Trump wants to squeeze us hard enough so we come begging

TORONTO—The Carney government—and, ultimately the country—faces a crucial test over the next six months: how much economic pain are we prepared to endure in the short run to preserve our capacity as a prosperous and sovereign nation in the long run? By July 1, Canada, Mexico, and the United States will face hard choices on the future of North American trade, investment and broader economic co-operation. By that date the three nations must decide whether to renew CUSMA, simply keep it on life support for the time being, or accept its demise. Prime Minister Mark Carney has expressed optimism that CUSMA will survive, but has also said he will only sign on to a revised CUSMA that is good for Canada whatever that means. Will the priority be to sustain our mature industries or to enable the future industries if a choice must be made, for example? What we do know is that difficult days lie ahead, that U.S. pressures will aim to divide Canadians both between industries and between regions, that the U.S. seeks to dominate the Western Hemisphere, including Canada, and sees us as a vassal state. Canadian resolve will be sorely tested, and there will be influential Canadians arguing for costly appeasement. The result will be much uncertainty and lost opportunity. A new report—Top Risks 2026—from Ian Bremmer and the American geoeconomics consultancy Eurasia Group, predicts the CUSMA “won’t be extended, updated, or killed. It will stagger on as a zombie, keeping businesses and governments guessing, while President Donald Trump continues negotiations with America’s two largest trading partners.” So more delays in investment and job creation, higher prices, and more cross-border friction that impacts other areas from defence and security, to health and energy. The Eurasia Group report does a fairly good job of showing why we are may very well have to live with a “zombie” CUSMA that is “neither dead nor alive.” For his part, Trump, the report says, “wants to avoid the constraints of a new trilateral deal so he can keep using bilateral leverage to squeeze economic and political concessions from both countries.” So far, it is working—Canada’s decision to rescind the digital services tax—which would have forced foreign Big Tech firms such as Alphabet/Google, Meta/Facebook, Amazon, and others, to pay a minimum tax on their substantial Canadian profits—is a good example. Canada retreated in the face of U.S. pressure, but got nothing in return. Meanwhile, in sectors the U.S. wants to reshore, including autos and auto parts, steel, and aluminum, “North American free trade is dead.” What we can expect, the report warns, is that “American demands on both neighbours will be extensive. For Canada, they will centre on tariff-rate quotas on Canadian autos, steel, and aluminum; expanded access to Canada’s banking and dairy markets; an end to what Washington calls discriminatory taxes and regulations targeting U.S. tech and entertainment firms; higher border security; higher defence spending; and more purchases of U.S. military hardware.” With Canada resisting U.S. demands that would give Trump a “win," and Trump unwilling to back down, “tariffs will stay elevated and weigh on growth, Ontario’s auto and steel heartland will sputter,” while “Canadian firms in unrelated sectors risk becoming collateral damage.” Yet, breaking up CUSMA is not an easy ride for Trump. In recent testimony before U.S. congressional committees, U.S. Trade Representative Jamieson Greer said that in public consultations “many stakeholders expressed support for the USMCA and many explicitly called for the agreement to be extended” with “broad support for the agreement” although adding that “virtually all stakeholders also called for some sort of improvement to the agreement.” Breaking up CUSMA would be costly for the U.S. So the next six months will see enormous pressure on Canada to deliver some kind of “win” for Trump. As Greer told the closed-door Congressional sessions, data sovereignty and the future of the digital economy is one such hot issue. Canada, he complained, “insists on maintaining its Online Streaming Act” as well as “other measures that restrict digital services trade.” The Online Streaming Act forces U.S. streamers such as Netflix, Prime, Apple TV, Disney, and HBO to allocate a small proportion of their Canadian revenues to funding some Canadian content on their systems, just as this country's domestic TV networks must do. These companies are here, though, as extractors, seeking to repatriate revenues home to the U.S. The Online News Act, which forces Big Tech to provide modest compensation to Canadian media for loss of advertising revenue, and the Online Harms Act, which aims to protect Canadians against internet abuse, are also U.S. targets. The Carney government had already rescinded the digital services tax. In fact, the U.S. consultation process included two panels specifically dedicated to digital-related issues and, as Greer reported, many stakeholders praised CUSMA’s digital trade rules, calling for them to be retained, perhaps with targeted updates. It’s not hard to see why. In the original CUSMA negotiations Canada acceded to American digital demands without much consideration of the implications—with the result that Canada’s efforts to exercise data sovereignty are already constrained. This time, will the digital economy again be neglected, or sacrificed, if that reduces steel tariffs? Much, though, will depend on the readiness of Canadians to endure economic pain in the hope that time is on our side—that the U.S. finds that its current bullying does not work and that the next administration will better understand how the U.S. benefits much more when it pursues a good-neighbour policy. The danger is that in the interim there will be growing pressure form various interest groups in Canada to do a deal, no matter how painful, just so there is a deal. But do we protect our auto parts industry, for example, by sacrificing our dairy farmers or data sovereignty? Trump’s view, from the beginning, has been that if he squeezes us hard enough, we will come begging. Our test is to prove him wrong, and not sacrifice the future for the present. David Crane can be reached at crane@interlog.com. The Hill Times

Trump wants to squeeze us hard enough so we come begging

Our test is to prove him wrong, and not sacrifice the future for the present.

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Trump wants to squeeze us hard enough so we come begging

Our test is to prove him wrong, and not sacrifice the future for the present.

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