The Decibel - Trade war on hold as Trump threats loom

Episode Date: February 4, 2025

Hours before historic, damaging tariffs were set to be imposed between Canada and the U.S., the two nations stepped back from the brink.The Globe’s international correspondent, Nathan VanderKlippe, joins the show to break down the phone call that led to the 30-day pause, Canada’s increased measures at the border, and what may be the beginning of a troubling trend: Trump threatening tariffs to get whatever he wants.Questions? Comments? Ideas? E-mail us at [e-mail]

A 30-day pause. That is the reprieve Canada got from Trump's tariffs after a very tense Monday. Nathan Vanderklip has been following the story for the Globe and Mail. The fact that we went from threats of something happening to basically the looming reality that free trade in North America was over to a suspension of all of this and somehow some sort of deal that may or may not last. I mean, it's all been quite an extraordinary period of time. While the immediate threat of severe economic suffering for Canadians and Americans is off the table for now, some harm has already been done.

The Canadian dollar plunged to a nearly 22-year low early Monday. All the uncertainty may create a chill on investing in Canada. And the trust between the two countries has been damaged. While both sides have acknowledged that an actual trade war would be even more damaging, Trump's love of tariffs is unlikely to wane. Tariffs are very powerful, both economically and in getting everything else you want. So what's next? Today, Nathan joins us from Washington, D.C. to look at what Canada has promised in order to push back the tariff deadline and whether Trump will be back for more.

I'm Madeline White, sitting in for Manica Ram and Wilms, and this is The Decibel from The Globe and Mail. Hi, Nathan. Thanks so much for being on the show. Thanks for having me. So we're talking around 730 p.m. Eastern on Monday night. It's been a busy day and we're going to kind of dive right into it right now and get into the news.

A few hours ago, around 3 p.m. Eastern, U.S. President Donald Trump and Canadian Prime Minister Justin Trudeau had their second phone call of the day. What do we know about what commitments were made on Canada's end during that phone call? Well, what we know is what we've seen from Justin Trudeau and President Trump both on social media. And there is a deal in which Canada has reiterated its previous plans to spend $1.3 billion on the border with new attention from helicopters and drones and other resources. And then we have a few new details that include numbers, but not a lot of specifics on what

they mean. So Prime Minister Trudeau has said nearly 10,000 frontline personnel are and will be working on protecting the border. The fact that they are already working on protecting the border does suggest that perhaps that doesn't actually involve any new resources, but we perhaps will see in the days to come. Canada is also committed to appointing a fentanyl czar, which is an idea that's been circulating, it's something advanced by Alberta Premier Daniel Smith. Canada will list cartels as terrorists, mimicking a US action on that under Donald Trump already

in the last couple of weeks. Canada said we will ensure 24-7 eyes on the border. Again, not clear if that really means anything or if that's just a reiteration of the status quo. Launch a state of Canada-US joint strike force to combat organized crime, fentanyl, and money laundering. Once again, there are joint Canada US measures that deal with a lot of things already whether this is something brand new or something that builds on existing efforts not clear yet. And then finally Trudeau said that Canada has signed a new

intelligence directive on organized crime and fentanyl and we're backing it with 200 million dollars and so that appears to be new. Once again we don't know what that means but it does suggest a new commitment from Canada to attack some of the roots not of so much fentanyl itself and the flows of fentanyl which of course as we know we don't have a lot of evidence that there's a lot of fentanyl moving from Canada into the United States. We do have considerably more evidence that organized crime has taken root in parts of Canada and that that organized crime plays a pivotal part in global money laundering networks.

And this appears to be an attempt to address some of that. So in exchange for all of this, there will be no tariffs from either side for now. What did Trump say about this deal? Well, not a whole lot yet. You know, he reported on his conversation with Justin Trudeau. He said he's very pleased with this initial outcome. But I think it's worth pointing out that he did call it an initial outcome. The tariffs, of course, to be paused for 30 days.

And he said during that 30 day period, it will provide time to see whether or not a final economic deal with Canada can be structured. And so his response there gets right into the heart of what I think has been the greatest point of confusion for leaders in Canada over the past couple of weeks as they've tried to process the president's intentions with regard to these tariffs. Are these tariffs directly related to fentanyl? And we had members of the Trump administration who are out there speaking to US media today saying this is 100% about the drug war.

President Trump was absolutely a hundred percent clear that this is not a trade war, this is a drug war. But the Canadians appear to have misunderstood the plain language of the executive order and they're interpreting it as a trade war. But then you have the president saying, hey listen we've got a deal for Canada to do more on fentanyl, on narcotics, on money laundering and we're gonna take 30 days to see whether or not a final economic deal with Canada can be structured. So the president himself of course has been muddying the waters on what exactly the US wants to see. Is it just more action on combating this this horrific scourge of fentanyl which is obviously killing thousands many thousands of Canadians even as it's

killing many tens of thousands of Americans or is this part of something much bigger? Yeah I mean I do want to ask you some questions about what that much bigger part could be and we will get to those but why do we think that it was these new concessions today because as you point out, a lot of them maybe aren't actually new things, like the 10,000 personnel on the border. We don't know if those are new people or if those are people that are already there or some combination of the two. So what was it about today's concessions that, you know, allowed for a deal to get done,

even if it is just a temporary pause? Well, I think the skeptics version would be that these concessions included big numbers. They included $1.3 billion on the border, 10,000 people, $200 million on an intelligence directive. And those big numbers allowed the US president to declare victory, that he had achieved substantial and substantive concessions. I mean, some of this is obviously new. I mean, there's there's new border spending here from Canada, there's new intelligence spending here from Canada. Are we suddenly going to see a rush of people in uniform from the Canadian side to the border? I'm not sure we have any

evidence to say that we should expect that. Right. Because again, like the word Trudeau used was personnel, not troops. Correct. Okay, on this idea of like he can claim victory, I wanted to ask you, Nathan, what does Trump gain politically speaking from this deal? Well, what Trump gains politically speaking is fresh evidence that his approach, his use of tariffs, gets results. And we've heard a line from the White House many times in the last few days, promises made, promises kept.

You know, he was elected in no small measure because of the concerns that Americans have about the border and what was crossing it. Most of those concerns were directed at the southern border, at the border with Mexico, but it really was striking. I did reporting in many different parts of the United States in the run-up to the election. One of those trips took me into Montana and some of the parts of the continental United States

that are the farthest from the Mexican border. And even there, the border was very top of mind. So this was a major issue that won him election, and therefore it's a major issue for him to be seen to be addressing. Now, of course, this deal came out of the second call between Trump and Trudeau. What happened on that first call?

Because I don't want people to forget about that one either. I think the most honest answer is, at this point point we don't yet know. What we know is that they had a call and it appears that there was a call with the president of Mexico at roughly around the same time on Monday morning. That call with Mexico prompted an immediate 30-day suspension of the tariffs. It did not with Canada. We had conflicting reports on that. Donald Trump called that first call pretty good. We heard from some folks in the United States who had gotten word from the White House that it had not been a terrific call.

Donald Trump was speaking after that call on Monday and he reiterated things that he said before about Canada being very tough, very tough to get a deal with. Hard to know whether that was meant as criticism or if hidden in that was some form of grudging admiration. Whatever it was, it took two calls. I'm glad you brought up the Mexican president, that's Claudia Scheinbaum, because of course, as you say, that came after just one call between her

and Trump. So I'm sure many people are wondering why Canada had to work a little harder here to get its deal, especially when the issues around fentanyl and border crossings are much less the Canadian-U.S. border, as we've discussed, than compared to the U.S.-Mexico border? For Mexico, I think there was always a clearer set of problems and therefore a clearer set of potential solutions. With Canada, the notion that we were dealing with very small fractions of the quantity of illegal narcotics and illegal migrants who were coming from Canada into the United States relative to the numbers coming from Canada into the United States relative to the numbers coming from Mexico

into the United States has always made it much more difficult to conceive of what exactly the problem was. And if you can't figure out what the problem is, it's much more difficult to address that problem. So that's part of it. We may also be dealing with history here, personal history. We know that Donald Trump and

Justin Trudeau have exchanged intemperate words in the past. We know that they have a history. We know that there are people in the Donald Trump administration right now, including Peter Navarro, who's understood to have played a role in drafting the executive order that implemented these tariffs, the ones that are now on pause, that he has not minced words about Justin Trudeau. And then perhaps one final factor is, I think the White House can be forgiven for asking whether any deal they strike with Justin Trudeau is a deal that Canada can really be counted on to deliver,

given the fact that Prime Minister Trudeau is not long for the Prime Minister's office. And so there's a number of different factors that are different between Canada and the U.S. relative to the U.S. and Mexico at this moment. Yeah, those are all interesting points. I want to come back to that middle point you made, though, about Trudeau's and Trump's relationship. When did that relationship between them really start to sour? Oh, who knows? I think Trudeau has always represented a form of politics that Donald Trump doesn't have much truck with.

I mean, Trudeau has been a supporter of this sort of liberal values-based order. Donald Trump clearly is not. I mean, Trudeau has been a supporter of this sort of liberal values-based order. Donald Trump clearly is not. They are very different in personality. They are very different in age. They are very different in political outlook. One of the things that I've always found interesting in the last few years about reporting about politics in the United States is how often Justin Trudeau's name comes up

in conservative circles. And for many of those folks who supported Donald Trump, Justin Trudeau was either A, the antithesis of everything they wanted their own country to become and the politics that Justin Trudeau represented, and B, a warning about what their own country could become if they pursued the policies that they saw Justin Trudeau to represent. Okay, but there has also been a history of like difficult trade negotiations between Canada and the U.S., specifically between Trudeau and Trump, right? I'm thinking back to when NAFTA turned into USMCA and also there was, I believe, the G7

meeting which was held in Canada in June 2018 can you remind us what happened there? Well, this was in the midst of another series of Trump terror threats on Canada Trump was imposing tariffs on steel and aluminum Mr. Trudeau had talked about retaliation but you know, this was all in the context of G7 talks on Canadian soil. And what happened was all of the countries after a fractious negotiation, I don't know if you remember that famous picture that came out at the time of, of Donald Trump seated and this kind of array of world leaders kind of standing and kind of hunched over peering

in on him. Nobody looks very happy. That was there. Yes, I do remember that. So Donald Trump gets on his plane and takes off and then Justin Trudeau goes on TV and make some remarks about how, you know, Canada will not be pushed around, he said. We're polite, we're reasonable, but we also will not be pushed around. And so Donald Trump at that point says, forget it, you know, like you, I'm tearing up this

communique that I've grudgingly agreed to sign on to. And then he took to Twitter at that point in time and called Trudeau, his comments dishonest and weak. And then you had Peter Navarro, who said, you know, there's a special place in hell for any foreign leader that engages in bad faith diplomacy with Donald Trump. And again, Peter Navarro is the guy who's now in the White House helping to write some of this tariff plan.

Navarro subsequently apologized for that, but I was actually reading through a book he wrote in the last few years, and he is unsparing in his criticism of Justin Trudeau calling him a thet, androgynous and other things. We'll be right back. Okay, Nathan, I want to switch gears now and kind of look forward. It seems like the issues around fentanyl and the border have been dealt with to some extent, at least for now. What other issues do we expect the Trump administration to raise during this pause? Well, we've heard a lot in the last few weeks. We've heard a lot even in the last few days about

some of the things that this new White House wants to see. Donald Trump in the last couple of days has repeatedly raised this notion that US banks are not able to access the Canadian market. That's not true. It is true that US banks have not been particularly successful in Canada, but there are US banks in Canada. And we've heard Donald Trump as well as his nominee for Commerce Secretary Howard Lutnick talking about how Canada in their perception treats US farmers very poorly. That seems to be an effort to say we are coming for greater access to your dairy markets.

The supply management in Canada is always being hated by particularly conservative Americans. And so there's going to be an attempt there. And we also know that in one of his first days in office, Donald Trump signed an executive order on an America first trade policy. And part of that includes a whole bunch of new scrutiny and studies and reports on the effects of North American free trade. And those are due on April 1. And those are likely going to start

the renegotiation of the United States-Mexico-Canada agreement at that point in time. We had thought, perhaps, that the renegotiation on that might not happen until 2026. But it's pretty clear that that's going to start to happen this year. And so there's a whole lot more that's coming there. You did bring up, though, the USMCA, which, you know, is also called the new NAFTA.

You've talked also about how Trump said in his truth to social post about this deal with Canada, that he's looking forward to creating this final economic deal. I guess I'm wondering, like, isn't the USMCA already that deal? Like, we do have a deal with the Trump administration around how trade is supposed to happen. So what does a final economic deal actually mean in this context? Well, I think it's pretty clear that they have come into office with a view that all previous deals are off. Even though they created it, like the USMCA is a deal Trump struck. And after striking it, declared it to be a very good deal. Yeah.

Let's not forget that either. Yeah. But yes, this is how they are approaching this. Now, presumably, with any renegotiation of the USMCA, we will see something that is a little bit more structured than we saw in the last few days with a blanket 25% tear off on everything but oil and 10% on oil and gas and other energy goods. But still, it's very clear that they are looking to renegotiate that. I think we need to put this in a broader perspective. All deals may be off in terms of foreign deals, but all deals are off in a whole bunch of other areas. We have the United States withdrawing from the

World Health Organization, we have the United States withdrawing from other United Nations bodies, we have the United States that is very seriously looking at its foreign aid. At one point blocked all of that spending, then reinstated some of it, but is now going piece by piece and is going to pull back from a lot of its global commitments. We have the United States internally examining its own payments inside of the United States to look at what can be there and what can't. This notion of ripping up the old ways of doing business is a constant, whether it's

outside of US borders or inside of them. I hear you on that. But one thing that is new this time around, and at least it's new in a sense that it's public, is, you know, Trump's musings about Canada becoming the 51st state. And I think a lot of people are wondering how much that is really just coded language to get at, you know, Trump's desire to like own Canadian natural resources. Is that part of what perhaps they're looking for in this quote unquote final economic deal?

That remains to be seen. Donald Trump on Monday was, I thought, more explicit than I've heard him before in terms of laying out his thinking on this 51st state idea. What I'd like to see Canada become our 51st state. We give them protection, military protection. As a state, it's different.

As a state, it's much different. And there are no tariffs. So I'd love to see that, but some people say that would be a long shot. I think you can read his comments and understand them to mean mean I want this to happen I want United States borders to Extend from the Rio Grande to Ellesmere Island

But I know that the only way to do that is to affect an economic siege of Canada Until Canada capitulates and if I do that there's going to be suffering inside of the United States it seems like this is something that he wants now is this something he wants enough to pursue is this something he wants enough to direct the levers and institutions of American government to achieve we don't have any evidence of that yet in fact we've we've heard that for example when Canada's foreign minister Melanie Melanie Jolie, met with Secretary of State Marco Rubio, this never arose, which would seem to suggest that this

is something that at the moment is a personal ambition of Donald Trump as opposed to an ambition of the United States as a nation. But it's clearly something he's thinking about. Is that what he means by a final economic deal? That's not how I read it to mean, but who knows? We'll see. Just in our final few questions here, Nathan, I want to talk about kind of the bigger picture strategy and lessons that maybe we've learned

over the last few days. For one, I'm wondering, you know, isn't there a concern here that Trump is going to just keep like playing this playbook over and over again, threatening tariffs and postponing them and bringing up new issues for Canada to respond to time and time again? Yes, because I think for the White House, the lesson has been this works.

I think what anyone else is going to have to do is look very carefully at the threats that were made and the concessions they prompted and do a balancing act there. The threats that were made against Colombia and against Canada and against Mexico, those threats were extraordinary. These were threats of economic warfare. The concessions were much less significant than that. I mean, Colombia allowed aircraft to land, military aircraft with deportees to land on its soil. Mexico says 10,000 troops to the border. It's again, it's not clear how many of those troops are already there.

Canada spending more on sort of intelligence and other matters. At some point, you have to wonder, is the bigger lesson massive terror threats work, or is the bigger lesson actually massive terror threats don't really work because it's not actually that hard to get out from under them? We'll see. I mean, it is worth pointing out that the tariffs are not over. There's a 30-day reprieve. And that's true for Canada and Mexico. And the US was very clear in saying the same was true with Colombia. The tariff threat remains. I want to ask you about one thing specifically on this matter, though.

You know, Canada did threaten tariffs of its own in response to Donald Trump's Saturday executive order. Now, in that order, there was actually a clause that said, you know, Trump reserves the right to increase his tariffs if Canada tries to impose tariffs back. Of course, that's not what ended up happening here. And in fact, the opposite kind of happened. So what does that signal to Canadian officials in terms of their own strategy? I think one of the difficulties going forward for Canada and for any other country is going to be discerning what kind of tariffs they're up against.

And I've heard this from a number of people here in Washington. Oh, well, there's multiple kinds of tariffs. There are tariffs that are designed to raise revenues for the United States. There are tariffs that are designed to bring manufacturing back to the United States. There are tariffs that are designed as tools to prompt action as Leverage to force others to do things which one is it and this I think was the question That was the most difficult for many people as they were contemplating this 25% tariff in Canada Which kind of tariff was it and I think that will continue to be the question for a lot of people.

I mean, let's not forget that part of the reason that this was proved difficult to discern was because we didn't actually have any conversations that took place between Justin Trudeau and Donald Trump between his inauguration and the moment he imposed the tariff. That conversation only happened after the tariff itself was imposed. I suppose the optimistic lesson that can be taken is that there are deals to be done. Just to end here, Nathan, the last 72 hours have been a lot. I think it's fair to say,

and that's for everyone. How would you sum up the damage that has been caused in terms of the overall Canada-U.S. relations? Well, I look at the video of people booing an anthem at a hockey game. And that's not something I recognize in Canada. And I look at liquor store shelves that are empty. I look at people who are canceling vacations to the United States. I look at friends who are canceling Netflix because it's a US service. Is this something we forget? Maybe. I mean we are deeply interwoven, intertwined countries, you know, socially, economically in all sorts of different ways. So is this something we put behind us?

Maybe. Or is it something that lingers for a while? I also think that's possible. Maybe that only takes a couple of weeks. It could take a couple of months. It could take longer. Yeah. Nathan, I really appreciate you coming onto the show.

Thank you. And I'm thinking maybe I should just book you right now for 30 days from now so when we do this all again. See you then. That's it for today. I'm Madeline White. I produce The Decibel with Michal Stein and Ali Graham. David Crosby edits the show. Adrian Chung is our senior producer. And Matt Frainer is our managing editor. Thank you for listening.