Whereas in 2017, the White House concentrated its demands in the relatively conventional process that led to the USMCA, this time, Mr. Trump is pressing Canada for a fast deal on a suite of issues.Evelyn Hockstein/Reuters
When U.S. President Donald Trump set out to renegotiate his country’s trade relationship with Canada during his first term, the talks followed a formal process and involved hundreds of people. The U.S.-Mexico-Canada Agreement was the product of discussions between everyone from career trade negotiators to cabinet members to political staff.
Mr. Trump’s current bid to overhaul bilateral trade, by contrast, is being substantively hammered out by just a handful of top people: the President, Prime Minister Mark Carney, Canadian Ambassador to the U.S. Kirsten Hillman, U.S. Commerce Secretary Howard Lutnick and Intergovernmental Affairs Minister Dominic LeBlanc, according to three sources with knowledge of the process.
The talks have included some in-person meetings but have largely relied on telephone calls and text message threads, said the sources, one a Canadian government official, one a Canadian industry source and one a U.S. industry source. The most significant negotiations appear to be happening directly between Mr. Trump and Mr. Carney, the Canadian industry source said.
The Globe and Mail agreed not to name them to learn details of the confidential discussions.
The freewheeling, informal nature of the talks is only one of the sharp divergences between these negotiations and those during Mr. Trump’s first turn in the Oval Office.
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Whereas in 2017, the White House concentrated its demands in the relatively conventional process that led to the USMCA, this time, Mr. Trump is pressing Canada for a fast deal on a suite of issues he cares most about – the auto sector, steel and aluminum – before a planned USMCA review even gets under way later this year.
The current discussions also include non-trade-related matters, ranging from border security to the proposed Golden Dome missile defence system. And both Mr. Trump’s tariffs and his demands have been far harsher in his second term than in his first.
Mr. Carney, for his part, has adopted a different negotiating strategy from the one then-prime minister Justin Trudeau and foreign minister Chrystia Freeland employed with Mr. Trump the first time around.
While Mr. Trudeau and Ms. Freeland held off on concessions until the end of talks – trying not to give up leverage points until it was clear what the U.S. would do in exchange – Mr. Carney swiftly met Mr. Trump’s demands to kill a digital services tax and boost defence spending in a bid to mollify the mercurial president. Mr. Carney also partly rolled back Mr. Trudeau’s retaliatory tariffs.
Where the talks will lead remains an open question. Mr. Trump has set a deadline of Aug. 1 for a deal. But on Friday, he held out the possibility that there will be no agreement and he will simply set tariff rates unilaterally. “We haven’t really had a lot of luck with Canada. I think Canada could be one where there’s just a tariff, not really a negotiation,” he told reporters at the White House.
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Brian Clow, who was Mr. Trudeau’s adviser on U.S.-Canada relations, said the Canadian “Plan A” for Mr. Trump’s current term was to make some sort of limited deal in which Ottawa would agree to the President’s demands for more border security and a clampdown on fentanyl, in exchange for him lifting his tariffs. All other issues would be pushed off to the more formal USMCA review.
“It seems that approach is dead now,” Mr. Clow said. Instead, Mr. Trump has repeatedly added issues to the agenda of the talks, including recently suggesting Canada’s supply management system for dairy and eggs should also be part of discussions.
“Donald Trump and his team feel they are in a stronger position this way, in this type of format where they can put a whole bunch of things on the table and force Canada to engage, given that they’re holding this giant tariff over our heads,” Mr. Clow said. “Trump likes this format of talks because he’s in the driver’s seat.”
The President’s tariffs, which in his first term consisted of a 25-per-cent levy on steel and 10 per cent on aluminum, have also gone much further this time, with tariffs of 50 per cent on both metals, 25 per cent on autos and a separate 25-per-cent tariff on all goods traded outside the USMCA.
Daniel Ujczo, an Ohio trade lawyer and honorary Canadian consul, said his understanding is that a major sticking point in Canada-U.S. talks is that Mr. Trump wants Ottawa to agree to both an export quota on steel as well as a tariff on all steel exported from Canada to the U.S. within that quota, which would effectively amount to double protectionism on the U.S.’s part.
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Ottawa, meanwhile, wants Mr. Trump to agree that any deal they make is final and that he won’t simply violate it again, as he did with the USMCA by imposing his current round of tariffs. “Canada is saying ‘we don’t want to do a deal only for you to then hit us with something else six months from now,’” Mr. Ujczo said.
Further complicating Canada’s task is that Mr. Trump has repeatedly moved the goalposts in negotiations, making new demands and threats concerning everything from fentanyl to defence spending to the digital services tax. At times, he and Mr. Lutnick have suggested that, on certain key industries, the goal is not to reorganize international trade but to stop it entirely.
Meeting with Mr. Carney at the White House in May, Mr. Trump said the U.S. should not import Canadian autos, steel or aluminum at all. In a television appearance last weekend, Mr. Lutnick said the President “doesn’t want cars built in Canada or Mexico when they can be built in Michigan or Ohio.”
Mr. Carney’s moves to meet Mr. Trump’s demands – a harder border, spending 2 per cent of GDP on defence, ending the digital services tax – so far do not appear to have gotten Ottawa anything in exchange.
Lana Payne, the president of Unifor, Canada’s largest private-sector union, said Canada is not going to be able to reach a good deal unless it starts pushing back and imposing economic pain on the U.S. “These extortion and pressure tactics are meant to condition us to take more concessions, and I don’t think that’s where we can be as a country,” she said.
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The Canadian government official said that, on the digital services tax, the government felt like it didn’t have a choice but to drop it or face Mr. Trump quitting negotiations and jacking up tariffs.
A former government official said that, by the time Mr. Carney pulled back retaliatory tariffs, those levies had lost their effectiveness. Unlike during Mr. Trump’s first term, when red-state businesses and politicians responded to the retaliation by pressing Mr. Trump to end his trade war, Mr. Trump’s movement has now so taken hold of the Republican Party that those states’ business and political leaders have no appetite to contradict the President.
The former official is not being named so they can speak freely on trade strategy.
Even if the two sides reach a deal, it will not be the end of the road. The issues on the table represent only part of the trading relationship between the two countries, with the rest potentially set to be renegotiated in the USMCA review.
And for the first time this week, both countries have begun to hint that they may not make a deal imminently. This could mean living with the new status quo of Mr. Trump’s tariffs and threats for the time being – and taking up all of the issues in the USMCA talks after all.
“We have a lot of work in front of us,” Mr. LeBlanc told reporters on a sweltering Washington sidewalk after two days of meetings with Mr. Lutnick and Republican senators. “We’ll take the time necessary to get the best deal.”
With a report from Mark Rendell in Toronto.