During his initial term, Donald Trump, the former U.S. President, started a formal process involving a considerable number of individuals to reshape the U.S.’s trade policies with Canada. This effort culminated in the creation of the U.S.-Mexico-Canada Agreement (USMCA), with stakeholders ranging from longstanding trade negotiators to political staff and government ministers. Now, Trump’s newest initiative to transform the bilateral trade landscape is noticeably different; it is primarily driven by a select group of senior individuals such as the President himself, Canada’s Prime Minister Mark Carney, Canadian Ambassador to the U.S. Kirsten Hillman, U.S. Commerce Secretary Howard Lutnick, and Intergovernmental Affairs Minister Dominic LeBlanc.
These discussions have featured some face-to-face gatherings, but the vast majority of communication has been through calls and text messages. Surprisingly, critical negotiations seem to be happening chiefly between Trump and Carney. The lack of formality and defined structure of these conversations is one of several factors that starkly contrasts these discussions from those held during Trump’s initial time at the helm.
Trump’s first presidency saw trade negotiations take a more traditional format, culminating in the USMCA, but the current approach is very different. Trump is now prioritizing swift agreements on issues he holds dear, such as the automotive, steel, and aluminum sectors, hoping to secure these accords before the USMCA review due to commence later in the year.
Interestingly, these ongoing conversations have even broached topics unrelated to trade, such as border security and the proposed Golden Dome missile defense system. Notably, Trump’s tariff decisions and demands have escalated significantly in his consequent presidential term.
Canadian Prime Minister Mark Carney has opted for a different tactical approach to these negotiations compared to his predecessors. During the initial trade talks, Justin Trudeau and Chrystia Freeland, who were respectively prime minister and foreign minister, were hesitant to grant concessions until the negotiation’s concluding stages. Unlike them, Carney promptly addressed Trump’s requests to abolish a digital services tax and increase defense expenditure in an attempt to placate the unpredictable President. Carney also partially reversed Trudeau’s retaliatory tariffs.
A deadline of August 1st has been given by Trump for reaching an agreement. However, he recently hinted that he might unilaterally set tariff rates if no agreement is made. This negotiating format is preferred by Trump as it places him in a commanding position.
In his initial presidential term, Trump levied tariffs of 25% on steel and 10% on aluminum. However, his second term has seen an increase in these tariffs, with 50% tariffs on both metals, 25% on automobiles, and an additional 25% on goods traded outside the provisions of the USMCA.
Trump has shown a propensity to shift negotiation targets, introducing new demands and threats that range from issues such as fentanyl, defense spending, to digital services tax. He and Lutnick have indicated that in certain crucial sectors, the ultimate objective might be to halt international trade rather than restructure it.
In a meeting at the White House in May, Trump expressed his wish for the U.S. to stop importing Canadian autos, steel or aluminum altogether. This has created an environment where the only viable way for Canada to secure a beneficial deal is by pushing back and inflicting economic discomfort on their U.S. counterparts.
A high-ranking Canadian government official revealed that in respect to the digital services tax, they felt compelled to abolish it or risk Trump terminating negotiations and raising tariffs. This sense of helplessness has added another unique dimension to these already complex negotiations.
There remains the possibility that even if a deal is secured, it will not signify the journey’s end. The discussed issues represent just a fraction of the complete trade partnership shared by the two nations, with the rest likely becoming negotiation topics during the USMCA review. It has been suggested by both nations that an immediate deal might not be feasible.
This potential delay could mean both countries having to tolerate the current climate, characterized by Trump’s heightened tariffs and threats, for the foreseeable future. This could result in the continuation of addressing these issues in the upcoming USMCA talks. It has been increasingly observed that the road to trade agreement between the U.S. and Canada has become a long and winding one, far removed from the traditional paths followed thus far.
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