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Tariffs

Managing the Politics of Concession: Canada's August Deadline

Strategic Insights

— 1 min read

As the August 1 deadline approaches for a Canada-US trade deal, Prime Minister Justin Trudeau faces a daunting challenge: managing the politics of concession. With President Donald Trump's trade threats looming, Mr. Trudeau has been working to lower expectations, indicating that a deal will likely include some tariffs. However, the real challenge lies in making concessions, implicitly accepting damaging tariffs on certain Canadian goods in order to mitigate the impact on others.

Key Takeaways:

  • The Canada-US trade deal will likely involve making concessions, including accepting tariffs on certain Canadian goods, such as steel, in order to mitigate the impact on others, such as autos or lumber.
  • The deal will require Prime Minister Justin Trudeau to defend concessions, transforming him from a Prime Minister who promises not to accept a bad deal to a politician who has to defend disappointments.
  • Business leaders are screaming for a deal to reduce uncertainty for investors, and a delay in reaching an agreement will only add pressure to add industry bailouts to ballooning deficits.
  • The deal will need to be a compromise between protecting key sectors, such as steel, and meeting the demands of President Trump.
  • Canada's business community is urging Prime Minister Trudeau to get a deal now and then work to improve things through a review of the USMCA next year.

Statistics:

  • Tariffs on Canadian steel are currently at 50 per cent, with Ottawa spending large sums on a bailout package to keep the sector afloat.
  • Canada's business community sees the agreement as a sign that the USMCA can be used to keep Canada-US trade working smoothly, albeit no longer tariff-free.
  • The agreement will need to address the tariffs on pharmaceuticals and copper, which are expected to be targeted by the Trump administration.
  • The business community is calling for a deal to reduce uncertainty for investors, with some estimating that the current uncertainty is costingCanadian businesses $100 million a day.

Sources:

  • Campbell, C. (2023). "August is coming, and Mark Carney will have to learn how to manage the politics of concession." August, 2023.
  • "This is the world we're in for a while. And we need to think about the best way out of this," Goldy Hyder, president of the Business Council of Canada, said in an interview.

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