The Current - Canada hits back in US trade war

Episode Date: August 26, 2026

The federal government announced their response to the new U.S. tariffs on Canada. We’ll hear from the Mayor of Sarnia about the impact this escalating trade war will have on the city, former Alberta Premier Jason Kenney on the politics of this war, and what he wants to see from his province. And Randall Bartlett, the deputy chief economist at Desjardins Group, joins us to talk about the possible fallout for the Canadian economy. 

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. I'm Susan Ormiston, and this is the current podcast.

Canada must respond. And today we are in a proportionate, targeted, and strategic way. Today I'm announcing that Canada will match the United States tariffs, dollar for dollar, rate for rate. That's finance minister Francois-Philippe Champagne, announcing the federal government's plan for what exactly comes next in this trade. war with the United States. It included counter tariffs as well as grants and loans to support businesses and workers. Mike Bradley is the mayor of Sarnia, Ontario, a community that is watching this all roll out very closely. Mayor Bradley, good morning. Good morning, Susan. What's at stake for Sarnia if this trade war continues? Well, I believe it's the same stakes for all

of Canada, but we are on the front line, border city, a very busy border city. We also are the energy hub of eastern Canada with the petrochemical chemistry sector located here. And already there's discussion about tariffs on plastics and other goods that would impact here. And what we produce here in Sarnia Lampton is part of the supply chain for all of Canada. When you look at the auto industry, there's the tires, we produce the rubber, we produce the gasoline. So there's great apprehension here and great fear. At the same time, I will say there's also great support for what the Carney government has done so far. How long would that support last do you think as the economic consequences come down to Sarnia?

That's the billion-dollar question. Right now, everyone is hyped, they're supportive of the government. Will we sustain that? I hope so. Six months from now, if jobs are lost and there will be jobs lost, if industries are totally damaged, will that sustain? If you look at most examples of wartime, that people will come together and stay together. I use the Ukraine as an example. So I hope Canadians will stand by this. It is going to be very, very, we've had this two-year root canal from the United States, and we're tired of it. We're just tired of it. So we will sustain that, I believe, as Canadians. And in fact, every time I see another gesture from the Trump administration or more remarks or rhetoric, it hardens people here. So I have faith in the Canadian public. They'll stand by the federal government. And I hope the provincial governments will continue not to be parochial and stand up and support the federal government. Mike, I'm curious, what have you been hearing from your counterparts in the U.S.? The border towns on the other side? Our leaders reaching out to you? Have you heard from them?

No, and the reality is in the last two years, that relationship has disentangled. I did so many things I used to do in the United States. I was on boards and committees, and we had great relationship with Port here in Michigan. That has dissolved in the last two years. And at one point, a senior official over there said, oh, the only reason Canadians aren't coming over here anymore is because of the exchange rate. That is absolute nonsense. We've always gone back and forth no matter what, the exchange.

rate. And we treasured our relationship with the Americans, but that has just fallen apart. And I think the same thing has happened with the governors and premiers that's just not there anymore. I will say that some of the mayors I talked to in the last year in the United States are scared. They know that they come out and support Canada. They lose their federal grants, their security grants, all those things. So there's that element there, which I understand. Is that the reason for the silence, do you think? I think it's part of it. Cross and the River here that I'm looking at right now. I sound like Sarah Palin. I can see port here.

There is, they voted twice, 77% twice for Trump, that number. And now they're trying to understand why we're not over there. Well, it's really, so it's on the ground, too. When people say it's just one man, it is a lot of other people. And the one thing I fear I do have, Susan, everyone keeps on talking about the midterms. Yes, we're all watching that, right? If it goes the way we think it is and Trump suffers some big losses, I think the next two years will be just search and destroy looking out at different issues to strike back at Canada

and other countries. Gosh. Mike, in the minute we have left, what do people need from the federal government right now? Was yesterday's announcement enough? Well, it wasn't particularly for the energy sector, but for the others, I welcome that.

We have to support steel. We have to support the auto. But again, as a national government, we're deeply in debt, and how long can we sustain that if we go six months a year or two years? That is the big question. But I think it's important

that they reached out right away. As what happened during the pandemic, those immediate steps gave people from comfort in a very scary time that we were all fearful for what was going to happen to us. So I think that's the same thing that happened with these announcements to back up the different industries across Canada. As you say, it depends on how long this lasts, though. That's the truth. And is it sustainable?

I would hope that we could bring this thing with this deadline of the tariffs, September 8th, I think we'll bring it to a close. But I'm also scared about other things. You know, we'll start doing the water diversion from Great Lakes routine again, all those things. But let's get through the storm. I'm really pleased to see from coast to coast, Canadian standing together, saying we're not going to take this. Mike Bradley, thanks so much.

Thank you, Susan. Mike Bradley is the mayor of Sarnia, Ontario. Jason Kenney is the former Alberta Premier and current co-chair of a campaign against Alberta separatism. Jason Kenney, good morning. Good morning. Do you think the government has struck the right balance, sending a message to the U.S., but protecting Canadians?

Yes, I do. I don't think there's any perfect optimal strategy to deal with such a impulsive and unpredictable counterparty and one that's so aggressive. But I think they've sent the right message, which is that Canada is not a punching bag, that we will respond in a measured way. I think we all hope this won't escalate further. But if it does, at least the administration knows that Canada is not a pushover, and that we will defend our economic interests. It's a risk, though. Of course, there's also a risk in doing nothing. There's a risk in, there would have been a risk in accepting a bad faith deal that would be a huge step down from the

NAFTA-KUzma agreements that would have made permanent. One of the problems with what was apparently on the table is that it would have been Canada accepting not in a long-term agreement like a renewed Kuzma, but in a short-term agreement in which the United States explicitly would have reserved the right to change its tariff policy at any time for any reason, we would still be accepting the premise of an asymmetrical imposition of tariffs on various Canadian industries. That would be devastating for a couple of those industries, including the auto sector. And it would have more importantly sent a psychological message of total submission that we can be bullied. So I think that that was the greater risk

than taking the risk of the calculated risk of these countermeasures. The conservative leader Pierre Pollyev said this week, calling on Prime Minister Mark Carney to recall Parliament. He also wants us to scrap all the gas tax and the industrial carbon tax, drop the GST. Are these the right things to be calling for at this moment? You know, I think that, yeah, I'm an old-school parliamentary guy, and I do believe that at moments of national crisis, Parliament should meet.

and that's the ultimate form for accountability. I don't agree entirely with calls for the release of all of the details, because, first of all, there wouldn't be a final text that was subject to negotiation. I know that in contexts like this, there are lots of different texts flying back and forth different versions. A lot of it's happening verbally and at sideline conversations. And finally, a lot of that has to be kept confidential. We all hope, I think, that sanity will prevail.

in the American policy, they'll come back to the table, and we wouldn't want to have revealed every aspect of our trade position in that. But in terms of the broader economic reform, she's recommended, I broadly agree. I do think that this is, you know, the one thing that we're missing, the current government, the current government has made a lot of progress towards deregulation and economic reform. I don't think nearly enough, given the dramatic impact that these measures may have

on the Canadian economy, I think they really need to think about fundamental fundamentally changing incentives for people to work, save, and invest in Canada, that means reducing the tax burden. I need to ask you about the current Alberta Premier's position, Danielle Smith. She's saying that cutting energy exports as a response is not on the table and that she thinks counter tariffs ultimately risk escalation. You've called for perhaps an export tax on our energy exports from Alberta. Which is the right approach here? Well, to be clear, I'm suggesting that should be on the table, the idea of an export tax. As I'm sure you know, that Canada operates a trade deficit with the United States if you exclude our energy exports.

If you include the oil and gas that we ship to the United States, almost all of it from Alberta, that's where Canada gets the trade surplus about which the president complains. And yet he wants more of our oil. He wants something like the Keystone XL pipeline. And the point is that two-thirds of U.S. oil imports come from Alberta. 90% of U.S. gas, natural gas imports come from Canada, and 95% of the potash imports where their farm fertilizers come from Saskatchewan. That is to say that by far the strongest leverage points are things like this,

not to mention central Canadian hydroelectricity. So I think they should understand, with respect to the Premier's point about escalation, that should the Americans escalate this to an untenable level, should they really try to manifest President Trump's threat to use economic force to force the annexation or acquisition of Canada, that we have some very strong levers to pull that would materially increase the cost of living in the United States in advance of a midterm election.

I don't want to do that, but I think it would be irresponsible to take our strongest potential countermeasure off the table completely. Premier Smith is voicing some doubt about the current federal government's position on this. Do you think that this sort of chink in the Canada unity across the country with the premiers is risky? Well, I don't think anybody sitting in the White House analyzing nuanced differences in language or policy between provinces. There's one Canadian government that speaks for Canada. And I hope and believe all of the premiers understand that.

But this is one reason why I've called on the governments of Saskatchewan and Alberta to join the other eight provinces in solidarity by no longer stocking American alcohol products in liquor stores. Because this is a zero-cost way. There's zero-cost to Canadian consumers. We can easily substitute those products. for Canadian products, strengthen the Canadian economy,

in a way that apparently does register in Washington. They've raised this as one of their, these, what started as largely symbolic countermeasures have become apparently a real, irritant in Washington, demonstrating that we can have an impact. So I do think Alberta and Saskatchewan could strengthen the national, sense of national solidarity by doing that.

Just a few seconds. left in a word, do you think that these two sides can cool off and get back to the table? Yeah, they can. I think it's, however, unlikely in the short term. I do think time is on our side. U.S. courts keep striking down tariffs that are clearly a congressional power to levy these taxes. Upcoming midterms focus on the cost of living, which will be made worse by these tariffs. and the crisis in the Middle East, much bigger fish to fry. I think that ultimately time is on our side,

and that's one of the reasons I think the Prime Minister's approach is prudent. Thank you, Jason. Thank you. Jason Kenney is the former Premier of Alberta. 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 on cover 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.

Randall Bartlett is the Deputy Chief Economist at Desjardin Group. He's in South River, Ontario. Good morning. Good morning. So a lot of tariff talk, people are parsing through the numbers. How would you rate the federal government's response so far? Is it

Does it strike the right balance? Well, I think the federal government is very much focused on trying to tariff those goods that, you know, are kind of tit for tat with the United States, where we really focused on things like steel, aluminum, and the products that the U.S. is tariffing on us. It's dollar for dollar. So I think in terms of how measured the response is, it does seem to be equal and opposite to the United States. and so it really follows the sort of path that Canadian governments have taken throughout 2025 as well. And so it does seem proportionate with the actions of the United States. Randall, as of September 8th, if this goes through as planned by the federal government, we will be receiving more money because of these counter tariffs.

How much monthly tax revenue would these tariffs bring in? So by our estimate, the federal government can expect to bring in around 600,000, million dollars additionally every month as a result of these tariffs. So we look at that in the context of the $7.5 billion support package that was announced yesterday by the federal government. It's broadly offsetting. So the impact on the federal deficit should be broadly neutral, in terms of the ability of the government to pay for those programs with the revenues brought in from the additional tariffs. But if there's a need for more support for workers, that would change the economic calculus there?

That could very much change the economic calculus. There's no doubt. And the other aspect we haven't thought about in great detail yet is the impact on the broader Canadian economy and what it means for other types of revenues, personal income tax revenues, corporate income tax revenues. And when we see in terms of our estimates of the impact on the Canadian economy

is that the retaliatory tariffs are both going to slow economic growth. same time boosting inflation. And so, well, we haven't sorted out the details of the exact revenue impact yet. Certainly the impact on Canadian businesses and consumers is one where growth is going to be slower. The labor market will likely be weaker and Canadians will be paying more for the goods that they buy. Yeah. I mean, just for clarification, $600 million a month will be coming in, but who's paying that? Well, it's Canadians that are paying it. The people who pay for import tariffs are the residents of the countries that are applying those tariffs. And so it will be Canadian businesses and consumers that are going to be paying these retaliatory tariffs.

How long can we keep imposing these retaliatory tariffs? I've heard a lot of people talk about a concern now that we are in a tariff world going forward, regardless of the number or the up and down or retaliatory, we're going to have tariffs with our trading partner. Well, we've very much been in a tariff world since the beginning of 2025. while the federal government roll back some of the countermeasures that were applied back in March and April of 2025, sort of in the later part of last year, many still stayed in place as well. There were still ongoing tariffs on steel, aluminum, autos, because the U.S. was applying those to us,

and those were not duty-free under Kuzma. And so we've been living in this escalated tariff world for some time. But even before that, we'd lived in a world where our softwood lumber was getting. hit with duties that were regularly demonstrated to be illegal and outside of the trade agreements we had with the United States. So it does seem that we live in this escalated tariff world, and that's potentially going to persist even after the midterm elections and even the presidential election in 2028. Have there been some economic analysis done about what the risk is to investment in this country with the uncertainty and added cost of a tariff war?

Yeah, the uncertainty that businesses are facing as a result of the ongoing, on again, off again escalation in the tariff war of the United States has really kept investment on the sidelines, both in terms of domestic companies, not expanding to the same extent that they would otherwise, but also international investment. A big part of the government's mandate is to attract international investment to Canada for things like trade supporting infrastructure, rail, roads, ports, airports, as well as energy transportation infrastructure for renewable and non-renewable energy. And so we need those international investment dollars to come into the country. And it's a tougher case to make when this trade war continues

to escalate. So finally, the retaliatory tariffs go into effect on September 8, as long as nothing interferes in the meantime. What else does Canada have at its disposal to counter U.S. aggression while not hurting Canadians more? Well, I think that we've seen some of the measures obviously introduced by the provinces, and that was a real sticking point during the negotiations, things like removing alcohol from liquor store shells. And it's certainly been something that's raised the ire of the U.S. administration really sort of accelerated the negotiations. And so ultimately, there are measures that governments can take. But at the end of the day, it all costs Canadians more. And so hopefully by announcing these measures yesterday and not introducing them until

September 8th that leaves the door open to return to the negotiating table with the United States and avoid not only imposing retaliatory tariffs on U.S. imports, but also possibly reducing some of the tariffs that Canadian exporters are facing as well and hopefully reaching a deal that both countries can accept. Just briefly, in your world amongst economists, do they think that these negotiations will resume? I think there's a sense that these negotiations are going to resume, going forward. What that looks like and what the timing is is really anyone's guess. But certainly, I think it's in the best interest of both countries to return to the table, particularly given the midterm elections coming up in the United States and swing states like Michigan and Minnesota,

having center races during this cycle. And so I think it's probably in the best interest of the U.S. administration and the Canadian government and businesses and consumers on both sides of the border to get some sort of resolution to this. All right. Thank you so much, Randall. My pleasure. Thanks so much for having me. Randall Bartlett is the Deputy Chief Economist at Desjardin Group. You've been listening to the current podcast. I'm Susan Ormiston. For more CBC podcasts, go to cbc.ca.ca slash podcasts.