Front Burner - The world’s biggest risks, with Gerry Butts

Episode Date: January 7, 2026

Today, Gerry Butts – former principal secretary to Justin Trudeau and current adviser to Prime Minister Carney – is on the show.Butts is also the vice chairman of the global political risk firm, the Eurasia group, which releases a “Top Risks” list every year. We’ll drill down on a few of them, including their number one risk, the “U.S. political revolution”. The report makes the case that, outside of the U.S. itself, America’s political upheaval has the greatest impact on Canada. We’ll also discuss the “Zombie USMCA” deal and the future of NATO.For transcripts of Front Burner, please visit: https://www.cbc.ca/radio/frontburner/transcripts

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Donate at lovescarbro.cairbo. This is a CBC podcast. Hey, everybody. It's Jamie. Jerry Butz is my guest today. And we're going to be talking about some of the biggest risks the world is facing in 2026. Jerry is the vice chairman of the Eurasia group, a pretty influential global political risk firm. and every year they publish this worrying top 10 risk list. We're not going to have time to get into all these risks with Jerry today,

but there are a few I really want to drill down on with him, namely the number one risk, U.S. political revolution, and why the report says Canada is the most impacted country outside the U.S. I also want to discuss what the report calls the risk of a zombie USMCA trade agreement and the future of NATO. Jerry is a really good person to do this with because, well, he is Canadian. You might also know him as one of Justin Trudeau's closest advisors and an advisor to current Prime Minister Merkarty.

Jerry, welcome to Front Burner. It is very great to have you on the show. Happy New Year, Jamie. It's a thrill to be here. I'm a huge fan. Happy New Year to you as well. Okay, so you've got this ranked list of global risks, and coming in at number one is what you call U.S. political revolution, which is this kind of umbrella term for topics that we've been discussing on the show a lot this year. Pro-Trump, media consolidation, loyalty purges, attacks on the civil service, oval office control of federal agencies like the FBI, aggressive legal action against critics, family enrichment, Maduro's rendition. Why is a U.S. political revolution the number one

global threat? It's a great question, Jamie. And I think it's important. to take a step back and look at the overall context here. We as a firm have been around for just about 30 years now at Eurasia Group, and for most of that period, we have been advising largely U.S., especially in the early years of the firm, investors on political risk and geopolitical risk in other parts of the world, i.e., what you should know if you're thinking about investing in the dissolving Eastern Block after the collapse of the Soviet Union, that sort of thing. And what we found over the past five or six years, really stretching back to Trump's

election in 2016, is that increasingly we're advising our clients about risks that are endemic to the domestic politics of the United States. This report is an attempt to articulate in a coherent framework what exactly has happened to generate that. But from a Canadian and from a global perspective, the most important takeaway is that for most of our lives, the United States has been the world's most significant shock absorber of geopolitical risk, and it is now probably the world's most important generator of it. That is a very, very big change. Why do you think revolution is the right way to describe what's going on there? Well, we like to think in historical context at Eurasia Group, and it helps us separate the

signal from the noise to use the cliche and separate big things from small things. So we were thinking back, as we were doing our brainstorming, what constitutes a political revolution. We thought in our lifetimes there have really been two significant political revolutions, one in China that generated a 50-year prosperity wave, so you could consider it at least from an economic perspective, if not a human rights perspective, a successful one. And then a second one in the Soviet Union that was instigated by Mikhail Gorbachev. Gorbachev then launched Perestroika, a program of reform aimed at liberating the economy within the communist regime. He authorized the creation of small businesses, freed dissidents, and allowed the system to be criticized.

In Eastern Europe, satellite countries were freed. He even allowed the Berlin Wall to fall. That ended in disaster. Tonight, the red flag was taken down from the Kremlin where it has flown since the 1917 revolution. The Soviet Union it symbolized is now dead. In its place, they raised the flag of Boris Yeltsin's Russia. And we think that what's going on in the United States, now you enumerated many of the leading indicators of the revolution, ascends to that kind of historical importance. So it's an open question, whether it will be successful or not personally and corporately.

We think it won't be, but we don't have high conviction on that, and I certainly don't. I think it's significant for observers of politics and geopolitics, and frankly, especially if you're Canadian, for everyday citizens to realize the magnitude of the historical event we're living through. Why don't you have high conviction on that? Well, you never like to underestimate the resilience of the United States and its institutions. It's been on the mat before. It's death has been predicted many times.

and somehow through the ingenuity of its institutions and its people, it finds a way to punch out of a corner to mix metaphors. As a longtime observer, the United States, as someone who's dealt very closely with different American administrations over the years and previous lines of work, things can change really, really quickly. And personally, this will date me for your listeners, Jamie, but I remember being an undergraduate student at McGill University, taking a full year course called government and politics of the Soviet Union, and the Soviet Union

dissolved at Christmastime. So things can change really, really quickly. And we can always retain hope, especially as Canadians, that Americans find the prototypical better angels of their nature. But right now, those angels ain't winning. The Democrats and lots of people, I'm sure in Canada and around the world, are pinning some hope on the midterms as a way to kind of constrain Trump, right? But when I was reading this report, you don't seem to think that the midterms will be anything more than a bit of a speed bump and why? Well, a couple of reasons. One is that, again, by historical, you have to set the base rate. at the right place. And midterms are traditionally rebukes to sitting presidents. Most sitting presidents do poorly in their first midterm. So if the Democrats do have a victory in the midterms,

and I stress the word if in that, for reasons I'll come to in a moment, then it's really just what you would expect to happen to a president. So it's not an unusual event. That's the first thing. But more importantly, I think this is the most important point. If you put yourself in Donald Trump's shoes, here's a man who believes he had an election he won stolen from him. He has been prosecuted by the state. He believes his political opponents have weaponized the state and its institutions against him. He has survived two assassination attempts, including one that was literally within an inch of killing him. And in response to all that, he engineered, again, these are his views, he engineered the greatest political comeback in the history of the United States.

And he firmly believes that if he and his allies lose control of the institutions of power in the United States, the same thing will happen to him. So for him, holding on to power either directly or through his surrogates, is literally a matter of life and death for him and his family. So he thinks, we think that all the guardrails are off and he will do whatever it takes. And most presidents, when they get rebuked in a midterm, they sort of trim their sails, they become more moderate. This is not what's going to happen with Donald Trump. He will double down. You know, I take your point that this revolution, you know, may not be successful and you, you know, have doubts that it will be. But, you know, reading the report, there is kind of a note of fatal.

in it, right? Like the kind of regardless of what happens here, the genie is to some extent out of the bottle and things can never kind of go back to the status quo. And I wonder if you could just flesh that out for me. Yeah, sure. And one thing we didn't get to in the report, because we're still a little ways away from the interminable primary process in the United States that each party goes through to choose its presidential nominee. But I think an underappreciated dynamic at this point in the cycle, is that the leading candidates to succeed Donald Trump, right now, that's probably J.D. Vance and Marco Rubio. But whoever it turns out to be, that will largely be a competition for who can out MAGA each other. In other words, whether or not Donald Trump is on the ballot and there's

lots of speculation about what he will and won't do in the run up to the 28 presidential election, Our point is that the change in American politics from a macro perspective, and perhaps more importantly, in the structure of the Republican Party and how it chooses its leaders, will inevitably privilege the person who has perceived to be more of a MAGA candidate, unless something, of course, unforeseen happens between now and the time they choose their candidate. This ascent isn't for everyone. You need grit to climb this high this often. You've got to be an underdog that always overdelivers. You've got to be 6,500 hospital staff, 1,000 doctors, all doing so much with so little. You've got to be Scarborough. Defined by our uphill battle and always striving towards new heights.

And you can help us keep climbing. Donate at lovescarborough.ca. Ladies and gentlemen, one of the great Canadians. Oh, here you are. You're here and we're here. No matter what race you were, what color you were, what religion you were, what language you spoke, you watched Mr. Dressup.

The tickle trunk was this magical, like, Pandora's Box. I'm talking about Captain Dressup. Mr. Dressup, the magic. of make-believe. You have made me what I am today. You know that. Watch free on CBC Gem. So this might be a good time to bring up Canada, which is just right in the revolution's blast radius.

And you make the case that Canada will be the most profoundly impacted country by the number one risk, by this U.S. political revolution, outside of the U.S., of course. And I'm not actually, I'm not going to say I was surprised by that, but, you know, I certainly paused when I read it. Why do you argue that we would be the most impacted? Well, I would first, of course, have to put the qualifier on it that I'm sure there are 28, 29 million Venezuelans who might disagree with that characterization this week. But look, the central geopolitical fact in Canadian life for our entire history has been that 9,000 kilometer border with the United States, right? It is definitional to who we

we are for better and for worse. So it stands to reason just on the most basic of facts that will be profoundly affected by what happens in the United States. But I think, you know, more importantly, and I think ultimately Canadians can take some comfort in this, that if you, depending on how you define the terms, we have had four, maybe five elections in our history where the ballot box question was the disposition of our relationship with the United States. And you could, inarguably, in three of those four or four of those five, the party that advocated keeping our distance won a pretty convincing victory, including the one that I was involved in last spring for Prime Minister Carney. Now, that's the good news. So we know how to negotiate ourselves around this

behemoth. And it's been it's been what we've been. we do for a living for most of our existence as a country. Yeah, arguably more acute right now, but yeah. A hundred percent, although, you know, the Civil War was no picnic. It's one of the, one of the few key reasons why we founded ourselves in the first place. So I think it's really important to understand that we have navigated very difficult territory with the United States. However, for your life and my life and most of the listeners' lives, we've been living in the aftermath of the one election where the party advocating deeper and broader integration with the United States won a decisive victory. And that, of course, is the 1988 free trade election. So we have whole generations of policymakers, of business leaders, of regular citizens all around the country who literally have never lived in a world.

where the overarching national policy of Canada was not deepening and broadening our integration with the United States. So we have to relearn all those things now. And, you know, personally, obviously I'm a supporter of the prime minister. I think where the prime minister won the election last year was when he was the first person to articulate vividly for Canadians that the America we grew up with is dead and we're going to have to governor. accordingly. The old relationship we had with the United States based on deepening integration of our economies and tight security and military cooperations is over. So then let's talk about your number nine risk, which is the risk of a zombie USMC.

as we go into this year, the agreement between the U.S., Canada, and Mexico is up for negotiation this year, where it can be renewed for another 16 years. And what do you mean when you say, zombie, USMCA? It's an agreement that still exists on paper, but is unenforceable for all practical purposes. And to kind of situate this for your listeners, let me describe what the process looked like when we were negotiating the U.S. MCA as a successor agreement for NAFTA. And the whole thing came down to whether or not the United States would continue with what was called Chapter 19 in NAFTA.

And not to, I can hear your listeners falling asleep now. So I'll get to the point quickly. Chapter 19 was basically the parties of the agreement saying we're all going to suborn our national sovereignty to a third party dispute resolution process. So we would create a fair judge and jury of. actions that were seen by one or both or all three of the parties of the agreement to have contravened the letter or spirit of the agreement. It is probably insane to think of Donald Trump agreeing to such a third-party dispute resolution mechanism now. The world has

changed completely. We don't believe that we will end up with a successor agreement to the USMCA because I don't think one is on the table from the United States that the other two parties can agree to. And I would be certainly thrilled to be proven wrong about that. But we think that the most likely outcome of the negotiations is one where the current agreement is extended on an annual basis and therefore the investment climate in North America is much more uncertain than it would be, were we to have a durable agreement that all three parties agreed to. Yeah. And as this year goes along, how do you think this administration is going to try and, like, turn the screws on us, essentially, like, try to extract what they want from us this year? Well, I think the best in politics, as in life, the best predictor of future behavior is past behavior.

And I think they will be bellicose in their threats. They are the thing that is, changed is that Trump has been given real-world reinforcement of his instincts to be direct and interventionist. I don't think we're going to see any kind of kinetic intervention in Canadian life, but we're going to see a lot of threats, and we're going to see a lot of seeding of pro-American activity by the Americans in Canadian life, and they will do everything they can to soften up the administration, our government, and the Canadian people to get the terms that they would like. So beyond your lookout for American intervention in Canadian politics this year. You know, so far, Mark Carney's strategy has been essentially to not

rock the boat too much. He has certainly faced criticism here for being too conciliatory for giving up. Of course. You know, what do you make of how he's been approaching those negotiations and the relationship? More broadly, do you think that he needs to do something differently? No, I think, look, I think the elbows up thing from the campaign was widely misinterpreted as an offensive posture when it really is a defensive one, right?

All of your listeners who know hockey will know that that's the way you protect yourself. And that's, I think, what the government and the prime minister has been doing. Obviously, the Americans enjoy asymmetric power advantages over Canada and a lot of respects. But it's also important that Canadians understand that we have cards to play in this. And I can speak to that personally because I've been at those card tables. And I think what the prime minister and the government is trying to do is, on the one hand, they don't want to take unnecessary risks, but on the other, they need to stand up for themselves and for the country, because if we've learned anything about Donald Trump over the years,

it's that when he smells weakness, he pounces. And we have this kind of half-joking continuum at Eurasia Group where we describe adversaries and allies of the United States on a continuum from Fafo, and I won't say that in polite company, what it means. But I think you know what I all the way to Taco, which is Trump always chickens out. And if you look at Trump's interactions with countries, the Chinese, for instance, who would be on the far end of the continuum, they faced him down and showed that they could hurt him and the United States very directly, and therefore he capitulated. On the other hand, you have countries like Iran and Venezuela, who he does not believe

possess any ability to harm him or the United States, and therefore he can do what he wants. I think the art of governing Canada at this moment, and I would argue it's easily the most difficult moment to be Prime Minister of Canada in my lifetime, is to situate the country on the right place of that continuum and not fight pointless losing battles, but stand up for the country's core interests in a sophisticated and strategic way. These cards that we have, what are they to you? It strikes me that maybe we're losing some of them right now. He thinks that he's going to get Venezuela's oil.

He's making these deals with Belarus for potash. Like, what are these cards? that you're talking about when you're at these tables? Well, we can get into the specific sectors where the United States is not dependent, but certainly reliant on Canada. And traditionally, that's been energy, aluminum, steel, all these things that they're trying to reset the terms of trade on. But I think it's from a bigger picture perspective, Canada has always been a constructive ally

of the United States. And I know that sounds very soft to a lot of people, but I think it's underestimated over the long term that whether this Donald Trump storm or this MAGA storm lasts for another three years or another 10, 15, 20 years in the United States, sooner or later, they will come out of this fever dream. And having been a constructive neighbor through all of that, I think is the most important card. have to play. So don't do anything stupid that looks like it will gain a short-term advantage that won't last very long and will cost you over the long term. So I think that that's the most important macro point. This is one of those moments in history, Jamie, where, and this gets back to your original question about why we call this a political revolution in the United States, it's often the case that if you read these periods, that the people living through

them. They don't really, they're by almost definitionally disorienting. So you don't know what's going to come out of the other end of it. You don't know what the stable equilibrium will look like in geopolitics afterward. And frankly, you don't even really know what's going to happen day after day. You just have this sinking feeling that all of the certainties that you've relied on up until this point are dissolving. And that's the kind of period we're living through. So the most important thing we can do as Canadians is to keep our heads and to remain ourselves and not trade our values for what we think will be, but almost always turn out to be illusory short-term advantages. I mean, just on this values point, I was just watching the prime minister

standing beside the prime minister of Denmark, basically reminding the United States. states that Greenland, which is an autonomous territory of NATO member, Denmark, is a sovereign nation. The future of Greenland and Denmark are decided solely by the people of Denmark. In Greenland, we know that. It's why we cooperate. And so by sticking to those values of a rules-based international order, is that setting us on a collision course with this country that, you know, you're saying we still have to be allies

with. That's a perfect example of the dynamic I was struggling to describe a moment ago. And that is, if we agree to live in a world or if we agree to behave as if we live in a world where sovereignty is only for big, powerful countries, then we've already lost. So I remember when Trump first started using the 51st state thing in public in about a year ago, maybe a little over a year ago. What I'd like to see Canada become our 51st state. We give them protection, military protection. We don't need them. And the Europeans sat on their hands. The British said nothing. The European Union sort of had a mealy-mouthed, don't pick on Canada. statement about it. And I remember how that felt to be someone who was advising an aspirant to the

prime minister's office at that point. You really felt alone in the world. And I don't think it's served the Europeans' interest to pretend that the line that they really believe is there is not there with the United States. Now, in the Greenland point, there are always specifics that are important to consider in these examples. I think the Prime Minister of Denmark is 100% correct when they said that if a NATO state is threatened by another NATO state to the point where their sovereignty is compromised, then that's the moment at which NATO ceases to exist. Now, I'm sure there are people in the United States who would love to see that outcome. There may even be people in the White House who would love to see that outcome. But at moments like this, you need members of an alleged

team to articulate what's in the team's interest. And there's no team in the world to which Canada belongs. That's more important to it than NATO. And if NATO doesn't survive, then our security is threatened no matter who is the president of the United States. So that's a long explanation for why I think the prime minister did exactly the right thing. standing by Denmark. As NATO, we can provide security for all of NATO, Greenland included. And as the threat environment is changing, we're making the investments in order to do that. And we can operationalize and augment and build additional plans to do that.

And that's what we will do. And we stand with Denmark. We stand with Greenland. We're, you know, our closest partnership is with the United States. But let's say something happens with Greenland and the United States does something and intervenes in Greenland and then nobody actually acts upon that, right? Not just statements, but, you know, if they invoke Article 5 and nobody, nobody does anything, then that would be effectively the end of NATO. Well, but the whole objective is to make sure. we don't get to that point. You could also make the argument that if NATO had rolled over,

if the United States had rolled over and let Vladimir Putin march through Ukraine, that more indirectly, that would have been the end of NATO because, of course, Ukraine is not a NATO state, but had been given security guarantees throughout its history, importantly, to relinquish its nuclear weapons in the early 90s. So, yeah, of course, if the United States decides to attack, another NATO country and the remaining NATO countries don't do anything about it. That's the end of NATO. We should do everything we can to avoid getting to that point. And I think that the history of the United States under Donald Trump is, if you don't stand up, they will push harder. Okay. Jerry, thank you very much for this. Really appreciate you coming by.

Oh, it's a real pleasure. I'm a huge fan of what you're doing. And thanks for All right. That's all for today. I'm Jamie Poisson. Thanks so much for listening.