The Current - Canada will prevail against Trump tariffs: finance minister

Episode Date: February 3, 2025

Finance Minister Dominic LeBlanc says he’s convinced Canada will prevail against Trump’s sweeping tariffs, but admits things could get rough in the meantime. He explains what the federal government is doing to win this fight and support Canadians, an effort that global trade expert Carlo Dade calls a “really difficult balancing act.” 

Viking. Committed to exploring the world in comfort. Journey through the heart of Europe on a Viking longship with thoughtful service and cultural enrichment on board and on shore. Learn more at Viking.com. This is a CBC Podcast. Hello, it's Matt here. Thanks for listening to The Current, wherever you're getting this podcast. Before we get to today's show, wonder if I might ask a favour of you if you could hit the follow button on whatever app you're using. There is a lot of news that's out there these days.

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The sound from hockey rinks and basketball arenas on the weekend as hockey fans and basketball fans booed the American national anthem. On Saturday, US President Donald Trump imposed 25% tariffs on virtually all Canadian goods due to start on Tuesday, though energy products are getting a lower 10% tariff. When Prime Minister Justin Trudeau made his announcement of how Canada would respond, he was flanked by Minister of Foreign Affairs Melanie Jolie and Dominic LeBlanc, the Minister of Finance and Intergovernmental Affairs. Prime Minister Trudeau spoke with President Trump this morning. We spoke with Dominic LeBlanc before that conversation. The Bank of Montreal says Trump's tariffs hammer will come down hard on the Canadian economy.

How bad is this going to be? I think it's gonna be very tough. Provincial governments and the Department of Finance have looked at various scenarios. What we don't yet know is how quickly Canadian businesses will be able to respond. Some sectors will be able to respond. Some sectors will be able to respond more easily than others but I think we shouldn't underestimate if you

take the auto sector, the auto parts sector for example in Ontario or I'm talking to you from Moncton New Brunswick this morning, people are fishing lobster in the Bay of Fundy now and 70 or 80 percent of that catch gets sent to Boston. So you can see the price went up, will go up by 25 percent tomorrow. So big and small sectors of our economy are going to be hit in a difficult way. Our government, of course, responded with some counter-tariff measures that we can escalate over time.

We're convinced, Matt, in the end the Americans will conclude that it's not in their economic interest to continue this kind of back-and-forth. The Wall Street Journal editorial this morning, I thought, made the case very well. But we're in for buckle up, I think as your introduction said, we're in for a bit of a ride, but the Canadian government and the provincial governments, I think, will do everything necessary to support the economy and Canadian workers. You looked Donald Trump in the eye at Mar-a-Lago, and there has been endless...

That's a pretty pompous way to describe it. I was at a dinner that he hosted. You spoke with, or at the very least, you looked at him, and you spoke with him, and there has been endless kind of shuttle diplomacy back and forth, there have been these videos of what's going on at the border sent down to try to catch his attention as well. I just wonder why you think the efforts of Canada

failed to persuade him to change his mind. So I've asked myself that question, Matt, and I think my colleagues have as well, because you're right. We made a considerable effort. Premiers made a very considerable effort to speak directly to Americans, American leaders. We think we have a good story to tell on border security, on the increased work that the RCMP and CBSA have done in recent weeks with their American partners the idea that there's a difference between Canada and the United States in the

Common desire to fight against the horrible effects of fentanyl or the Mexican cartels or other organized crime groups that traffic those drugs There's no daylight between Canada and the United States Excuse me in wanting to fight That kind of criminal activity or the horrible effects it has in Canadian and American communities. So you're right, if that was the pretext for these tariffs, we think that that argument should be rationally resolved. So then therefore one asks the question,

well, why did they go ahead with this decision on the weekend? What's your answer to that? I'm not a psychiatrist, I've asked myself that question. There is a thought that in his administration, there's a belief that tariffs per se are a great economic policy. It'll generate revenue for the United States, sure.

They're applying them to other countries, China, Mexico. They're threatening to do it with European countries. It's an interesting intellectual conversation or discussion to try and figure out why they're doing this. The focus for us, Matt, has to be, okay, they've done it. What do we need to do to respond to get Canada out from under this circumstance as quickly as possible. And as we go through it, what do we need to do with provinces and territories and other

partners to support Canadian businesses? So we're really going to focus on that, but I'm going to go down to Washington and see, for example, the incoming Commerce Secretary Howard Lutnick. He told me the day after he's confirmed, he'd be happy to spend the morning with me in Washington and go through all of this. Prime Minister's speaking to President Trump this morning in about 45 minutes, I think. So there still is a lot of ongoing conversation,

but we wanna see results from that. And you're right, we're frustrated, because up to now we haven't got the result that we think the American economy and the Canadian economy require. Do you think there's any wiggle room? I mean, in that conversation with Donald Trump that the prime minister will have, is there any

wiggle room, do you think, to avoid these tariffs coming into place tomorrow? Um, we, we don't think so. As I say, the conversation, I think is going to happen, uh, shortly. Uh, but the president said, we took note of what he said publicly at the end of last week or on I think it was on Friday or Saturday that there's nothing that

Canada or Mexico could have done to avoid this so he said that himself which as you say sort of is a bit contradictory from the idea that if we could show them and work with them to tell the good story about border security and collaboration with American law enforcement that's been the case in Canada for a long time, they would be reassured and these tariffs wouldn't happen. So there's a lot of contradiction in much of what is said publicly, but we can spend a lot of time being distracted by that.

The Prime Minister will make the case to the President this morning why this is putting at risk decades of economic and security partnership and will hurt Canadian and American businesses in a way that's totally unnecessary. We'll continue to make that argument. I'm convinced in the end it will prevail because it's in the American economic interest to not sort of get into this rabbit hole. But now that we're in it, we've got to go through it. And we've got to do it in a way that supports Canadian businesses and the Canadian workers. Does the fact that energy tariffs are just 10% compared to 25 suggests that the visits

that Daniel Smith, the Premier of Alberta has made, have paid off in some ways? That there are other strategies to try to deal with this Premier Smith has certainly been advocating for that Circumstance herself Canadian business leaders. I was in Calgary last week met with Premier Smith But the CEOs of many of the big energy companies from from Alberta I companies from Alberta. I think it's also a recognition, Matt, that the Americans are

dependent on Canada for much of their energy imports, not just oil and gas. That's the obvious one. But there are critical minerals from Ontario. There are rare earth minerals from Western Canada and Northern Canada. Energy, there's rare earth minerals from Western Canada and Northern Canada, energy, there's electricity that comes from Ontario and Quebec but not exclusively Ontario and Quebec. So it's energy defined broadly. The recognition by the differential perhaps in the tariffs tells us that as an input into their own economy, a tariff is in and of itself negative for their economy. Many of the CEOs that I met with in Calgary last week

said that their concern was that American companies were simply gonna say to these Canadian companies from Western Canada, you're just gonna eat that 10% tariff because we're not going to pay more. That's one of the challenges of having a captive market. If so much of the resource gets sent to one client, you don't have to be an economics professor at University of Toronto to know if you have one customer that buys 90% of your product, perhaps you don't have the best chance to negotiate a good price. So that's one of the challenges that Canada has faced for a long time.

And what the Americans did on the weekend just lays that issue wide open for Canadians. There are people who are very, very anxious about what the next few days will hold. I heard Flavio Volpe, who represents Auto Parts Manufacturers this morning, saying that he believes that by the end of this weekend to next week, you will see assembly lines shut down in Canada and in the United States. What is your government going to do to help support Canadians who could be out of work, perhaps even temporarily by the end of this week? So we're very concerned about that.

I had the chance to hear Mr. Volpe at our cabinet retreat in Montebello, Quebec a couple of weeks ago, and I know he's been very much engaged with our government in exactly that context in describing probably one of the first sectors and a critically important one for the Canadian economy that's going to feel the impact of this bad American decision. We've said all along that the government of Ontario, Premier Ford, has been also very clear with us privately but publicly that his government would be there to support businesses and workers that are going to face this circumstance through no fault of

their own. There are existing federal programs, Matt, employment insurance is obviously one of them. Matt, employment insurance is obviously one of them. We can adjust some of the criteria, some of the access to benefits. There's changes we can make around work sharing to allow more workers to remain employed, to share, in other words, the economic risk with the businesses. All of those programs are being looked at like literally on the weekend and today. We have the ability to immediately put in a number of flexibilities in existing programs. I can, as the finance minister, ensure that there's liquidity in the economy, that businesses have access to the money they need to continue to operate. What about for people who worry about their rent?

I mean, will there be direct supports to people who worry that if they're not working, they can't keep the lights on in their house? Well, as I say, there are programs that exist now to support those workers, and if we need to have different programs that meet a particular need, we will. So we'll do what is necessary to ensure,

to your exact question, that these workers are not, through no fault of their own in an untenable economic position. So we've said that we'll be there to do what's necessary and that's the case. The good news is a lot of those programs exist now and if we have to have different ones in partnership with provinces that will very much want to step up, then we absolutely will do that as well. I know we're short of time. Let me just ask you a couple of things quickly. One is, are you confident that this Team Canada approach is actually paying off, that the country is actually speaking with one voice?

Because as we've heard, there are business leaders, there are chambers of commerce, there are premiers who are saying things that seem to go against the narrative that the federal government is putting out, that seem to be talking in a different way. Are you confident that we're all speaking with the same voice here? Look, in an open democracy, you're never going to have everybody saying the same thing. And different sectors of the economy and different representatives of different groups of workers will feel and see the impact of this differently. So that's not surprising, but the basic premise, will the country remain united in the face

of this economic threat? I'm absolutely convinced we will. I was very, very encouraged by the conversation with all 13 Premiers we had on Saturday late afternoon. I participated in that call with the Prime Minister. There was very much a desire to maintain a common purpose and some Premiers who perhaps have expressed previously different preferences were very much united in that purpose. So and I was I was in came back to New Brunswick from Ottawa Yesterday Matt people on the airplane between Montreal and Moncton sort of saying, you know

We got to stand up for for our country and don't let the Americans push us around These are just people there really is a shared I think common purpose in the country Let me I'm convinced that that that will that will endure. Let me just ask you briefly about that. What do you make, I mean Canadians are angry. You would have heard that on the plane, you would have heard that in Moncton, New Brunswick. What do you make of how Canadians are responding? Not just booing anthems, but I mean how people are responding in terms of talking about cancelling vacations to the States, looking at bi-Canadian policies.

What do you make of how we, we as Canadians, have responded to this? It's quite touching to be honest. It's quite moving to see how people who aren't policymakers or business leaders or representatives of large groups of workers in their own daily routines and in their own decisions as consumers are wanting symbolically and substantively to do something to support the common cause. That provinces are taking alcohol, spirits and wine and beer from the United States off the shelves in provincially run liquor commissions. I was at a restaurant in Moncton last night and the owner told me that he's taken off the menu all of the California wine that would have been available.

They're not serving anymore. He's taken it off the shelves in his restaurant in Moncton. There very much is, I think, a grassroots effort to show Americans, but to show one another that we're in this together. And to your point, the workers that Mr. Volpe would represent should be moved that the premier of Nova Scotia is going to apply a more expensive toll on American license-plated vehicles between New Brunswick and Nova Scotia. Everybody's trying in their small way to say to the Americans, you know what? Decades of friendship and partnership

economically and from a security perspective can't be thrown out because a particular president decides for a reason it's not particularly clear back to your earlier question, um, to do this to the Canadian and American economy. A busy day for you. I appreciate you taking some time to talk to us and hope we talk again as this unfolds in the

meantime, Dominic LeBlanc. Thank you. It's always a pleasure. Thanks for having me in your program. Dominic LeBlanc is Canada's Minister of Finance and Intergovernmental Affairs. Viking. Committed to exploring the world in comfort. Journey through the heart of Europe on a Viking longship with thoughtful service and cultural enrichment on board and on shore. Learn more at Viking.com. Every language is a note

in the symphony of our heritage. Together they create a harmony that cannot be silenced. Discover your voice on the new APTN Languages TV channel. Carlo Day, Director of Trade and Trade Infrastructure at the Canada West Foundation, also incoming director, the Center for Intergovernmental Policy, the School for Public Policy at the University of Calgary. He joins us now.

Karl, good morning to you. Morning, Matt. How bad is this going to be, do you think? So it's, of all the scenarios that we have been studying in terms of possible tariffs from the US, this is close to the worst. Had the 25% tariff been extended to energy, it's not just oil and gas, all forms of energy, it would have been worse.

But certainly, this is going to be one of the more severe shots we've experienced. It's worse than the last time the Americans did this to us in 1971 when the across the board tariff was only 10%. So certainly, there's economic modelling to show that the damage will be severe. As you understand it, I mean, run us through some of the scenarios in terms of what that's going to look like.

We talked about automotive and the fact that assembly lines could shut down within days, certainly. What about other sectors in broader manufacturing and farming? The minister was talking about fisheries, for example, in Atlantic Canada. Walk us through what you think is going to happen.

Sure. So, it's going to be highly dependent upon sector, as you've mentioned, but also businesses. So, for example, if businesses have taken precautions, and unfortunately, there's no sign that many Canadian businesses have done this. But for instance, stockpiling goods ahead of the embargo could help to, not the embargo of the tariffs, could help delay the onset and give businesses some time to readjust. But in agriculture, certainly. Beef. Beef is as integrated as automobiles to some degree, maybe not seven or eight times crossing the border, but at least two or three.

Each of those times crossing the border will of course incur new charges. So we're probably looking on something along the lines of what happened when the Americans imposed country of origin labeling rules and the beef industry took, I think if I remember correctly, around a billion dollar hit over a year. So that's certainly going to be a major impact. Oil, my colleague at the U of C, Jen Winter, did a modeling exercise, a redone modeling exercise from the last time we had blockages shipping oil to the U.S. And there I think it's hundreds of thousands of dollars a month that were

projected to lose. So you go sector by sector, the damage certainly is there and the ability to move to other markets, well we've got the experience with the blockage of canola in China to show just how difficult it is to move supply and production chains. Canada has announced two phases of retaliatory tariffs, or calls for Canada hit even harder. Christoph Freeland, who is hoping to lead the Liberal Party, said that there should be, for example, 100% tariff on Tesla.

That if Elon Musk is trying to sell cars in this country as a close advisor to the president, he should feel this. Do you think Canada is doing enough in the face of what was announced by Donald Trump? Yeah, Tesla. Look, there's only so much we can do. Our tariffs are largely symbolic. They're not going to deliver real economic impact or pain to the Americans. Take bourbon. We've announced that we're going to tax

or put a tariff on bourbon. Kentucky thought to be highly important. It's a nine billion dollar US industry. Canada imports about 30 million. So you go across the board, our ability as a smaller economy to harm an economy as large as the US with a market that is 340 some million consumers is really, really, really limited. So the terrorists are more symbolic. If we were to cut potash, that's the only product we really have on which the Americans are fairly uniquely and highly dependent on Canada. 87%, they import 90% of the potash, 87% comes from Canada.

You can't grow corn and other crops without it. But were we to do that, we would essentially be threatening the Americans with starvation. So we've got to be really careful here that we don't invite even greater terror of action or other punitive measures from the Americans. So it's a really difficult balancing act. I have to let you go, but Donald Trump's only been president for two weeks. So it's a really difficult balancing act. I have to let you go, but Donald Trump's only been president for two weeks. And we've got 250 more to go. Unfortunately, we had time back in March.

Had we in March, when he seized the Republican nomination, begun preparing, it was clear that terrorists were coming. You had Orrin Cass on the show, and thank you for doing that. That's going to be one of the most consequential conversations we've had. But we would have understood what Dominique Roblach still doesn't seem to understand. The terrorists were coming.

We're not dealing with the US. We think we know. So yeah. Right. Buckle up, as we said earlier. Carlo, thank you very much. My pleasure. Carlo Day, director of trade and trade infrastructure

at the Canada West Foundation.