Since walking away from a nearly-done deal with the United States in late August, the U.S.-led trade war with Canada has escalated to retaliatory tariffs implemented by Canada, and more threatened tariffs by the U.S. This week, the Prime Minister is in Europe, laying the foundation for closer ties with the European Union, a move that is not landing well with the American administration.
Does this get us even further from any sort of negotiation on trade? What are we negotiating anyway?
Sean Speer, editor-at-large for The Hub and former senior economic advisor to Prime Minister Stephen Harper says that, in his view, Canada may have walked away from the best deal it was going to get, and that the ensuing tit-for-tat back and forth we're experiencing now will only end up putting Canada in a worse position in the short-term, and possibly in the long-term as well.
Despite public frustration and media skepticism following the collapse of recent trade talks (do we really know what tanked the deal?), Speer maintains that the framework negotiated by Canadian representatives secured critical protections for primary exports. He cautions that adopting a prolonged tit-for-tat stance could expose the broader economy to more severe non-tariff measures.
"I think if you look at it dispassionately, I think you can make the argument that all things being equal, it was a pretty good deal for Canada," says Speer. "My biggest fear is that the politics on both sides of the border incentivize politicians to continue this escalation, and that the administration isn't merely focused on symbolic retaliatory tariffs, they start to draw on some really powerful policy instruments that would do serious harm to Canada."
Addressing domestic competitiveness, Speer highlights the government's recent announcement allowing immediate capital expensing, which aims to match and exceed tax provisions in the U.S.. He notes that providing immediate depreciation on long-term assets will significantly improve Canada's ability to retain capital and support broader economic stability amid ongoing market turmoil. But that doesn't, at least for now, begin to chart a course back to the negotiating table.
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Read more » All right, joining me now is Shaun Speer. He's the Hubs Editor-at-Large, lecturer at the U of T and Carleton University, and for many of you, former Senior Economic Advisor to Prime Minister Stephen Harper. That carries a lot of weight with our audience. Shaun, welcome here.
Yeah, Lyndsey, it's grateful— I'm grateful to be with you.
Okay, so all of my policy wonk friends freaking out right now, and I'm just going to roll with that. We are at such a strange time, and listening to your podcast, listening to the discussions going around, you know, you've taken sort of the look at this Canada-US relationship, this trade war, and maybe taken less of the view of, you know, the whole elbows up retaliatory measures are what we need to do. Walk us through that. Where do you see where Canada has perhaps fallen flat on its response to the US?
Yeah, if you'll permit me, Lyndsey, let me step back a little bit because I follow American politics closely. I'm interested in a lot of the intellectual and, call them philosophical currents running through American politics, and so I've observed the growing trend towards protectionism on both the Republican and the Democratic side. And of course, the Trump administration has its own particular flavour of protectionism. And so for a long time, I was of the view that the spirit of NAFTA was dead, and that irrespective of whatever happened in negotiations, that we were going to have to live in a world where we couldn't couldn't be sure of tariff-free or low tariff access to the US market, which of course throws into question a bunch of stuff about Canada's economy and Canadian policy. I must admit, starting from that very pessimistic point of view, I was surprised by media reports now going on 3 or 4 weeks ago about the contours of the alleged deal being negotiated by Prime Minister Carney, Trade Minister LeBlanc, trade negotiator Janice Charette, and their counterparts on the American side, particularly U.S. Trade Representative Jameson Greer. If we are to believe a lot of the reporting, in effect, what was being negotiated would have protected tariff-free access to the U.S. market for the vast majority of Canadian exports, including large swaths of our agricultural economy, in exchange for maintaining tariffs on aluminium and steel and autos and some number of other concessions from Canada, probably with respect to the treatment of big tech firms when it comes to the CANCON rules, probably some liberalisation or adjustments to the supply management regime and And maybe some other things. I must admit that that deal, as it's been reported, is far better than my operating assumption going in, that to the credit of the Canadian government, they managed to secure, again, as we understand it, better terms than I ever envisioned. And so what's been striking to me in the ensuing weeks is others have claimed, you know, in effect that there is no deal that's satisfactory because President Trump is unreliable, that we ought to essentially wait the administration out, possibly past the midterms and maybe even all the way to the 2028 presidential election. And here I am, someone, as you say, who worked in a Conservative government, at times has been critical of the Carney government on different files, Saying, actually, I think the Prime Minister here managed to negotiate a pretty good deal, certainly better than what I thought was possible. And in that sense, I worry a lot, Lindsay, that we're kind of in a world where the conversation is so in kind of one direction that it is undermining our ability to kind of think dispassionately and rationally about what is possible and what Canadian interests are. And although I know I find myself in the minority here, I think that we may rue the day that we didn't sign the deal that was negotiated, because as I say, those terms may not have been the first best choice, of course, but given the situation we're living in, actually represents a pretty positive, in my view, outcome out of the whole maelstrom that really started when President Trump started talking about ripping up NAFTA and renegotiating the underlying assumptions of the Canada-US free trade arrangement.
So when that's— so there's a lot to unpack there, and I think these are important points, is that CUSMA, USMCA did replace NAFTA. It was under Donald Trump that this deal was struck.
Yes.
But I think the writing was on the wall that this was not necessarily a forever thing. And especially as Trump came into his second term.
Yes.
There's 2 things here I think that are important is that I think I agree with you and I will also be one of those contrarians because we're going to talk retaliation in a minute. And I'm probably in the minority. majority on that one as well. But realistically, the deal, as you put it, is perhaps the best worst option that we could have taken and better than maybe what we've got now, or for sure better than what we've got now given where it's going now. But were there things in there in that particular deal that have come out since that you think were the actual reason that we stepped away from that deal?
Yes.
I sort of feel like we still don't have transparency on exactly what blew that all up.
Yeah, great question. In a way, what you're alluding to is maybe the following. Towards the end of August, I think Wednesday, August 21st or 22nd, Jamieson Greer announced that a deal in principle had been achieved. He congratulates the president on X. It really does look like there's a breakthrough. And of course, by Friday, late into the evening, the Prime Minister is telling the Canadian negotiating team to go home, and we're in a world of escalating tariffs. And it prompts the question, of course, what happened? And as you say, we've got kind of competing claims about what happened in the intervening time. The Prime Minister has alluded to last-minute items, including some expectation that we would match the American on external tariffs, say vis-à-vis China, some expectation last minute that we would do something on quote-unquote French language. We really don't know, though I would say that Jameson Greer and some other American representatives have brought into question at least the interpretation of the Prime Minister and the negotiating team about what exactly those last-minute issues are and were, and I'm prepared to believe that they were such that maybe they fundamentally changed the nature of the agreement and it went from being acceptable to unacceptable. But what we do know is what was negotiated midweek, and as I say, I think that if you look at it dispassionately, I think you can make the argument that all things being equal, it was a pretty good deal for Canada.
Yeah.
And what strikes me, Lyndsey, is that there are a lot of people after the deal blew up who didn't just criticise or raise questions about some of these so-called last-minute issues. They criticised the entire negotiations, kind of root and branch, which then prompts the question, what is their position? Is it the position of, say, Andrew Coyne, the Globe and Mail columnist? And others like him that a deal with this president is impossible and that Canada has to live with growing uncertainty and possibly an escalating trade war for now until January 2029 when a new president is installed? If so, what are the kind of costs and trade-offs of that? Would it mean, for instance, that the Canadian government would need to massively intervene in the economy, something similar to what was done during COVID to prop up businesses that would be negatively affected by rising tariffs and other non-tariff policies from the United States. Like, no one is arguing, at least I'm not arguing, that the responsibility doesn't rest with the president. No one is is arguing, you know, that the president hasn't precipitated all of this with his threats and provocations. No one is arguing that these are anything but hugely challenging, thorny, woolly issues that require, you know, prudence and judgement and all the rest. But I think I worry a lot that that there's almost like a kind of madness of crowds happening, that people are so understandably kind of pissed off, if I can use that word, You may. about the president, that it is impairing our ability to kind of think dispassionately and rationally about our interests. And I think if you did that, you would see that the Prime Minister and the people around him deserve credit for having negotiated what, on the face of it, strikes me as a pretty good deal And I'll just wrap up here by saying, again, I think the onus is on those who are arguing that we should put off any negotiations, put off any deal for some kind of future event that somehow fundamentally changes the negotiating dynamic such that Canadian interests are better upheld. There's some onus on them to, like, explain what those circumstances are, how they change, and what the costs are for Canadians. Before we go kind of headlong, headfirst rather, into what could be a kind of enormously disruptive and painful process at the end, which it's not obvious to me that we would get a better deal than the one that was on the table at the end of August.
So, and this is where I have landed on this as well, is that I follow this stuff probably not as closely as you do and your team, John, but we follow it from an agricultural perspective and from a bigger perspective. Every day, far more than the average person in my circle of people, much to the chagrin of my friends. And I don't know what's even going on all the time.
Yes.
Okay, so the US said, nope, they're tariffing us. So we said retaliatory tariffs. So those went in after Labour Day. Now we've got the September 29th deadline. At some point when someone says, do we get back to the negotiating table? I have to ask, For what? Like, which one of these things are we actually talking about? And my— so that's where sort of my concern is, you know, a relatively well-informed Canadian, I can't make heads or tails of what we're supposed to be going back to the table about anymore.
Yes.
I don't even know if USMCA is in the mix. Do you know what I mean? Like, I feel like it started as that renegotiation or renewal and we have devolved into something else. And one of the things I do want sort of Your thoughts on is the— so we, we walked away from that deal. Uh, could have been a really good deal, might have been a good deal. Maybe you're right. And I will also agree there, there may have been a deal breaker added at the end that for whatever reason we walked away. Got it.
Totally.
But now we move into this completely befuddled, confusing era of just this is on, this is off, this is on. And there are real and concrete costs and fallout from this.
Yes.
And that's the part, from your perspective, at least at the surface right now of what we can tell, where do you see the biggest hurt maybe in the short to medium term happening for the Canadian economy?
My biggest fear, if, and maybe cooler heads have prevailed, you'll note, for instance, that in recent days, the Canadian Prime Minister indicated that we would not be responding to the latest round of American tariffs with our own. With our own new set of retaliatory tariffs. Maybe that is a sign that cooler heads are starting to prevail. Maybe there is indeed an off-ramp, as you set out in the introduction. But my biggest fear is that, that the politics on both sides of the border incentivize politicians to continue this escalation, and that the administration isn't merely focused on symbolic retaliatory tariffs, they start to draw on some really powerful policy instruments that would do serious harm to Canada. You'll note this in the past week or so, the administration announced that they were providing instruction to the GSA, which is kind of like the American equivalent of our Public Works Department, that Canadian businesses can't participate in, in U.S. government procurement. That is an example of a non-tariff response.
Right.
But there could be others, right? Like, what happens, for instance, if the administration targeted visas or brought into question the reliability of the Canada-US tax treaty or the licences of Canadian banks operating in the United States? Some of those measures, or even musing about them, could have significant implications for Canadian equity markets, for Canadian businesses, and of course for Canadians. So let me emphasise, I am, you know, because of course when you have these types of conversations, Lyndsey, I'm sure you've encountered accusations that you're a traitor or that you're disloyal or that you are—
Right.
A Trumpist, like none of that could be further from the truth. If you want me to say that Trump is the principal source of why the relationship has deteriorated, of course I would agree with that. But it seems to me that our job in the media is not to kind of affirm people's raw, understandably raw emotions. It's like to help them think through what is a kind of wicked problem. And it seems to me If that's the way you're thinking about this, it's in Canadian interests, all things being equal, to try to bring greater stability to Canadian access to the US market. And that a kind of tit-for-tat retaliation— first of all, it's not obvious to me how it secures a better deal. And worse, it's just going to create a lot of disruption and pain in the intervening time. And it may feel good in the moment. But there's an onus on policymakers, and if I can call them kind of thought leaders, that their responsibility is not to kind of scratch an itch, it's to deal with the issues and challenges as they exist.
And so you bring up an important point, I think, as well, is that, you know, for the most part, most of this trade deal and trade wrangling has been in sort of this Exactly that public sphere of tariffs and trade and really focused on that. But you're right, there are— just yesterday on the show, we had Patrick DeHaan of GasBuddy on to talk about diesel prices and talked about just how fully integrated something like our energy is between Canada and the US at a level of infrastructure and a level of like— And so you're right, there's a— there is a difference as much as— and I'm not saying that it doesn't hurt economically to have all this happening. But there are other levels and layers to this that should the US want to take them, they very well could. I would imagine there would be some cost to the American people as well, but realistically, like in any of these, Canada loses more. We're 40 million people.
Yes.
Right, so we lose more. So that brings me sort of to where As you did mention, the investment summit's happening this week. Carney made this announcement about that. You know, are there, do you see an off-ramp slash road back to a table? Is it in that business realm? Is it in that investment realm? Any guesses on how we sort of get back to the table?
Yeah, it's a great question. And this is conjecture. Of course, I don't know, but I think one of the reasons that the Prime Minister was prepared to kind of take the political risk to secure a deal near the end of August, notwithstanding the fact that it would galvanise some Canadians for obvious reasons, is because he was hearing from those attending this week's investment summit that one of the kind of crucial preconditions for increasing investment with— in Canada was trying to bring greater stability to the Canada-US relationship. Companies invest in Canada typically to serve the North American market, not just Canada. And so I can't help but think that some of the urgency behind those negotiations was that the PM was keen to try to have a deal done going into this week's summit. That, of course, failed. But it seems to me that that's still probably the strongest impetus for getting a deal. And it seems to me the Prime Minister almost has like 2 birds on his shoulder. One is his political advisors telling him that when Donald— the salience of Donald Trump is high, it's clearly in the political favour of not just of the federal government, but really incumbent governments across the country. People seem to flee to safety when Donald Trump looms large over our politics. And so, you know, I'm not accusing anyone of playing politics with this, but it's just a kind of axiom that that is no doubt something that at least some people around the Prime Minister are thinking about. Then there's this other bird on the shoulder. The Prime Minister has huge ambitions for his kind of theory of the case when it comes to Canada's economy. We're seeing that play out at the Investment Summit. There's announcements today, September 15th, that are really, I think, significant, including, for instance, major expensing provisions in the tax system, like really great stuff out of the Prime Minister and his government, for which they deserve credit.
Yes.
But there will just be a kind of constraint on how far they can push that as long as the Canada-US relationship is in turmoil. And one can't help but think that at some point, Lindsay, the Prime Minister will say, I've got big ambitions for Canada. I need to get this deal done so I can get back focused on that. And hopefully that is an incentive, the incentive we need to to do this. I know I've mentioned this a couple of times, but let me just reinforce because it can't be underscored enough. This is a difficult hand. It's just about the most difficult hand any prime minister could be dealt. I don't— I'm under no illusions that there's easy answers, but I think we kind of owe it to ourselves, we owe it to our fellow Canadians to kind of keep our heads. And I think if you do that, You'll see that the basic contours of what was negotiated towards the end of August was actually a pretty good deal, and in my judgement, worth taking, especially when set against the alternative, which is a kind of uncertainty, if not an escalating trade war with the United States that will impose real costs. And it's not obvious to me ultimately produce a better outcome. And, you know, that may be hard for some people to hear. But I think those counselling the opposite similarly owe it to Canadians to explain why their plan is better besides just accusing you and I and others of being disloyal or traitors. It's just not illuminating in a moment where our public debate desperately needs illumination.
We have thick skins. Sometimes, Shaun, and for good reason. There's 2 things I wanted to end with. Please tell me something cheerful, but I don't know that there's many except for that it's almost pumpkin spice latte season. That's what I'm going with. But the last point is I did want to, because you mentioned the announcement, a super mega deduction is I think how this has been put out there, which I think is a ridiculous name for something that actually looks really good.
Yes.
How important is that regulatory change, do you think?
Yeah, it's significant. You'll know that setting aside the trade war, we're in a competition for capital. Last year, the Trump administration and the American Congress passed one big beautiful bill, as the president calls it. Amongst the provisions in the legislation was a pretty generous treatment of capital investment for companies that invested in physical assets in the United States. That risked increasing the incentives to choose America over Canada. And so what the Carney government has done here, as I understand it, is not just match the generosity of the tax treatment set out in One Beautiful Bill, but actually exceed it. So on a permanent basis, capital expenditures in a long list of capital assets will have immediate depreciation that will hugely improve Canada's competitiveness vis-à-vis the United States on capital. And so, you know, I think that's great. On cheerfulness, I have to answer that question.
Thank you.
Otherwise, it sounds like a dire conversation. I said we're speaking on the 15th of September. My kids were back at school about 10 days ago or so, and I gotta tell you, Lindsay, there's nothing better than seeing the kids in their school clothes and, you know, their school pictures and You know, that's, uh, I suspect that resonates with a lot of your listeners and viewers. It's, it's, uh, it's, you know, best part about being a— one of the best parts about being a parent and, and, uh, and, uh, a lot of fun here. And I suspect a lot of fun in the households of many of your listeners and viewers.
I'll take that one. I love back to school. I think you're right. It's such a cheerful time. Um, it's not as cheerful in the high school years, but That's okay, we're going to move on from that. All right, John, we're going to leave it there. Thank you so much for joining me here on the show, really appreciate it.
Uh, look forward to talking to you again soon.
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