The Current - Is Canada getting a good deal on tariffs?

Episode Date: August 20, 2026

As Canada and the US come to an agreement on tariffs, we'll hear from three specialists on whether this is a good deal. Flavio Volpe is the President of the Automotive Parts Manufacturers’ Association. Carlo Dade is the Director of International Policy and the New North America Initiative, at the University of Calgary School of Public Policy. Laura Dawson is the Executive Director of the Canada US Future Borders Coalition.

Between tariffs, trade battles, and an ongoing war in the Middle East, the lazy days of summer seem to have skipped Washington this year. So our podcast, Two Blocks from the White House, is here to keep you caught up, even if you're in vacation mode. Join me, Katie Simpson with correspondence Paul Hunter and Willie Lowry and other journalists from our D.C. Bureau for a front row seat and what this all means for Canadians. Find and follow two blocks from the White House with new episodes every Wednesday

in your favorite podcast app, including YouTube. This is a CBC podcast. I'm Lindsay Duncombe and this is the current podcast. Canada and the United States appear to have reached a tentative deal on tariffs. If the deal is finalized before the midnight deadline on Saturday, it looks like Canada will avert a new 50% tariff that was set to take effect. U.S. President Donald Trump says he has brokered what he calls a very good deal. Yesterday, Prime Minister Mark Carney met with his cabinet and with the premiers to discuss the ongoing negotiations. This is Canada-U.S. Trade Minister Dominic LeBlanc after that meeting. It was a constructive and, frankly, a very important conversation. The Prime Minister updated the premiers on where we were in terms of our discussions with the United States. We have more work to do. Madame Charette participated in the discussion from our embassy in Washington. because she is finalizing the important work that we need to do over the next little while.

Flavio Volpe is the president of Automotive Parts Manufacturers Association. He also sits on the Federal Government's Advisory Committee on Canada-U.S. Economic Relations. Flavio Volpe, hello. Thanks for having me on, Lindsay. We're waiting for official details here, but I want to get into the details that we are hearing about this deal. Sources are telling CBC that it includes the lowering of the tariff rate on Canadian-made vehicles to 15%. That is down from the current 25%. Is that a good deal for car manufacturers in Canada?

Car manufacturers in 2024, the last year before this trade madness, averaged 6% profits from their car assembly and related. business. So it's better than being subject to four times your profit margin. Now we're only at two times in change. We have to be careful when we say things like improvements or good deals. A good deal is allowing a company and entrepreneur to invest money and expect a return. Because the industry has been tariff-free for 60 years in a joint market with the U.S., All of the assembly plants here in Canada and all of them are in Ontario are designed to ship finished vehicles to the U.S. So we're completely exposed. So it's an improvement.

And I know that the Canadian negotiating team, who I'm in constant contact with, are in a tough position and they're grinding it out. But at that level, even with the Americans potentially carrying over a 50,000, percent allowance for U.S. content in it. So reduction from... Can you explain what that means? Sure. Right now, the 25% is on the value of the completed vehicle, but the companies can claim up to 50% reduction on that if they can demonstrate to the U.S. American content in that same proportion. So the effective rate is 12.5%. So if he drops it to 15 and the effective rate is 7.5%, it's a big improvement, but it's still more than the profits of these companies. Is it enough to keep auto jobs in Canada?

No, I mean, you can use any industry on this. I mean, if you had a pizzeria and the pizzas cost more than you're selling them for, you're not going to have a pizzeria for long. And so the companies are heavily invested here, tens of billions of dollars of factories and capital, what they'd likely do at that level. If the Canadian government and the Ontario government didn't come together with maybe corporate tax changes or other industrial policy changes, they would continue making the cars and the factories that they have now. But when those cars come up for a renewal and they usually build the same cars for five to seven years,

then the cost of building them in Ontario will be, the cost to them is more than it would cost to build or extend a plant in Ohio. So with what you know about the deal as it stands now, you're saying that there would need to be additional government support in the terms of tax arrangements to keep those plants and those jobs in Canada. Yes, I don't want to be so presumptuous as to say that any of that is, owed to anybody. We're in a very complicated economy here in Canada and especially here in Ontario, there are a lot of different pressures

on government and government funding. But if you want to stay in the auto business, which is the biggest intersection and cluster of science and math in any consumer good, then we have to do something to bring that number below the profit margin.

Otherwise, none of these companies are charities, and they're not state-owned Chinese operators that are willing to take a loss as they build market share. They've been here 40 years for the Japanese companies, 120 years for the American companies, who we helped build. But they have to face shareholders and quarterly reports. And unfortunately, none of them are Canadian who would make the home team decision and lose money just to wave the flag. Is what we're dealing with now kind of like a stopgap measure where we can not have the new tariffs come in, reduce what exists now, and then lay the groundwork for bringing in Mexico for Kuzman negotiations? Yes, I think that's a reasonable expectation of what's possible.

As we talked to the negotiating team, one of the things that we thought that could be. bring the effective rate down below the profit line is a recognition for the Canadian content that's in those cars or the and or the Canadian and Mexican content that are in those cars, you know, the three Kuzma partners. And also if there's a clear path to, okay, look, this is an interim moment, interim number, but we're going to go into chapter and verse renegotiation of the rules of origin for automotive of manufacturing in the Kuzman negotiations that'll further give potential relief. I mean, look, I'm Canadian first.

And the auto parts suppliers represent the biggest Canadian manufacturing companies anywhere across the country. They're Canadians. They fly the flag in front of their factories and in a lot of cases on the uniforms that their employees wear. So we'll work with both levels. government. In 2009 and 2010, when the world fell apart and Canada and Ontario participated in the bailout of General Motors and Fia Chrysler, we lowered the corporate tax rate for manufacturers

by 2%. We allowed them to do a whole bunch of other things that kept them around. Thank you so much for that insight this morning, Flavio. Thank you, Lindsay. Flavio Volpe is the president of the Automotive Parts Manufacturers Association. He also sits on the Federal Government's Advisory Committee on Canada-U.S. Economic Relations. Let's bring in Carlo Dade. He is the Director of International Policy and the New North America Initiative at the School of Public Policy at the University of Calgary. Good morning, Carla. Good morning.

As we go through these different messages from Ottawa and Washington, I'm struck by the fact that both countries seem to be highlighting different parts of the United States. this tentative deal. The White House is talking about Keystone and energy security. The Ottawa officials are talking about tariff reductions. Is it possible for both countries to be happy here, or is someone going to be the loser? Two really good questions there. And let's separate them. On the first one, the different statements coming out of people who walked out of the same room and supposedly have the same discussion, is par for the course for what the Americans have done

with these agreements on reciprocal trade, as the Americans call them, agreements really on managing trade. The Americans have done this with 21 other countries ahead of us. We're country number 22 in this list or on this list. At each of those other agreements, and they range from the EU through Japan, Vietnam, for example, the Vietnamese were shocked at what the Americans tweeted, what President Trump tweeted when they came out of the agreement.

So for these other agreements of which were in the line standard course, I don't think it's possible to have a good agreement. None of the 21 other countries left the negotiations better than they started off. Everyone else made concessions to get a worse deal. They also faced obscenely high tax. tariffs in exchange for tariffs that were less obscenely high. The Americans are forcing people to take a overall baseline tariff without a trade negotiation but using executive power.

And now it's our term. And this is happening in conjunction with the Kuzma talks. We're unique in that we have a second set of trade negotiations with the Americans while they're negotiating a new layer on top of that. We know that Prime Minister Mark Carney briefed the premier. yesterday. As part of that meeting, he said he wanted them to be prepared to put booze back on the shelves and to take the U's American procurement to bring back on the table. Different reaction from different premiers. We have Quebec saying it's not sufficient information, hopeful about the possibility

from David Eby. Do you get the sense that there's unity here? Not yet. And again, this is a unique situation in Canada, our provinces are closer to Emirates in the UAE than they are American, our Mexican states. And the other 21 countries that have gone through this process haven't faced the same tension. The issue is, especially with provincial control over liquor, is that we've caused an own goal here. Alberta and Saskatchewan have opened to U.S. liquor, but sales are through the floor. I think overall down 40%. Beer has cratered, American wine has cratered. We've done it on the prairies without handing the Americans a club, a government-mandated embargo that the Americans can use against us. So hopefully the premiers can come to realize that we can

have the impact of sending a message to the Americans without at the same time handing them a club to use against us, which is the government-sponsored of the government-mandated embargo. Before I let you go, I just wanted to touch on steel and aluminum, which has been suffering so much under the current tariffs, lowering that potentially from 50% to 25%. Is that enough to save the steel and aluminum industry in Canada? To save, I don't know.

With the Trump administration, you negotiate, for time, not for peace. You're not going to have a long-term solution. We had an agreement with the Americans as part of the Kuzma Agreement, a side letter that was ratified by Congress and his law that is supposed to limit their use of Section 232 tariffs on steel and aluminum. That didn't do us a lot of good during the second Trump administration. Trump signed it in his first administration, Second administration, he signed it. So even when we go beyond deals on restraining executive power and we try and get something ratified by Congress,

we've had trouble having the Americans uphold their end of the bargain. So whether or not this saves us, I think at best we can hope for a pause and a chance to regroup and rethink. Thank you so much for your insight, Carlo. My pleasure. Carlo Dade is the Director of International Policy and the new North America initiative at the School of Public Policy at the University of Calgary.

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Laura Dawson is the executive director of the Canada-U.S. Future Borders Coalition. She is in Atlanta, Georgia this morning. Good morning, Laura. Good morning, Lindsay. You know, you were talking when we spoke on Monday about how you were parsing through all of the weekend leaks.

Now we're parsing through what little scraps of details are coming out. Given what we know now, what do you make of this tentative deal? Oh, I know I keep coming across as an optimist, but by gosh, it is nice to see some firm commitments on the table that at least people can respond to. And as your previous speakers have said, it's not a solution, but it is breathing room. And that's something that businesses have really needed. Also, I think it exemplifies the fact that this isn't a two-person negotiation where people are passing fold of cheats of paper across the table saying, you know, good deal or bad deal. This is incredibly complex. And there's

stakeholders at all levels who have a say in what goes on. It's industry. It's the provinces. As Flavio was outlining, the calculations with auto sector profitability in the short and long-term are extremely difficult. And so we've opened up a lot of new doors in terms of complexity and thinking through the future. But at the same time, we're better off today than we were a week ago. Donald Trump said that American farmers are going to be thrilled with the deal. If you're someone in the dairy sector in Quebec, can you hear that American farmers are going to be thrilled? How do you think you'd react to that? I would hope that the folks in the Quebec dairy sector are taking the top line social media tweets from the United States as being a bit of

theater. And that they are looking more closely at the actual deal that's been to go. associated looking at whether or not the concessions that have been made, which I have heard are manageable, maybe not optimal, but manageable for this moment, that they can live with those. I mean, it's a bit strange to me when he says, you know, all farmers and I'm like, well, what other sectors have been covered as far as I know? They're just talking about dairy. But we know that the president likes some theater. He likes the top line announcements, the images with the Keystone Excel pipeline. And if that's what it takes to get a deal and get a little bit of certainty for business, I say go for it. It'll be really interesting to see how those concessions, which you describe as manageable concessions, are really digested by the Canadian public. When we know that there hasn't been much of an appetite to concede to the Americans and to Donald Trump at all, how can't Ottawa manage concessions in that environment? Yeah, I mean, I think that they have worked really closely with the core sectors on specific reductions, specific positions on auto, steel and aluminum, forest products, etc.

And those will be the most challenging, I think, to manage. Where we look at these other sorts of commitments, they are more like best efforts and how do we work together to reinvigorate pipelines? How do we work together on critical minerals? How do we work together on procurement and defense? And I think those are easier to manage. Also easier to manage are removing barriers or issues that haven't been there for a long time anyway, like the provincial booze ban, like government procurement anti-American restrictions in provincial procurement. So if something hasn't been in place long enough to really get in bed, it's not that difficult to eliminate.

So we've got different classes of commitments and concessions here. Some are going to be easy. Some are going to be difficult. And some, as Flavio was saying, may require the wholesale restructuring of a key Canadian industry. The other thing that Flavio said is that this is, in a way, biting time until you get to those larger Kusma negotiations. With what you know now, Laura, and obviously we're still waiting. for details. What could this step mean for the future of Kuzma? So we don't have a roadmap for where we are with Kuzma because this whole notion of a review, annual reviews or six-year reviews,

it's brand new. So we've never done this before. So there isn't a slate that says, okay, and now you talk here and then you do that and the deadline is X. It is all terra incognita. So what it feels like to me, and I'm sorry that that's a very imprecise thing. We're going on vibes here this morning, Laura. The vibe feels like they've got some serious backdrop to a trilateral conversation that may provide more certainty within the Kuzma, USMCA, for at least certain sectors and make it more likely today that we'll have a renewal, or at least a non-withdraw from that deal, more likely today than it was a week ago. But again, Mexico is going to be a really important part of that conversation with anything in an integrated sector. such as autos, but also things like energy. So Mexico comes into the conversation now once this hump has, we've gotten over that.

Yeah, yeah. And there's been bilateral conversations going on with Mexico, with Canada, and the U.S. already. So hopefully the stage has been set for productive, final stage conversations, not preliminary, getting to know you kind of stuff. Thank you so much for this insight, Laura. You're very welcome. Thank you. Laura Dawson is the executive director of the Canada-U.S. Future Borders Coalition. She is in Atlanta, Georgia.

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