Front Burner - Why aren’t Canada and the U.S. officially talking trade?

Episode Date: May 26, 2026

As we inch closer to the July 1st CUSMA review deadline, there still aren’t any formal trade talks between Canada and the U.S. planned. The government says there are informal talks happening at different levels. Other recent developments aren’t great. U.S. officials have blasted a substantial hike in what big streamers have to pay into Canadian content, and they’ve suspended a joint defense board that’s been around for 80 years. This week as talks between the U.S. and Mexico begin, Canada is excluded. Our returning guest is Eric Miller, the president of Rideau Potomac Strategy Group and a fellow at the Canadian Global Affairs Institute.For transcripts of Front Burner, please visit: https://www.cbc.ca/radio/frontburner/transcripts

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And Brandon Fraser. The final decision will be mine and mine alone. Pressure. The Untold True Story of D-Day. Only theaters May 29th. This is a CBC podcast. Hey everybody, it's Jamie. As we inch closer to the July 1st, Huesma review deadline,

the fact that there aren't any formal talks between Canada and the U.S. on the trade front grows more glaring by the day. The government will say that there are informal talks happening at different levels. For example, Canada-U.S. Trade Minister Dominic Claibon spoke this week with the U.S. trade representative Jameson Greer. It's hard to get a read on whether anything's substantial is happening behind the scenes, but there have been some recent public developments that really aren't great. U.S. officials have blasted a substantial hike in what big streamers have to pay

into Canadian content. The U.S. suspended a joint defense board that's been around for 80 years. There's a new tariff on Canadian mushrooms. And this week, as talks between the U.S. and Mexico begin, Canada is excluded. To help us make sense of the latest trade war news and read the tea leaves and what's turning into a kind of quarterly check-in. I'm joined again by Eric Miller, the president of the Rito Potomac Strategy Group and fellow at the Canadian Global Affairs Institute. Eric, it's always great to have you on the show. Thank you so much. Thank you for having me, Jamie. So when we last had you on back in February, the Trump administration seemed to be taking more aggressive shots at Canada and directly at Mark Carney, Howard Lettnick at the time, was on this bender about deals Canada was making with China,

namely electric cars. There he is complaining that he's going to go to China and improve it. What's he going to do? China's delighted to sell to him. But do you think China's going to open their economy to accept exports from Canada? This is the silliest thing I've ever seen. U.S. Ambassador Pete Hoekstra was telling us that if we don't buy U.S. jets, we're going to have a problem on our hands. Treasury Secretary Scott Bessent was taking aim quite directly at Kearney himself,

basically telling him to fall in line? In my investment career, I've seen what happens when a technocrat tries to pivot and become a politician. It never really works out well. So I would just encourage Prime Minister Carney to do what he thinks is best for the Canadian people,

not his own virtue signaling. Have you seen the rhetoric change at all since then? Well, you've had different people who've been saying different things, but fundamentally the trajectory is toward a worse of the bilateral relationship. And so the issues are different, for example, the U.S. suspension of the permanent joint board on defense. That's something which we hadn't seen before,

and certainly we have an ongoing challenge with tariffs, but fundamentally the relationship is on a bad and worsening trajectory. I saw last month Howard Lutnik did say that our negotiators suck, was, I believe, the word that he used. I want to come back. to the Joint Board of Defense with you in a minute. But U.S. ambassador to Canada, Pete Hoekstra, just gave an interview this week to CBC's Radio Canada. He said a bunch of stuff that I'm sure we'll get into in more detail throughout this conversation. But a few standout moments included him saying, you've got folks who are doing everything they can to get the Canadian public to rally against America. It just doesn't make any sense.

But do you understand where that frustration is coming from in Canada? No. No. No. A lot of Canadians are saying... He said tariffs are here to stay. He believes Canada and the U.S. could be further along in negotiations, but expressed frustration and disappointment with the Carney government. I'd just be curious to hear your read on the interview in its entirety. What did you think the ambassador was trying to accomplish her? Well, Ambassador Hockstray is correct that the U.S. has put tariffs on pretty much everybody. But the reality of Canada-U.S. trade is that it is not like that with any other country. And so if you look at U.S. trade with China, U.S. content in that trade is in the single digits.

If you look at U.S. trade with Canada and with Mexico, you're looking at 30 to 40 percent U.S. content on average. Why? Because we have a relationship that is built on shipping intermediate inputs to the most economic sources where they are manufactured. And so a kind of co-production relationship is very, very different than the relationship that the U.S. has with Europe or Korea or China or any other country. And so just like the ambassador has said, we put tariffs on everybody in the world. That's true. But when you do not recognize the distinctive nature of that relationship and the fact that

U.S. content in North American inputs enormously benefits the U.S. when it is sold, in Canada or in Mexico, just like Canadian content benefits Canada when it's sold in the U.S. or Mexico. This is something that's very, very different. And so this treatment of North American neighbors and the supposition that our trade within the region is something that is the same as everybody else's is just flat wrong. And so the ambassador said, why don't two fall in line with everybody else's reality instead of our own reality? There are two countries that have retaliated against America. Okay.

China and Canada. You said it. I didn't. Do you think he understands that there's a special and unique relationship, this guy? Well, the ambassador may or may not understand it, but he is speaking the view of the administration. And as you cited Secretary Lutnik's inelegant description of Canada and its negotiating views and so on, he's putting that position forward. But fundamentally, those who are making decisions within the Trump administration either

don't acknowledge or just don't accept the fact that trade within North America is different than trade with everybody else. So he may understand it intellectually. But when you're an ambassador, your job is to project the views of your own government in the country where you're serving, as well as I would assume gather information. about the thoughts, feelings, and interests of that other country vis-a-vis your own. Speaking of Mexico, Mexico and the United States are already beginning formal negotiations. They start this week in Mexico City.

And U.S. Trade Representative Jameson Greer said that they will focus on rules of origin, which I think is mostly automobiles, right? And economic security, these talks exclude Canada. And are we at risk of being left behind here? Are you concerned about this? I'm not wildly concerned about it. So first of all, the U.S. has finally, I think, laid out what it sees as a vision for this renewal process. Because, of course, we have the agreement.

It remains in effect. And what nobody was clear about for a while was what would the modalities of these negotiations look like? And essentially what James and Greer seems to have come to is we would like to see, the maintenance of a trilateral core, but have separate bilateral agreements on issues that are of interest. And so that's something which he has now come to the conclusion that he wants to pursue. And so what that means is that the U.S. is talking to Mexico separately. Now, there's been a lot of discussion around, is Mexico doing it better than Canada? Is Mexico playing its relationship with the U.S. in a better way because there seems to be less tension?

Well, what we've seen recently is that the tension between the U.S. and Mexico has ratcheted up. Mexico is formally ahead in its bilateral discussions, but I do not expect them to glide to an easy agreement anytime soon because the environment has just gotten a lot more complicated for Mexico. and Claudia Scheinbaum has to watch her left flank because there are those in her own party who are deeply frustrated at what they see as her going too easy on the Trump administration. Okay, I want to dig into some of the latest developments a little bit more with you now, sort of on the subject of trade irritants with the U.S. One of the things the U.S. has been banging on about for a long time is the regulation of their tech companies. Last year, Carney scrapped a digital services tax a 3% levy on tech giants, essentially, in a bid to restart stalled trade talks. Last week, the Canadian Radio, Television and Telecommunications Commission, the CRTC, decided to triple the revenue.

The big streaming platforms like Netflix, Disney, and Amazon have to set aside for Canadian programming. So it was 5% and now I guess it's set to go to 15%. the streaming industry has predictably slammed this. The U.S. administration has identified this as a problem as well. And Pierre Pollyev even the conservative leader has warned that this could lead to a backlash from the U.S. For God's sakes, let people come home and relax and enjoy their favorite binge-watching experience without paying yet another liberal tax hike. We might see more steel, auto, aluminum, and lumber workers lose their, jobs because of the retaliation that the liberal tax hike might provoke.

Hoekster, for example, is saying it's making a bad situation worse. How big a deal could this be, do you think? So in Washington, the tech companies are very, very powerful. And there will not only be opposition to this from the Trump administration, but from both sides in Congress. And so many tech companies are headquartered in California. California is a Democratic state, and the Democrats in that state will gladly join Republicans in opposing this measure. Now, for the understanding of listeners, you have the online streaming act, which was passed by the Trudeau government a few years ago, which was basically meant to bring the contribution arrangements toward Canadian content, to the new era. So to date, you've had a situation where you had CBC and CTV and the big broadcasters

contributing in some cases up to 45% of their revenues to the production of Canadian content. That is being reduced under this particular measure. But under the Online Streaming Act, you had an introduction first last year of a 5% levy, and now it's going to 15% because the idea is to align the fee with where people are actually consuming content. And a lot of people spend their Friday nights watching Netflix instead of watching CTV. And so, thus, the government wants those companies to pay. Now, those companies are rightly from their perspective opposing this, because it means that they have to start paying significant shares of their Canadian revenue. And this is 15% on their Canadian revenue.

This is going to be a very big issue. And particularly the Trump administration, having successfully pushed back on the digital services tax, they're going to go all in to try to overturn this. This will absolutely be part of the negotiation. But again, on the other hand, if the Trump administration pushes too hard, and the Kuzma process falls apart, this will be another example of where a close Canada-U.S. relationship disintegrating comes back to hurt the U.S.

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So another thing the Americans have been very seized about is our defense spending. Earlier this month, they announced that they were pausing this 80-year-old permanent joint Board of Peace, which I had never heard about before, but is basically this board that meets a few times a year to discuss bilateral defense issues. Carney has said that the board has a long heritage, but I wouldn't overplay the importance of this. We have many aspects of very close defense cooperation with the United States, as you know, our closest defense cooperation. I'll give you the example of NORAD. Is he downplaying it? And do you see the pause of the board as a big deal here?

How does it relate to the QSMA negotiations? It's a milestone on the worsening of the relationship is essentially what it can be seen as. It was created in 1940 before the U.S. entered World War II, but when the Franklin Roosevelt administration could clearly see that war was coming. And so McKenzie King and President Roosevelt met in Ogdensburg, New York, and this institution was created. And over time, it had come to meet a couple of times a year, and it did some important work from time to time. But fundamentally, this is an expression of broad frustration with Prime Minister Carney in Washington. because on a fact basis, Canada did hit its 2% target. And even Ambassador Hoxtra said this in his interview that...

Yeah, we're thankful that what? And I think these are again, the prime minister's words, that for the first time in 37 years since the fall of the Berlin Wall, Canada has finally met its defense responsibility. The Carney government has made clear that it's on track to go to 3.5% by 2035. And so one would think that would suggest that Canada is moving in the right direction. But at the same time, we're also hearing from the finance minister that there's not a plan that would enable them to get to 5%. So we just get to 2%. Now we're talking about the next target.

And Canada's already starting to potentially walk back its commitment from 5%. But then we look at Eldridge Colby, who's the Undersecretary Policy at the Pentagon, who announced this. Canada has failed to make credible progress on its defense commitments, said a senior U.S. official. And so the U.S. is pausing the permanent joint board on defense, adding, we can no longer avoid the gaps between rhetoric and reality. And Mr. Colby is known for hard-knuckle tactics.

He has actually an interesting background. He's the grandson of William Colby, who was director of Central Intelligence, the CIA director, in the 1970s. And Mr. Colby first came to popular awareness in the U.S. for his meeting with Cardinal Christoph Pierre in January, when, as was later leaked, he basically told the Vatican to get on board. He said the U.S. can do whatever it wants.

He even cited the Avignon Papacy. Yes. I didn't know it was that guy. Okay, great. Yeah. From 1309. to 1376 where the French essentially used their power to control the papacy. And so, yeah, it's the same person.

And he is somebody who's not afraid to throw his weight around or the U.S. weight around. And he's somebody who has as his tactics, among his tactics, the hardball threats that come from a great power to others. And so this is something that is unfortunate. It's also, I think, again, the U.S. may be thinking this will force Canada to change its direction. But what ultimately happens when these things occur is that Canada takes it as evidence that Prime Minister Carney was correct and that the U.S. really is using integration as a weapon. And maybe we shouldn't buy the F-35 fighter, for example.

whereas the U.S. intention is to make clear what Canada will lose if they don't buy the F-35 fighter. And so you have this differential between what is intended by the threat and what is heard by the other side. Right. And just to be clear here, sort of the public reason for the pausing of this board from the administration has been because we are not making sort of credible progress on our defense commitments. But what a lot of people are speculating is that it's really about whether or not Canada makes good on buying these American jets from Lockheed Martin. Yes, yes. Last week, the U.S. also announced tariffs on Canadian mushrooms and agricultural product. We haven't heard come up very often compared to dairy, for instance. Boxing up their bounty of oyster and Chautauki mushrooms, its business as usual at Frank Zhang's family farm for now.

Zhang is worried a new 2.84% tariff slapped on his produce by the Americans could lead to a decrease in sales. You don't know how much sales you're going to lose, and you might have to cut some positions. There's also Trump threatening to block the opening of the Gordyhow Bridge between Windsor and Detroit, which Canada paid for in full. As light testing continues on the Gordyhow International Bridge, Windsor's mayor is worried. decision makers will sacrifice the long game for the short-term opening of the city's second bridge. If it means our country has to take a bad deal to satisfy the president of the United States, I would wait until there's a time when there's a good deal because we do have lots of leverage. And do you see these tactics in a similar vein to what they did to the defense board?

Ultimately, is a kind of warning shot or a way of softening an attempt to soften us up before the amusement deadline. The bridge, for sure. You know, certainly it was, it's been widely reported that the owners of the incumbent bridge, the ambassador bridge, have met with President Trump. And they've sought to bring pressure to, you know, on the opening of the Gordy Howe bridge. And so that's something which is very much in the, in the vein of a pressure tactic. On mushrooms, I think this is also an important reminder that even while we have this high drama conflict between the prime minister and the president that also spills out to ministers and ambassadors and other representatives, you also have regular processes that are going on. This is more in the vein of traditional Canada-U.S. relationship. It's just taking on a bigger significance because it is, is happening now. But otherwise, this would be on page 11 of the business section of the Globe and Mail. Let's talk about Canada's strategy more now. In that Radio Canada interview, Hoekstra was pretty, he talked about booze quite a bit, actually. We think the alcohol ban is

totally unfair. It's a clear indicator of how 11 provinces feel about trade. with the United States. Sending a very, very clear message about how doing business with the United States doesn't appeal to them. The prime minister has reinforced that message. Okay. And so it creates some questions about, you know, does Canada really want to do business with the United States? He complained about how their strategy hasn't been to tell Americans not to buy Canadian or travel to Canada. He also said that the Americans are not willing to trade the alcohol. ban for relief of any tariffs, like the ones on steel, for example. And do you think that overall, this has been a good strategy for us? It is something which very clearly has rankled the U.S.

If you are, for example, the California wine industry, which I guess the Trump administration is not particularly seized with, but Canada is by far their largest export market. And a lot of those exports have really dried up. And so they are paying a terrible price for the this end and the ambassador is expressing concern and frustration. But the reality is, is that it's not Mark Carney who has to be satisfied in order for US One in spirits to go back on the shelves of the Maker Control Board of Ontario or its counterpart in BC or in Newfoundland. It's the premiers. And the premiers also have concerns and interests in these trade talks, just like anyone else. And And so, you know, it's understandable if you're in the ambassador's shoes why he'd be frustrated,

but he has actually a lot of different interests in people to satisfy. And I don't see many of the provinces agreeing to put U.S. wine and spirits back on the shelves without at least some sense that there's going to be an imminent agreement to bring stability and predictability to the relationship. Because, you know, the provinces know, this has gotten under. the U.S. skin, and therefore it's become a negotiating shit because everything in the age of Trump is about negotiation. And so why are they going to give that up? Okay, well, just on that point, this is something that you would negotiate informal talks, much like a lot of what we have talked

about today. And I just want to try and get to the crux of what I think the biggest issue is here, which is that we are not getting to these formal. talks. And I know when I talk to people in government, they say that there is communication at various levels and that they have told the Americans that they are ready when they are. But when and how is this thing going to get to something more official? And what is the risk of not actually getting there? Well, one of the things that we have seen is that the U.S. has asked Canada to essentially pay concessions in order to restart the talk. That's what the tactic of the Trump administration was last June when the digital services tax was done away with.

And Canada did that, and talks got restarted until they stopped again in October. And so Canada is basically saying, we've tried this strategy, and we don't see that you're willing to carry through with the talks, and you're just going to, little by little, ask for more and more concessions. And so this is a situation where, first and foremost, you have to have some agreement that we're going to have talks without preconditions, because Canada having paid what it regarded as a major concession on the digital services tax and gotten effectively nothing for it, you know, it's a once bitten twice shy kind of situation. When do we get the beginnings of official talks? We'll have to see. I mean, this is why the situation is so concerning because there's a lot that can go wrong

that could lead to this situation being out of control. Yeah. And look, I know that you have been, when we've talked in the past, quite supportive of Canada's strategy when it comes to approaching these negotiations and Mark Carney does certainly seem very confident in his strategy of holding out for the right deal and not capitulating anymore before they get to formal talks.

But I just want to throw to you like the opposite perspective here. You know, for example, the New York Times reported that Rick Switzer, a deputy U.S. Trade Representative said at an event recently hosted by the Council on Foreign Relations that Mark Carney's actions amount to political malpractice, saying that Canada's deputies, upon the U.S. economy. That's just a fact. It's not hubris. And just like, does he have a point, this idea that this is potentially way more damaging for us, even if it is also damaging for the United States? It is certainly damaging for Canada if this falls apart. I mean, this would be something that would be horrendously challenging for the Canadian economy. But I guess the counter, there's a couple of counterpoints to that. Number one, dependence cuts both ways. And so I spoke at an event recently where a former U.S. diplomat said, well, Canada just has to

get on board with a U.S.-led deal because it sells 97 percent of its oil to the U.S. and doesn't have anywhere else where it can sell it and it's fully dependent. And my retort to that is, yes, it's true. Canada sells 97 percent of its oil to the U.S., but those refineries, in the Midwest and in the Mountain West that take that crude are configured to take only Canadian crude and have zero other prospective sources which can supply them. So you take a situation where you're already seeing gasoline above $6 a gallon in large parts of the U.S. and you drive that price significantly higher. And so integration goes both ways. Those refineries need Canadian crude, just like Canada needs to sell that crude to them. The other thing I would say is that Canada's fondest view would be to retain the

status quo, to have free trade going both ways in North America. And the challenge that you have, if you agree to have tariffs, is that Canada is put in a structurally disadvantageous position vis-à-vis the U.S. in the quest to attract investment and all the rest of it. Because what we've seen with other jurisdictions is that these agreements are more like U.S. products pay nothing to go into their markets, and their products are charged 15% to go into the U.S. That's what Europe negotiated, that's what Japan negotiated, that's what Korea negotiated. If you had that sort of a situation where a U.S. product from Buffalo or Detroit could come to Toronto and pay nothing, and a product from Toronto going to those cities or others,

in the U.S. had to pay 15%. That would be very, very challenging for the Canadian economy. And because the Canadian economy, like other parts of North America, has been set up to sell intermediate inputs into bigger supply chains, that is something that would put a long-term, really terrible weight on the Canadian economy and its ability to be competitive. And so Canada didn't ask to be in this situation. the only reason why it has a surplus of trade with the U.S. is because of energy, which the U.S. needs and those refineries have to take Canadian heavy crude from Alberta. But this is what happens when you begin to start to break that apart.

And so, yeah, Canada would be hurt very, very badly. But I think what its ultimate goal would be how do we find a way bad? to the status quo or something that looks like it, and how do we not have a situation where Canada is structurally uncompetitive compared to the U.S. for the next 50 years? Yeah. All right. Sounds like quite a task.

Eric, thank you so much for this. My pleasure. All right, that is all for today. I'm J.B. Poisson. Thank you so much for listening. For more CBC podcasts, go to cBC.ca slash podcasts.