heads to prevail and a deal to be secured. Buuut Bloomberg reports that the Canadians aren’t holding their breath that talks will resume before the November 3 midterm elections. Indeed, Canadian Ambassador to the U.S. Mark Wiseman said the long deadline *shouldn’t* be thought of as runway. As such, Canadian businesses are bracing for the long haul.
So where did everything go wrong?
The early public statements saw more fingers flying than a food fight at a Raising Cane’s, but we now have some public and anonymous comments to help color inside the lines.
PM Carney gave a good amount of detail during a lengthy press conference on Saturday. His remarks reiterated that he was willing to drop retaliation and change up the dairy system. However, “We were not prepared to compromise Canada’s sovereignty or undermine our key industries. We were not prepared to compromise on the protection of the French language and our culture.” He added, “For my government and for Canada, these issues were never on the table, even though the United States tried until the very last minute.”
He said, as he did in the wake of the talks failing, that the U.S. “proposed new terms that were uneconomic, unfair, and undermined the net benefits to Canada, calling into question the reliability of any deal…The cumulative effect of U.S. demands revealed the limits of their commitment to a true economic partnership.”
During Q&A, he said talks broke down vis-à-vis Section 232 auto tariffs over a lack of relief for larger pickup trucks (ie Ford F-350 or Chevy Silverado). This detail had been reported by Bloomberg just before the presser. He repeated his support on the French language issue, which got full backing in particular (évidemment) from Québec Premier Christine Fréchette, who told reporters, “Our culture, our language is central to our identity and it is important to exclude that from the negotiation table.”
He also alluded to an issue where the U.S. wanted “language which suggested restrictions in terms of our ability to execute trade deals, which would always be unacceptable.” An anonymous USTR official told the Washington Post, “There was no language that would prevent Canada from making trade agreements with other countries…We did express concerns verbally regarding trade agreements that would allow a flood of subsidized or dumped steel or aluminum from other countries, and flagged this as an area for continued dialogue.” But I will also flag language that we’ve seen in other Agreements on Reciprocal Trade (ARTs), using Indonesia as a representative example (Page 8, Article 5.3.3): “If Indonesia enters into a new bilateral free trade agreement or preferential economic agreement with a country that jeopardizes essential U.S. interests, the United States may, if consultations with Indonesia fail to resolve its concerns, terminate this Agreement and reimpose the applicable reciprocal tariff rate.” Not saying this language was tabled, but it’s just where my mind went.
USTR Jamieson Greer went on CNBC this morning and gave some thoughts on why the talks failed. He focused on the fact that Canada “wanted more” despite being offered “the best access to the United States of any country in the world.” He acknowledged PM Carney’s account on trucks but added that was only “one of many things the Canadians wanted an expansion on.”
He called the French language issue “a fake story,” saying, “I don’t know what it’s about.” But he did pivot to criticizing Canada’s Online Streaming Act, which does have a French language requirement. That said, USTR Greer talked about it a broader, non-French framing: “Canada…forces American tech companies to take their earnings and give a percentage to their competitors in Canada.” A Globe and Mail story called the U.S. ask on the Online Streaming Act an “11th-hour” and “unexpected” demand made late in the game Friday.
Some final on-the-record remarks come from Ambassador Wiseman, who talked with Bloomberg Sunday, saying it wasn’t any one issue. Rather, “What we discovered was that what our understanding of what had been agreed to was quite different from what was showing up in the documents.” He said one or two misunderstandings are bound to happen, but the Canadians found that “every interpretation is the most negative interpretation.”
A Politico article added another potential dynamic to the pot: Were USTR Greer and Commerce Secretary Howard Lutnick on the same page?
USTR Jamieson Greer spoke with the New York Times Saturday and walked through some new details on what the U.S. was offering. That includes eliminating the 10% Section 232 tariff on softwood lumber, cutting the Section 232 auto tariff to as low as 7% (depending on U.S. content), lowering the Section 232 aluminum to 25% without a quota (compared to steel, which would’ve had a quota), and cutting certain Section 232 steel and aluminum derivative tariffs to as low as 15%. Notice that all of these things have to do with Section 232, which is under the Commerce Department.
An anonymous industry source told the Washington Post, “[White House Trade Advisor Peter] Navarro and Lutnick were both yelling at Greer saying: ‘What are you doing? This is stupid. You know, we’re not giving these things away.’” Three anonymous sources told the Globe and Mail that Secretary Lutnick had a “central role” in derailing the talks by “pushing…harsher terms” than USTR Greer. And PM Carney fanned the flames in his press conference, saying, “The Canadian team: Unified…Everyone in the loop, everyone knows what our objectives are…You cannot say that about the United States.”
But a White House official pushed back in the Politico article, calling “The idea that Lutnick and Greer were on fundamentally different pages…a weird deflection…It’s not like Lutnick was going off the reservation and derailing this, or something, unilaterally. That’s just not the case.” USTR Greer himself told CNBC today that he and Secretary Lutnick talk and work together “every day,” so there’s “not a lot of freelancing going on.”
I’ll close with a quick roundup of reactions from officials and industry. House Ways and Means Committee Ranking Member Richard Neal (D-MA) criticized the failed talks, calling it a “blown” trade negotiation. The Business Roundtable urged both sides to return to the negotiating table, while the Coalition for a Prosperous America reiterated its call for no changes to the Section 232 tariffs. The AP had a roundup of quotes from a lot of Canadian trade associations. And China’s Global Times greeted Canada’s “Chinese-style counterattack” against the U.S. tariffs (#NotHelpingButAlsoNotTryingToHelpInTheFirstPlace).
