Front Burner - How the Canada-U.S. trade deal fell apart

Episode Date: August 24, 2026

On Friday, Canada's trade talks with the U.S. fell apart less than an hour before the deadline for new tariffs hit. While there had been positive signs earlier in the week, Prime Minister Mark Carney says the U.S. proposed new terms in recent days that were "uneconomic, unfair" and "called into question the reliability of any deal." Former Conservative Leader Erin O'Toole is a member of the Prime Minister's Advisory Committee on Canada–U.S. Economic Relations. He joins host Jayme Poisson to shed more light on what went wrong, and what could be coming next.For transcripts of Front Burner, please visit: https://www.cbc.ca/radio/frontburner/transcripts 

Something is happening in Dawson Creek. A wave of violence has swept over this community of just 13,000 people. 15 murders in the last five years. I'm Timothy Sawa and from CBC's Uncover and the Fifth Estate, an investigation into deaths and disappearances in Dawson Creek and what's behind it all. The Mile Zero Murders, available now on CBC Listen or wherever you get your podcasts. This is a CBC podcast. Hi, everyone, I'm Jamie Prosson.

As you all know well by now, after a week of drama over a Canada-US trade deal, the whole thing fell apart Friday night, less than half an hour before the midnight deadline. The Prime Minister, Mark Carney, announced that he was walking away from the talks and sending his negotiators in Washington home. He said that Canada would be matching U.S. tariffs on roughly $28 billion in goods, dollar for dollar. The next morning, he held a news conference. In recent days, the United States proposed new terms that were un-economic, unfair, and undermined the net benefits for Canada and called into question the reliability of any deal. In short, they asked too much and they offered too little. Today, why did Canada walk away from a U.S. trade deal? What could come next? Aaron O'Toole is with me. Mr. O'Toole is the former leader of the federal conservative.

Party and in 2021 ran to be Prime Minister. He is also a member of the Advisory Committee on Canada-U.S. Economic Relations, a high-level group created this spring by the Prime Minister to help steer U.S.-Canada relations. Mr. O'Toole, thank you so much for making the time to talk today. Good to join you. So as I mentioned in the intro, you are a member of the Advisory Council on Canada-U.S. Economic Relations put together by the Prime Minister. You have been receiving regular briefings on these negotiations. And as I understand it, you were briefed this weekend. The group was briefed this weekend by Dominic LeBlanc, the minister responsible for Canada-U.S. Trade. I'm hoping that we could begin here with your understanding of why and how these talks fell apart.

What happened? Well, what happened is the final elements of a deal is to take what is talked about in negotiations and verbally committed to and locking it down on paper. and holding the sides accountable or what happened in the negotiations. That and the fact that the U.S. was increasingly taking unfair and really irrational positions led to this breakdown. So there was early promise, particularly with the United States Trade Representative, the Cabinet member in charge of trade, Mr. Greer. but it's clear that as we reached the final hours to solidify a written agreement, other members of the cabinet were also involved.

And the terms committed to sort of verbally, or the direction of negotiations started changing. And then it became clear that it was not in Canada's interest to accept a bad deal. So even though there will be some pain, and I think everyone involved is thinking about the businesses and the families that will be impacted. but it would be a worse decision to take a bad deal. You mentioned other members of the cabinet who became involved. My colleague McKenna has reported that in the days leading up to Friday, U.S. Commerce Secretary Howard Lutnik, someone with a very close relationship to Trump, was unsatisfied with the deal and thought the White House could do better. Mr. Carney was asked about Mr. Lutnik when speaking to reporters on Saturday, and he essentially didn't address it.

on, but he did say... The Canadian team, unified. Unified the individuals you see here, their team members, our ambassador in Washington, my chief of staff, unified, talking together to the clerk of the Privy Council, everyone in the loop, everyone knows what our objectives are, collective decision-making, as I say, ultimately, I in the cabinet bear responsibility for those decisions, but unity. You cannot say that about the United States. administration. What did you take from those comments, which were, in my opinion, quite interesting?

Well, I think your colleague is exploring something that probably has a lot of truth to it. You know, without getting into what exactly our discussions entailed, the 232 tariffs, the steel aluminum auto, which have really been the pain Canada has felt, and our manufacturers in particular, those are actually under the responsibility of Mr. Lutton. And so if we want additional relief, if we want to basically try and save our auto and auto parts industry and keep this integrated North American auto parts and auto assembly industry,

which we've had since the 1960s with the AutoPact, which the Americans themselves in the first Trump administration signed on to with KOSMA, if we wanted to keep that, we needed to insist on certain elements, and that was falling apart. And so I do think the involvement of other members of the administration led to where we're at. And it also highlights the fact that the administration doesn't have a clear understanding of trade. You know, the 232 tariffs came up in the first Trump administration, and I was saying to the Trudeau government at the time,

this is one area that will likely survive a court challenge because Congress did say the president, if there's security risks in the United States can impose tariffs. And it is a security risk if they can't produce their own steel and aluminum for ships and for tanks and for aircraft. So that was always going to be one of the grounds that work. But it was always the first term about balancing off the power and pressure of China. It wasn't about blowing up North America. I think the Trump administration in the second term has lost sight of what they were. talking about in the first term. And that's leading to real problems. It's leading to U.S.

economic problems. And of course, it led to the breakdown on Friday. I know leading up to the talks on Friday, there was discussion about reducing auto tariffs down to 15 percent. And then if you included some American-made parts in it, it could get even lower. But there's reporting that has outlined how the Americans allegedly came in in the last minute and said that tariff relief would only be applied to light vehicles, not mid and heavy duty trucks. So like the Ford F-350s would have been excluded. You're not an expert on automobiles, but what is your sense of the role that that played? Was that a major factor here? Well, the shifting sands, I think, Jamie, was the biggest factor here. When you're committing to a certain direction in the

talks. And, you know, our negotiator, Ms. Charette and Dominic LeBlaw, approach this with complete good faith. And Canada was willing to talk broader issues, national security, defense, other resources that are critical to American success. But when the shifting sands means they are not going to be clear about content, rules of origin, this is always about making sure that Canada has a portion of the North American auto marketplace. In fact, we are the largest market for U.S. assembled vehicles. And so there has to be an element of fairness for not just our workers, but for our economy. And we couldn't get an assurance of that.

And remember, this is the same president and his team that locked into Kusma just a number of years ago. And so the prime minister's comments about signing agreements in pencil are true. Our government understood before many. that America would transform all of its commercial relationships, that it would put a series of tariffs on its closest allies and use economic integration as a weapon. We recognize that sometimes its signature was written in pencil. We can't even count on the word of the United States

based on a few years ago. And then if negotiations keep changing, as additional ministers come in, how can we sign something in pencil or even get to the table to sign it if we can't trust the counterparty. And that's really where we're at. And it's too bad because, you know, I grew up in a general motorist household. My dad worked at GM in Oswald. I've been around the auto industry and the integrated auto industry since I was a kid. And it's sad to see this administration forsaking that partnership on both the trade and a security level.

In his remarks on Saturday, the Prime Minister also talked about some last-minute curveballs having to do with the Americans wanting to dictate how we trade with other countries. The U.S. introduced at the last hours, in the last hours, efforts to restrict our ability to have other trade deals. We're the partner of choice in many respects for countries around the world, and the Americans wanted to restrict that. They had language that would, they wanted to restrict, unacceptable. I'm not totally clear if this means that they would dictate how we tariff other countries or if they would dictate, like, who we make deals with, like the Chinese, for example.

I just wonder if you might be able to give me a little bit more details around that. The Prime Minister called this request unacceptable. There's two sides to this. Clearly, the geopolitical competition between the United States and China is something that the Americans have been responding to, going back to, President Obama, who first started paraffin Chinese steel. China and their single communist-led government was using the power of their state and programs like the Belt and Road to basically monopolize commodities, like steel and aluminum, try and undermine the West's ability to produce them, and then, of course, critical minerals and rare earths. I'm sure a lot of your listeners know that in some instances, China controls some of these commodities. So that was what the Trump administration

in the first instance was exploring. It was something Canada was slow to catch up on, but caught up. Where the Americans appear to be now is also trying to dictate everything about the new economy, the digital economy. They want us to be subservient on regulation with respect to AI or to cloud computing. The Europeans are going a different way, and the Americans don't want us to follow a more balanced and independent regulatory. structure. So that's, I think, one of the things that Prime Minister was referring to. They're trying

to torpedo our existing trade relationship and the deals. And I say deals, because this goes back to the 60s, deals. Mr. Mulroney and President Reagan made a deal. We have the NAFTA deal. We have Kuzma. They're walking away in torpedoing deals and then trying to restrict us on who we can make new deals for it to help our workers and to help our economy. That is completely unacceptable, and it is an indirect attack on our sovereignty as a country. So we can collaborate with respect to some of the Chinese disruption on global trade, and we probably should. But never should we allow Washington to dictate what we do or how we regulate or what other countries we may partner with when they're excluding us from, from auto, for example.

It is pretty outrageous, and it's another reason why we have to walk away. So this might conceivably cover something like, we don't want you cooperating with the Europeans when it comes to regulating AI. That's what we're talking about here, conceivably. Yeah, they're looking both, you know, President Trump has a romantic notion that he's going to bring back all the jobs in the steel belt. that was lost in the 1970s, and he wants to control the economy of the future,

where we have to follow the rules based on Washington. We have to allow a few American firms that are already dominant to dominate the new digital economy from data to cloud. And that's unacceptable, particularly at a time that the U.S. Cloud Act, the Europeans and a lot of countries have expressed concern because the U.S. Cloud Act means data of Europeans or Canadians could be prone to U.S. search. Now, the big Silicon Valley companies and American giants claim that that's not the case, but there is actually evidence that that is a risk. And with this White House having an aggressive

approach on foreign policy, that's something I think all countries have to see as a bit of a risk. I think maybe connected to this might be some of the language stuff that the Prime Minister was talking about, We were not prepared to accept any compromise on our sovereignty, protection of the French language, and our culture. For our American colleagues, let's be clear, for my government and for Canada, these questions were never on the table, even if the United States tried to put them there up till the last minute.

He mentioned French language information on products, but also on discoverability online. There's a law that was passed recently in Quebec that creates quotas for French language content on streaming companies. The details are still being worked out, but the U.S. has pointed to it as an irritant in the past. What do you know right now about the demands on sort of culture and language that the administration was trying to get from Canada? And why was it a red line for the Prime Minister? Well, the cultural sovereignty of Canada is probably the oldest independence we've had from the United States from the very beginning. And we've had our own regulation of the airwaves, first radio and then television, print magazines. We've always had the ability for us to have a strong set of cultural industries. And this is another risk of allowing the U.S. to dictate the regulation of the digital economy. So online streaming, all families now know how many streaming services they might have in compared to the cable packages

they had in the past. So as we're going beyond the ability of Canada's CRTC to regulate content and what's on the air, the Americans want to dictate terms of this for the world as well. And of course, they see no need to protect the French language and things like that. We, of course, do. And we see the need to have rural communities serviced. And the north. and that's part of CBC's mandate. And so I think our cultural sovereignty is just as important as well. And it's interesting, as I've seen the U.S. take more and more aggressive positions under President Trump.

Myself, I'm actually now saying maybe the digital services tax is the way to go. I used to be kind of against it because, hey, I don't like more taxes on Canadians and on small businesses. But if we're having our media ecosystem undermined by a few powerful streaming giants, and then they want to dictate what's on the air, how much French there might be, how much coverage of Canadian there might be, I'm not comfortable with that. And I do think the Europeans have the same approach. They do not want a one-size-fits-all global culture policy dictated from Washington. Something is happening in Dawson Creek.

A wave of violence has swept over this community of just 13,000 people. 15 murders in the last five years. I'm Timothy Sawa and from CBC's Uncover and the Fifth Estate, an investigation into deaths and disappearances in Dawson Creek and what's behind it all. The Mile Zero murders, available now on CBC Listen or where, wherever you get your podcasts. I want to come back to U.S. trade rep Jameson Greer, who you mentioned before. This is the person that Canada has been negotiating with day in and day out for weeks.

I was just in Washington for several weeks, working out of the Bureau there. And I mean, it did seem to me like there was a decent working relationship between the Canadian teams and Mr. Greer and that they were making progress. But he also did come out Friday night and essentially say that Canada walked away. Canada declined to finalize the trade deal under the terms agreed earlier this week. Despite the U.S. offer to Canada to receive the best treatment of any major exporter to our market, new demands and walkbacks of other commitments by Canada have upended the careful balance reached in the past days. I mean, he's essentially accusing Canada of a walkback. And do you know what Mr. Greer is talking about there? Did we walk back on things that we had previously agreed to?

First, I'm glad you expressed that the way you did. I do think there's a lot of respect for trade representative Greer. In fact, a lot of people have commented on just how positive and professionally he's been and even the courtesy he's had of responding in French to some of the questions. His French is better than my French. It's pretty darn good. And I do know from both Minister Leblanc and Jenna Shrette. that negotiations have been really professional and respectful.

And I think there's actually a friendship. I do think he has the best of intentions in negotiating. But again, this goes back to where the conversations at the negotiation table were going and where the final terms being written down were going. That's where I think the Canadian team couldn't trust the direction of the talks, particularly when other members of the president's cabinet became involved. and when little additions came in. So we all saw how things were going in the right direction.

And then the president puts out that tweet saying, hey, there's a deal. He puts out a meme. I now think that that was done to pressure us to take whatever they were going to write down in the end. So we got close. And sometimes when you're negotiating final terms, you can have broad directional alignment, but you really don't know what the deal is until it's on paper.

And the U.S. approach of saying this is done, it's just going to be finalized. We're extending three more days. I think that was done to put pressure on the government to take a bad deal and to take any final last minute changes. And I'm glad they didn't fall for that. You know, Mr. Greer gave a interview with The New York Times this weekend and he kind of put some details to what he says was on paper, right? He told the times that the Trump administration had pledged to eliminate. a 10% tariff on software lumber. He said cars that contained American content could have been tariffed as low as 7%. Obviously, we've already talked about the heavy vehicle stuff. Reduction on aluminum and the majority of steel tariffs from 50 to 25%. Lower for products like golf clubs, as I understand it, the elimination of the new tariffs that came into effect Saturday,

obviously would be included in that deal. He told the times that this deal would have given Canada the most preferential treatment of any trading partner in the world. And to Mr. Greer on this point of Canada getting the most preferential treatment, what would you say in response? I'd say the Americans have had the most preferential trading in relationship with Canada

since the Ogdensburg Agreement when Roosevelt and Mackenzie King met. In fact, the U.S. would not have been able to help the Allies win World War II without Canada. And I think a lot of the American people politicians who don't study your history don't realize that those early collaborations on wartime partnership, the aluminum from Quebec, that built the aircraft that helped win the war

in in Europe and in the Pacific. So they've lost sight of the benefits Canada. And this is what drives me crazy. The trade imbalance with Canada, the deficit they have with Canada they like to talk about is because of energy. And the cornerstone of the Trump administration, And this is a concept called energy dominance. So they've only dominated an energy because of the Shale Revolution and reliance and partnership with Canada. So we provide a lot to them, and they need to start realizing that. And I think we were always going to accept some level of tariffs, Jamie, that we know we have a president who literally says it's his favorite word in the dictionary and tariffs. So it's a matter of how much and then how much of an individual attack.

So the two-three-two's needed to come down a little bit more and there needed to be clarity on auto parts and auto assembly. And when the fans were shifting, as I said, how can you sign something that you're not even positive they will live up to? And so I do think there was positive progress being made on many of the items Mr. Greer outlined, but there was an erosion of trust as some of the terms started changing. And that's, I think, as a result of some bad faith on the part of the administration. I would love to hear your response to this. If you listen to these guys, you know, members of the administration or even pundits in their universe on television, you do hear them complaining all the time about how, and I'm kind of paraphrasing,

here, but how Canada wants free access to the U.S., but Canada's dairy industry, banks, telecoms, liquor, are all protected. I would love to hear your response to that argument that, I mean, I think it's been percolating this week on Fox News, for example. Yeah, well, you know, Fox News doesn't intersect with the truth on a lot of these things very frequently. And here's the reality. Every country in the world subsidizes their farmers in one way or another. In Canada, we do it for the dairy and the poultry sectors through supply management. So the subsidy comes from a higher price paid by consumers. In the U.S., it comes from crop insurance, it comes from direct subsidies. Their dairy industry is subsidied. So traditionally, this is something that World Trade and the WTO and before that,

the gap, always tried to say, can we level the playing field in agriculture? Everyone always said no because of the need to keep family farms and to keep your ability to produce food. So if they're willing to lower their subsidies, that's when Canada should say, okay, we'll look at lowering our subsidies. The irony with this one, Jamie, is Canada is already allowing a certain level of American cheese into Canada. This is a tariff rate quota, a quota of cheese they can send in, not block. they're not even using all of what the quota already is, largely because their domestic milk and cheese industry is fine. They're not overproducing dramatically like they were years ago.

The market is much more balanced. And Americans are paying more for food than under our supply management system. So supply management is a bit of a red herring. You can have this debate on whether we should be doing it in the same way in Canada, but it was set up to make sure that the family farms survived. It was set up like before I was born. So this is something that has just been part of Canadian agricultural policy. But the Americans have farm bills and a whole range of aid that they're never going to drop

because they know the importance of food security as well. I think it's been very clear talking to you today that you feel like the Prime Minister didn't have another choice. on Friday night and that he made the right decision. But I would like to ask you about his decision to place reciprocal tariffs on the United States. Canada will match Washington's new tariffs, dollar for dollar, in order to protect Canadian workers, farmers, families, and businesses.

Our response will be concentrated in sectors such as steel, dairy, appliances, agricultural equipment, pulp and paper, and electronics. also include products that are currently subject to unjustified Section 232 and 338 tariffs. I know that we don't know the details of these yet. Do you think that the Prime Minister had to fight back with counter tariffs? Could he just have walked away from the deal? Great question.

And there's a lot of uncertainty around what dollar for dollar means. When we did dollar for dollar before, it was almost like what it sounded. We're going to pick a group of products that we bring in from the U.S. And we're going to tariff them at the same level of dollars as the U.S. From what I understand, there's been a number of people, myself including expressing concern and caution about that approach. And from what I understand, this is going to come in after Labor Day, Jamie. From what I understand, the dollar for dollar could mean an overall examination. And it could mean some of those dollars are subsidies for our.

are people to survive. So if that's the way they're going to handle it, and it's not just randomly picking stuff, because the Bank of Canada has a report on how that was done last time, actually hurt us because of the integrated supply chain. So some Canadian producers are then tax tariffs twice because of input. So I think the county government's taking a different approach. I've also said if they're looking at fixing what the Americans feel as a trade and balance and steel auto, this sort of traditional economy, maybe we actually throw in with Europe on the digital economy.

Maybe we bring back the digital sales tax. Maybe we say, yeah, the online streamers are going to have a whole series of content and culture and language requirements and follow the European example. I know the Americans won't like that. They're going to love that. And that's part of why I like it. You know, we are the smaller party, but in this case, the brutal dominance that the U.S. is trying to push on allies and on security is actually causing problems in their economy. Their bond market is in a state of upheaval.

They have a lot of debt coming due soon, and they're going to be paying higher interest rate, the war in Iran is depleting their military supplies. So if you want to rebuild your military and ships and all that stuff, why would you pay more for aluminum than steel? Right? So these policies are starting to come home to roost. That's not going to eliminate some of the pain our producers are going to feel in the short term. But I do think it brings the chance to have another negotiation where the Americans have to be more realistic. At least that's my hope. Do you think it's possible that we can get to another negotiation anytime soon? I mean, you noted I think that these counter tariffs don't come into effect until September 8th.

Was that done purposefully to kind of give it an off-ramp here? I think Canada approached these negotiations in good faith, and I know our team would approach any future ones in good faith. So time gives a bit of time for this to digest, no question. But I also think going to what I said earlier, the government is looking for this. dollar-to-dollar approach to be more than just tariffing $28 billion plus worth of U.S. goods. It's meant about keeping some of our producers whole and it could be a subsidy, which is a way of balancing trade. So I think they needed time to get that right. They really did go to the wire, you know, and this is what happens with deadlines is sometimes with deadlines, nothing happens

until the deadline. And in this case, the finalization of the written agreement was where we saw the shifting sands, as I said. So I do think the time will allow this to sink in the U.S. The president so far has not responded as aggressively as he normally does on social media. They also have midterm elections coming up, as you know, Jimmy. So there's going to be a number of pressure points that could have other people in the administration saying, look, we got close with the Canadians. Let's be reasonable here. and do this because if you look at the polling numbers for the Republicans, you know, the president's not up for election and can never be up for re-elect. But a lot of his members of

Congress are. And in suburban and swing districts where cost of living concerns are really acute, they're going to see the war in Iran. You know, the president promised no foreign wars. What's going on with that one? They're going to see the price of gas pump. They're going to see food inflation. So the tariff policy may be bringing in some revenue, but it's causing more economic upheaval and declining confidence in the U.S. So I do think there's a chance for that to come through. And because there's a chance that Canada might include other things in a bigger deal like ballistic missile defense or the F-35, there will still be an opportunity for the president to position this as a win from his standpoint, because we all know he's going to do

that regardless. But we have to make sure an American win also has some Canadian wins in it. You mentioned the midterms I was thinking about two important states there that they need. Michigan and Maine, for example. And we're seeing already in Michigan this becoming an issue in the race between Abdul al-Sayyad, the Democrat, and Mike Rogers, the Republican. and Abdul al-Azayad was just roasting Trump on the weekend over this. And just for people listening, you mentioned that Trump hasn't responded as aggressively as he usually does. I just want to read his true social posts. He said that Canada wants the benefits of being a U.S. state without being one.

He went on to say they have also charged our great farmers for many years, massive amounts of tariffs. No more three exclamation marks. So you're right. He has definitely posted more. aggressive stuff that Matt. Yeah, yeah. We've seen much worse than a few exclamation points, but I do think, you know, see, he's bringing up the agriculture one, because if you look at a tariff number above

the quota, it does look like Canada has this big wall up. But that's really just the way we have allowed subsidization of farming families. And the U.S., as I said, spends almost as much. The OACD studies this stuff, and our subsidy rate for farmers is almost the same. as the Americans, and both Canada and the U.S. are below Europe. So I hope cooler heads prevail. You're right. Michigan, Maine, there's a number of districts where most people want and are only accustomed to peace and tranquility with Canada, and they're used to Michigan. My father worked at GM in Oshawa, Michigan was the sort of headquarters of General Motors. So they're really used to this

integrated supply chain, going back generations now. Why would you throw that up? up. If you look at the losses, the U.S. auto industry is mounting, these tariffs have not been a success for them. So certainly you're making the case that, you know, Trump is increasingly weakened and that this could all bring them back to the table. But, you know, this is a very unpredictable administration. In his speech on Saturday, the prime minister was fairly defiant. As he said before, he spoke about the unreliability of America as a partner. You mentioned that pencil comment before. After the speech, when asked about the tone of his remarks,

which kind of suggested that we were at war, he replied, because we were attacked. Like, you're at war when you get attacked. We got attacked. The U.S. put 50%. Is that how you view it? Do you see this as a kind of war? And, you know, how bad could this conceivably get?

Well, when the deal fell down, Jamie, I put a tweet out of just a picture that said hold fast. That's an old Navy term. You have to hold onto your ropes in the rigging when you're going through heavy storms so you don't get swept overboard. That's what we need to do now as a country. We can't take a bad deal. We have to hold fast and continue to push on issues that we think could bring resolution in the future. But we may not be able to get resolution for some time. And so a bad deal would have locked in a lot of these things and potentially transformed our economy negatively. And the fact that in the U.S. were wanting to then dictate where we could trade in the

future or what regulatory alignment we could have, whether Canada was a bit more like Europe or had to take the terms from Washington, I think that's unacceptable and it is an attack on our sovereignty. So I thought the prime minister's remarks were measured, but very direct and clear, and I think that's what we need at this moment. We're all still hopeful that this could have just been really hard bargaining right to the end, and we can still keep the lines of communication open, and I know they are. Minister of Law is still in touch with Trade Representative Greer. Oh, interesting. But we could see months of uncertainty and pain from these tariffs. Mr. O'Toole, I think that's a good place for us to end today. I want to thank you so much for this. It's

been really, really excellent talking to you. Thank you. Thank you. All fast. All right. That's all for today. I'm Jamie Plessom. Thanks so much for listening. Talk to you tomorrow. For more CBC podcasts, go to cbc.ca slash podcasts.