Canada Is Done With Trump

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One subscription up to four separate logins for anyone in your life. Find out more at nytimes.com/family. From New York Times I'm Michael Bavaro. This is The Daily. In recent days, the United States proposed new terms. They run economic, unfair, and called into question the reliability of any deal.

In a dramatic decision, the Prime Minister of Canada has abruptly cut off negotiations with the US. And delivered a message to President Trump that virtually no other world leader before him has dared to convey. That he'd rather engage in a prolonged and ugly trade war than submit to an unfair trade deal with this White House. In short, they asked too much and they offered too little. On the American demands that led to the breaking point and Canada's plan to withstand economic warfare with no end insight.

Tuesday August 25.

Welcome back always a pleasure.

So good to be back, Michael. So I want to disclose something which is that I have a cold and as a result, I sound very gravely. And just for listeners who are public health minded, I'm going to acknowledge that you and I are not in the same room. You are in Canada. That is correct. I am in Toronto. You're in New York.

You are so safe. I am so safe. I am sorry that you have a cold and I hope you feel better soon. Thank you, but no one was infected in the making of this daily episode. No one in Canada, sir. Nobody in Canada, you have enough problems as it is.

So, Martina, it feels like Canada, the country you cover for the times, has officially had enough. They are done with the United States. Yeah, I think that's a really good way of putting it. I think both the Canadian government and frankly, the majority of Canadians are really done with the Trump administration.

“And that's why over the past few days, you may have heard the Prime Minister Mark Carney come out and say,”

"We're done with talking, we're walking away, we're now in a trade war with the United States." Right. It had all the earmarks of divorce. Sure feels that way. Maybe if we're going to be optimistic, let's say trial separation. But in all seriousness, I've been really closely following President Trump's commercial policy,

economic policy with other countries, his fights with allies and how so many of America's allies have fallen into line for him. And Mark Carney has decided to do something totally different, he's taking a massive bet. But he's just decided to walk away from President Trump and take the risk of enduring President Trump's economic and political targeting. Because he feels that President Trump is not going to make a good and fair and lasting deal with him. The pain and the terms are not worth it.

And he's prepared to risk the country's economy on it.

“I mean, if you were to summarize the bet that Prime Minister Carney is taking here, how would you describe it?”

I think Mark Carney is betting that his policies to make Canada stronger at home and build Canada's relationships with other countries in Asia and in Europe and to grow its economy and trade relationships are enough to keep Canada float and keep Canada growing even as he turns his back on the United States. Well, just explain how Carney gets to the point where he's willing to risk the entire Canadian economy.

And as you say, do something that no other world leader really has been willing to do, which is to stand up to President Trump and say basically go fly a kite.

Because I think most people have lost track of exactly how it is in this very bumpy trade relationship. We got to this this very public and potentially catastrophic breaking point.

“I mean, as soon as President Trump comes back into office, I'm sure you'll remember because it wasn't really that long ago was like 18 months ago.”

He starts this policy of tariffs against basically every country under the sun, including maybe you'll remember this.

This island that is only inhabited by penguins. From you and the Trump administration has been clear that ideologically they're doing this because they believe this is the way to bring jobs and revenues back home, especially in key industries like the auto industry or the steel industry that they feel globalization has weakened. And Canada is very directly targeted, but quickly you see many countries smaller, bigger, traditional allies. Let's say Britain, European Union, countries in Asia come one after the other and make concessions in exchange for small improvements to their tariff regimes like many deals.

But Canada holds out under Carney and Carney sort of speaks about that in a way that's much bigger than the economy. And he develops a sort of doctrine, if you will, especially through this featured speech he gave in Davos in January this year.

“In the decades, an American hegemony in particular helped provide public goods, open sea lanes, a stable financial system, collective security and support for frameworks for resolving disputes.”

This bargain no longer works.

Where he sort of frames this as a matter of survival in an era where Trump is just changing what America does in the world. To solve many countries are drawing the same conclusions that they must develop greater strategic autonomy. And he says for our country to survive and for your countries to survive all those countries that have long depended on the United States, we need to band together and we need to look after ourselves outside the U.S. Let me be direct. We are in the midst of a rupture, not a transition.

“And he says, nostalgia is not a policy. It's over. We all need to adapt to this new reality.”

And Carney just holds out. And among America's major allies, he holds out by far the longest.

And just reminds us what holding out against a pretty well known, vindictive president Trump when it comes to trade wars means for Canada over these past 18 months. So for sure, Canada has been hurting over the last 18 months. President Trump has taken hefty tariffs against really core Canadian industries. He's still aluminum softwood lumber autos. And Canada is almost in recession despite huge efforts to keep it growing and to keep the economy going. But Carney has decided that he's going to stick to a policy of retaliatory tariffs. The only country to do this other than China.

And he decides at certain points to roll those back a little bit, but overall, Canada keeps those policies in place. And one thing that really distinguishes Carney's approach to that of other countries is that he's not going to the White House seeking marginal improvements on specific tariffs. Instead, he's holding out for a big discussion on the whole thing and improving everything in the relationship. He definitely doesn't want to be seen to be begging for minor concessions. He thinks it's extremely injurious for the Canadian economy, it's bad for the Canadian psychology.

And it's bad for him personally to be seen going back to the White House cap and hat like so many other leaders have. And so he tries to pick the right moment to approach the White House and say, all right, this is a good time. Why don't we sit down and really make a better deal for both our countries, concessions on both sides and something we can both go home and feel good about. And that moment, the right moment, according to Carney, comes just a few weeks ago to where the end of July. When Trump threatens more tariffs on Canada, tariffs on several slightly odd Canadian goods like cheese, hockey sticks, feathers were on that list a bit weird feathers.

Yes, like for pillows? Oh hats? I don't know, but he finds that that moment is a good opening to sit down and the Canadians go to the US side and the say, okay.

And how do those talks go?

I mean, at first, it seems like they go really well. The US side is open, President Trump, our sources tell us, tells his officials, all right, go save, you can cut an agreement with the Canadians and a Canadian delegation goes to Washington and they try to work out solutions to all their disputes and rollback tariffs.

“And the Canadian side offers lots of concessions, such as, for example, the Trump administration had been very upset that Canadian provinces most of the country really had pulled US liquor off of the shelves and it was banned from sale.”

You couldn't cut a California white in Canada, really, Michael, at tragedy. How could you even make a deal a day? I know, right? And this is not a ton of money. It's like a $1 billion industry or so for Canada to like import this stuff, but it's, it's a big deal because it's a real gesture of resistance and the Trump administration just wants that policy revoked. And so the Canadians are like, okay, for the right trade deal, we will do that. They also want to change the quotas of American cheese that Canadians allow into the Canadian market. Canada has quite a protection system for its dairy products and so the Canadians are like, okay, let's talk about it. This is something we may be able to work things out on.

“And so I think there's a lot of goodwill there, both sides told us that talks were happening in good faith despite the general negative atmosphere and they make progress.”

So when do things go so sideways? Really last week and as ever, it all kind of falls apart in the last moment.

They really felt at the beginning of last week that things were close to a positive outcome. I mean, it got so far down the line that President Trump sort of posted that there was a deal all caps exclamation mark. And the Canadians were a bit more circumspect, but they were also positive. Lots of progress has been made the work continues and Trump gave them an extension to keep talking for three extra days all the way to midnight Friday just to seal that deal. And our sources together with honest ones on our colleague who covers trade have given us a really detailed granular look into what happened in those 48 hours up until the very last minute where everything kind of fell apart.

And what's really fascinating is that if you put the Canadian account and the US account from the officials we spoke to side by side, they're not really in disagreement.

But fundamentally, the Americans thought that what they had put on the table for Canada was a really good deal. The best deal in the world, they had made lots of concessions. But for the Canadians, it just simply wasn't good enough. And the reason for that were a number of really fundamental issues on which Canada just was not prepared to compromise on.

“Let me give you a few examples. One really important element that came in quite late in the game was an American insistence on having a say on the terms of Canada's trade agreements with other countries.”

The US basically wanted Canada to follow the exact tariff policy that it would take out on other countries with its own partners to make that more concrete for you. Canada is working on a trade deal with Brazil. If the Trump administration in a few months wanted to put on new tariffs on Brazilian steel, Canada would be committed to doing the exact same thing. That seems very unusual in the sense that it suddenly seems like the US is asking Canada and I'm being a little facetious here, but to basically operate as a 51st state to force US trade policy on another country is to take that country's ability to negotiate trade deals away.

And certainly that is how the Canadian side saw it. They saw it as an encroachment into their sovereignty, particularly at the time where they're trying to make trade deals with other countries to help their economy because their closest ally the US has slapped tariffs on them. Take it away from them and so they find that unacceptable. Another really specific issue that came up that we discussed with our sources was that the United States wanted Canada to remove certain laws that require US streaming companies operating in Canada to favor Canadian content shows that are made in Canada, including shows that are in the French language and made in Quebec.

Concession that was being asked would sort of translate, for example, in let's say Netflix, surfacing Quebec show higher up on your screen if you were based in Canada when you went online to watch a show, which makes a certain amount of sense. It's also what the US streamers do in the European Union where they sort of tailor the offering promoted for the local market. So the Americans were saying to the Canadians, we don't want any streaming service to show that kind of preference for French language.

They didn't say anything about the French language. They just said we think this is a matter of free speech and no one should be telling our streamers what they put where and in what order.

But for the Canadians, this was vital. And if nothing else, I think, both sides kind of agree that the US just didn't have a lot of regard, didn't have a lot of time for that kind of sensitivity, which was clearly so so important to the Canadian side. And one of the real points of contention that we reported on exclusively and it hasn't been reported previously in these talks was that the United States wanted Canada to cancel a program that had put in place to help its industries suffering from US tariffs, called by Canadian, which basically told Canadian government entities to prioritize buying Canadian products for public sector projects like, you know, by Canadian steel to build this bridge.

Which actually is a program that exists in many countries, including the United States. And the US asked Canada to cancel this program without offering to remove the tariffs that the program was supposed to be sort of countering a home.

“And I think that really irked Canadians. And the math was not adding up for the Canadian side. They were constantly running the numbers on the proposed improved US tariffs on some of their goods.”

I'm talking steel, aluminum, autos, and they kept going back and saying, well, you have to improve this because it doesn't matter if you cut your tariffs on SUVs to 15% because under this regime, we're soon not going to have an industry making SUVs because it's it's not enough.

Canadians determined that this deal was still going to cost them key industries like their auto making industry and therefore was not tolerable.

“That's right. I think they could see that perhaps there would be some relief in the short run, but still not enough to make those industries viable.”

Ultimately, too, there was something that really highlighted the black of trust underpinning these talks. And that was that the Canadian side repeatedly asked for some assurances that the new tariffs wouldn't be revised. Basically, that the US would stick to its agreement. And officials told us that at no point did the US make any such commitment. In fact, they insisted that they retain all the power to change their tariff policy even on goods covered by this agreement against Canada at will. Objectively speaking, I'm not a trade expert, but I'm listening to you carefully. This is not sounding like a good deal for Canada. It is kind of impinging on its ability to do trade deals on its sovereignty.

It's potentially putting key industries out of business and it is implying if not explicitly stating that it could all be torn up by President Trump and a given moment and made worse.

“I think that's a fair summary, and I think that's definitely how the Canadians see it. The American negotiators would say that's still the best deal we're offering anyone right now, so you should take it and you should say thank you.”

By quarter to eleven Friday, Mark Carney has decided that he's not going to go for it, and we find out that he's walked away. Good morning, everyone. Bonjour to you all. And the next morning, he addresses the Canadian public in this sort of quietly see thing, but really, really resolved press conference. For over a year, Canada has worked intensively in a good faith with the United States to negotiate a new comprehensive trade deal. We've been pragmatic, patient, and persistent.

And he says, we've been attacked, and we're going to retaliate. We're going to take out more counter tariffs against the United States.

“The gap between partnership and competitor, unfortunately, is remained too wide in recent days. We cannot accept what they've offered, and we will not give what they've asked.”

So, he basically puts the country on a war footing.

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“You know, what exactly is Prime Minister Carney's plan for what is now looking like a no-holds bar?”

Very prolonged potentially trade war against the U.S.

And how does he ever see it working out well for Canada? You earlier started to hint a little bit at his strategy, but just talk us through the details of what you called the bet that he is attempting here. Well, I think Michael, he's going to try and do two things. The one is really focused at the economy at home trying to protect those hurting from those tariffs and build up the economy. And the other is focus in a laser-sharp way on ways in which Canada can inflict pain on politically important places in the American economy through the counter tariffs that he's taking out.

Okay, let's talk about those one by one starting with how he can protect Canada's economy and Canadians from what will be the probably outsized impacts within Canada of ratcheting up a trade war. Yeah, so he's already said there's going to be pain. He's under no illusions that these tariffs and counter tariffs are going to hurt Canadians. In fact, he said so explicitly in his address on Saturday, but he also said we're going to do whatever he takes to protect you. And so he's planning public spending to support the industries and the workers that are going to be hurting.

He's not detailed what that's going to look like. I'm speculating here, but it could be bailouts or injections of cash and some of these businesses. It could look like employment security schemes. It could look like improved borrowing terms or tax relief. But he has said he's going to be there and he's going to put the country's budget behind those pain points in the Canadian economy. Naturally, interesting because that does sound like war footing. The economy will be oriented. It sounds like around buttressing industry borrowing potentially large sums of money to help something like the auto industry.

I mean, we've seen bailouts in the US. They're very expensive, but they can work. Yeah, for sure, and especially in crisis moments like this, and not to carry on too far with the war metaphor, but he will also continue looking for allies outside the United States. To support the Canadian economy. And just in a few weeks, time in mid September, he's organizing a massive investment conference. I'm talking the biggest funds, the biggest banks, the biggest sovereign funds in the world coming to Toronto to find ways to invest into the Canadian economy.

Prime Minister Carney is continuing his travel globally to cut new trade deals. I think he's due in Brazil soon. He's talking with Microsoft or the Latin American trading block. And that doesn't necessarily mean these entities would be taking a position against the United States. But they would be supporting new sources of revenue and investment for the Canadian economy.

And their confidence in his ability to protect them from the fallout of doing that.

I mean, extremely supportive right now in Canada, Mr. Carney is basically walks on water.

Paul released on Sunday by Angus Reed, a nonpartisan independent Canadian public opinion company shows that 76% of Canadians support the Prime Minister's decision to walk away from the negotiating table. That's huge. That is many, many more Canadians than voted for him, right? So this isn't a partisan issue anymore.

“And I think it's a bit of a country that's basically never agrees on anything anymore. Absolutely. But it's worth saying it will only go downhill from here, right?”

In the same poll actually Canadians expressed a lot of concern about their livelihoods, about the economy, about the industry and about the country's continued safety.

When it's in such an intense antagonism with the United States. And so I think as that pain starts to bite, that support is going to start coming down. And the Prime Minister is aware that there's a window in time for him to make things better and really demonstrate to the Canadian public that he knows what he's doing. I want to return to what you described earlier as Carnies plans to use retaliatory trade tactics to target politically sensitive areas in the US. I'm guessing the Carnie knows well that this is a midterm election year in the US.

He understands how that works.

“What might that retaliation look like and what is he hoping it leads to in the US?”

I think the Prime Minister has been really careful. He doesn't want to antagonize the American public. He believes the American public can be an ally for Canada in this situation. Because most Americans don't really understand why Trump is targeting Canada. But he does believe that he has a window of opportunity to take out retaliatory tariffs against the United States focused on areas mostly in red states and industries that are going to then go to President Trump and ask him to stop it with Canada.

What would be an example of the kind of retaliatory action that Carnie could take that would lead to that kind of conversation with Trump in theory?

“I'll give you an example of something we've already spoken about today, which is the ban of the sale of US alcohol products in Canada.”

We know that this has been very, very painful. For example, you know, for bourbon distillers in Kentucky, so we know that those industries have been in the administration's ear asking for the fight to be resolved and for the sale of their goods in Canada to be restored. And I think that's what Carnie's hoping multiplied. And the Canadian officials are doing their homework where are industries based that are going to hurt Trump. So for example, the Prime Minister mentioned a number of other categories of products, including household products that we know are predominantly made in Bahaya, Michigan, Kentucky. So that's really what they're looking for. They're looking for a specific categories of products that are going to inflict pain in specific Republican pockets of support.

And it feels like the wager Carnie is making is grounded in a deeper truth, because while Canadians overwhelmingly support Carnie pulling out of these trade talks based on that poll, you just mentioned, pulling here in the US shows that a clear majority of Americans disapprove of Trump's trade war against Canada and more broadly of his entire approach to trade in the second term. So Carnie's logic would seem to be that he can rally Canadians to make the sacrifices required to get through this and they will support him because they think it's righteous.

And if you can keep wounding President Trump politically, where it matters in the US, there's not going to be as much support for his agenda, but where that would seem to get tricky really fast is that it's probably hard to do that without antagonizing Americans, which you said was Carnie's goal. How can you hurt American industry without hurting the Americans who work in those industries? For sure, and I don't think that Mark Carney is motivated to not hurt Republicans. He's acknowledged that these countertares are going to hurt Americans, as well as Canadians. He said we are taking these measures reluctantly. We didn't start this. He keeps saying this. This isn't our war. We got attacked, but we got a fight.

So I think in that context he wants to take that fight to the people who voted for Trump. And there are big, big tools he could use to inflict pain on the US that he's not going to use.

There is an absolute dependence on these products. But imposing tariffs or restrictions on those exports to the US would hurt all Americans in some ways. Feed into this spiral of cost of living crisis in the United States because of the oil crisis and the Middle East. And Carney doesn't want to do that because he doesn't want to turn the whole American public against him.

“In a particular moment where a lot of Americans, I think, think he's doing the right thing. I'm just trying to understand what Carney's endgame is.”

If he's successful in punishing industries in Republican states and if he's successful in winning American voters to his side,

where does that ultimately get him in a punishing trade war led by a president who often is unmoved by appeals from either industry or consumers?

I think two things, I think it helps him fund some of the measures back home because those tariffs are going to bring in revenues for the Canadian budget. But I also think it creates an atmosphere around the cause of Canada in the United States. And he stays firm. He stays resolved. We know President Trump may be angry with him right now, but appreciates a strong guy across him at the table. And he tries to take that to President Trump at a different moment in the future. But there is no doubt that Carney's playing the long game here. If he was playing the short game, he would have taken the deal on the table on Friday.

Well, I'm glad you're thinking about Carney because that's where I want to end the conversation. We spend so much time on the show analyzing President Trump's behavior in these kinds of conflicts.

“And I'm glad that we're focused on Carney because that's how I want to end this conversation with what you think you.”

And frankly, all of Canada is learning about Mark Carney from the way that he's handled this conflict. And it occurs to me that when he gave that speech in Davos, many months ago, he was applauded by world leaders for declaring a kind of independence from the US.

But those world leaders, basically none of them replicated his actual conduct of standing up to the US. He's quite alone in doing that.

And then having the backbone or the delusions on which side you're on that this will work out. So what would you say you're taking from how he's handled this?

“Yeah, I mean, I think it's important to remind people, Mark Carney was not a retail politician until a year and a half ago, right? He's a kind of career economist.”

So when he came to Canada age 60, he came home to do this. And I think he launched a really confident alternative vision for Canada. A Canada that would be independent of the United States, it would export all this incredible resources that it has, and it would not be that kind of stereotypical kind of like little cousin to the US, me, and just polite. And it's a generational shift, but it's a gamble if it takes too long to implement and if it just isn't enough to sustain the Canadian economy. It will be a very, very serious problem on the other hand though, if it does work and if Canada is able to stand on its own to feed in a much more substantial way.

And particularly by forging these relationships with other countries, what a powerful thing that will be to and what an incredible sort of thing for the rest of the world to look at.

It will mean that he took that risk and it paid off, but that is a very long term project and the trade war is happening today. What you're describing sounds not just like an economic project, but a project to redefine the entire Canadian psyche. Yeah, I think he's doing nation building and identity building in Canada and he's asking Canadians to see the country the way he sees it. And so I think it is fascinating. It's not something we see a lot in the West. We don't see that happen, but it also right now means standing up to the superpower next door and I think that's really, really hard.

Yeah, thank you very much. Appreciate it. Thank you, Michael. You can read more from Martinez Davis, Gridnaf and all of our international reporters on the New York Times app. If you don't already have the app, we want to let you know that if you download it right now, you'll get access to everything on it for free for the next month. So give it a try.

Here's what else you need to know today. On Monday, the Supreme Court allowed the Trump administration to move forward for now with plans to restrict mail-in voting before the midterm elections.

“But it caution that the order was preliminary and not a final decision on whether Trump's actions on mail-in ballots will be lawful.”

The courts three liberal justices descended on the emergency ruling, with one of them warning that the decision would inject, quote, chaos and uncertainty into the midterm elections.

And the Trump administration launched what it said was it's most wide-ranging assault yet on Iran's economy, as it replaces military attacks, which paused nearly a month ago with financial attacks.

“Second World War, D-Day marked the historic beginning of a campaign with our allies to target and drive the enemy from its positions, including those in third countries.”

Today, in that same spirit, we are launching an economic onslaught against Iran's financial connections around the globe.

Treasury Secretary Scott Besson said that the effort would begin with new sanctions against 60 entities that enable Iran to obtain weapons and sell oil.

And suggested that the ultimate aim was the collapse of the Iranian government. To the ordinary soldiers supporting this regime, as more and more of your paycheck stop or supposedly just delayed, ask whether your commanders are leading your country to triumph or to ruin, and recall that the Berlin Wall fell when ordinary soldiers decided not to shoot at their own people. But it's unclear how much impact the new policies will have. Previous rounds of sanctions have already crippled much of Iran's economy, and yet the government there has repeatedly found ways to finance its military.

This episode was produced by Carlos Prieto, Diana Lynn, and Shannon Lynn. It was edited by Deventeller and Liz O'Balen, contains music by Rowlingy Misto, Pat McCusker and Dan Powell, and was engineered by Chris Wood. Our theme music is by Wonderland. That's it for daily. I'm Michael Borrow. See you tomorrow. I am MJ Franklin, and this week on the Book Review podcast, it's a bookstore, Palusa, an entire episode dedicated to bookstores.

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