The Munk Debates Podcast - Friday Focus: A late night tariff announcement and Canada's plan to recognize a Palestinian state

Episode Date: August 1, 2025

Friday Focus provides listeners with a focused, half-hour masterclass on the big issues, events and trends driving the news and current events. The show features Janice Gross Stein, the founding director of the Munk School of Global Affairs and bestselling author, in conversation with Rudyard Griffiths, Chair and moderator of the Munk Debates. Rudyard and Janice start today's show with Trump's late night tariff announcement which sets a 35% tariff on Canada, but only really affects 10% of goods that fall outside of CUSMA. The punishing tariffs on aluminum, steel, and the auto industry, however, remain. Why did Mark Carney not try to strike a deal before today's deadline? What will happen if CUSMA protections are removed in a future deal? And how should Canada prioritize its sovereignty and self-respect in negotiations that give us privileged access to the US market? In the second half of the show Rudyard and Janice talk about Canada's announcement that it will join France and the UK in recognizing Palestinian statehood at the UN in September. While it is understandable that western governments want to do something to stop the carnage in Gaza and bring an end to this war, this type of political statement emboldens Hamas and makes the conflict more intractable and less solvable. In the midst of this turmoil, however, came a surprising announcement from surrounding Arab countries: the governments of Saudi Arabia, Qatar, Egypt, Turkey, and several others called on Hamas to disarm and end its rule over the war torn strip. Is this the start of the end for the terrorist group's reign in Gaza? To support the Friday Focus podcast consider becoming a donor to the Munk Debates for as little as $25 annually, or $.50 per episode. Canadian donors receive a charitable tax receipt. This podcast is a project of the Munk Debates, a Canadian charitable organization dedicated to fostering civil and substantive public dialogue. More information at www.munkdebates.com.Become a Munk Donor ($50 annually) to get 72-hour advanced access to the full length editions of Friday Focus and Munk Dialogues. Go to www.munkdebates.com to sign up. Hosted on Acast. See acast.com/privacy for more information.

The following is a complimentary excerpt of this week's edition of the Friday Focus podcast by The Monk Debates. To access full-length editions of each and every episode, along with all kinds of great additional benefits and perks, become a donor to the Monk debates. You can do that for as little as $25 a year, and you'll receive each and every year 50 Friday Focus episodes at full length. It's all available right now on our website. in just a few simple clicks. Triple W. The Monk Debates.com. Look for the Friday Focus option in our navigation bar, the top right of the website. Make your donation, and we will send you each and every Friday a link to listen to the

full-length edition of this program. Thanks in advance for your generous contribution. Welcome to the Friday Focus podcast for the 1st of August 2025. I'm Richard Griffiths, Chair of the Monk Debates. I'm joined by Janice Gross Stein, the founding director of the Monk School of Global Affairs. Janice, great to be in conversation with you as we head into, well, the second to last big, long weekend of the summer. How are you spending your long weekend in August? Well, I am really privileged.

I am at a cottage with my grandchildren and children in that order, Richard. Wonderful, wonderful, wonderful. We are recording this. late Thursday evening because both you and I are going to be in not so great locations for sound and recording tomorrow Friday. So I apologize in advance to our audience of any events that overtake us, but we're fortunate enough to have stayed up late enough on Thursday that we have now have news of Trump's tariffs on Canada and the rest of the world, which were announced by the White House tonight.

I think the key thing we should start on Janice is, is Canada. Canada. There will be a 35% tariff, as he promised, affecting roughly the only 10% of goods that fall outside of Kuzma. It moves up our effective tariff rate, but maybe 1% to somewhere around 9% on all goods if you kind of blend them together. But the sectoral tariffs, the much more punishing tariffs, especially on aluminum and steel, remain in place. And autos are there too, much higher. than 9%, but a lot less than steel and aluminum. So nothing here, I think, Janice, that was a surprise. Maybe the only surprise is that there was no deal. The Carney government, for whatever is that of circumstances, we don't know yet, did not choose to go the route of Japan or Europe and subscribe to some kind of agreement. Yeah, I think you've nailed it, Roger.

This is an effect of 1% increase in tariffs, so no listener. should panic. But what that doesn't do is take account of sexual dislocations. The base one is auto and here Canadian auto manufacturers and

auto parts manufacturers some of what they do is covered by Cosma but not all and they are howling with rage because those that are not covered are now going to be more expensive. This is hard

to believe more expensive going into the United States than imports from Japan or the European Union. So just imagine to make this real, a German car or a Japanese car or German parts or Japanese parts will be less, will cost less than what comes from Canada. And that is worrying to the province of Ontario, frankly, and to the prime minister. Yeah. I think it will depend. It's very complicated, It depends on the foreign parts that are in that car versus parts that, you know, were manufactured in the United States or parts that are, in a sense, Kuzma compliant. I don't know how they figured this out. It's like you have to take apart almost every vehicle to, you know, figure out what, in fact,

the formula is. But I guess my concern here, Janice, the bigger concern is that the absence of agreement means that the uncertainty remains. It remains over the Canadian economy. It remains over Canadian businesses. And as I've been writing over at the hub this week with my colleague, Sean Speer, you know, we are seeing a pattern with these other deals, Indonesia, Japan, Europe of a flat tariff, 15 to 20 percent on all goods as a kind of tollgate fee to get access to the U.S. market.

That's a politest way to put it. The other way to put it is a shakedown. It's usually 10 to 15 percent on most goods, except the ones that Americans don't want to pay, a select few usually related to defense industries that they don't want to pay tariffs on. And then, you know, so-called investments in the United States, which, again, I think is a lot of Kabuki theater because governments don't make investments. Companies do. But it does make me think, Janice, that, you know, we have a year to figure out Kuzma or what the horrible acronym we gave to the successor of NAFTA. But, boy, you have to think that Kuzma is a.

dead man or dead woman walking, depending on how you want to modernize that metaphor, that we are now going to, yes, whistle by the graveyard today with a minor tick up in tariffs. But the big fight, the big question of the future of free trade in North America looms ahead. And I would think that we just have to acknowledge that that era is over. The free exchange of goods across our board. border or very low tariff rates is done under this president and under this administration. And we are set for a really tough renegotiation of Kuzma between now and in summer 2026. So, right there, the future of Kuzma is the story, frankly, because 90% of what is crossing

the Canada-US border now from Canada is Kuzma compliant. businesses have caught on, they've registered, and that's why the Canadian economy has not really felt the terrific bite that we would feel otherwise. So if that umbrella is removed, that it's just a game changer. So you're absolutely right. This will be a tough negotiation. I think one of the reasons we didn't get a deal is because, you know, our team was less willing to accept two things. that everybody else accepted that flat tariff going forward 15%. That's a tough pill for Canada to swallow when it has had a free trade agreement.

And secondly, are these commitments, which I agree with you. This is pine the sky stuff about hundreds of millions of dollars. Hundreds of billions, yeah. Hundreds of billions that are going to go into the United States from Japan, from the European Union. But how can any of these governments deliver on that? They can deliver on a tiny part of it, which is government investment in defense, but nothing else.

But it doesn't matter because Trump wins, because he sells that to the American public. And like it or not, he is restructuring the global trade system. He is. And he's doing it. It's not. The word is, in fact, you know, it's a holdup, frankly.

What's interesting, Janice, is it may be a holdup, but he, you know, he hasn't robbed the whole bank yet. I mean, the agreement with India fell apart seemingly over some, I don't know, we don't quite know, but issues around maybe issues that were causing problems with Canada, access for U.S. dairy products into India, you have to think that our own supply management system was something that Trump put on the table.

We similarly saw... Let's just pause, whether you know, about one, okay, supply management, because you brought that up rightly. Wow, this is a crazily difficult issue. It is the Vermont cheesemakers versus the cheesemakers and dairy that are holding both countries

hostage here on this issue. It has been top of the list for Trump. You know that the county government has said supply. management is off the table. Now, what proportion of our total trade is dairy products and cheese? It is tiny, but it is regionally very important. And they did not break through on this one.

You're absolutely right. And we also, I think heard credible leaks that the president did want a significant tens of billions of dollars of contribution to his so-called gold. dome or a completely hypothetical and unproven continental ballistic missile defense system. So there might have been a lot of reasons for the Carney government to say no to this point, or at least to resist reaching a deal. But I go back to the uncertainty that will remain now and the fact that this president seems dug in on a few features of both that we're seeing in the agreements with these other

countries like a flat tariff and large investments, but also I think we are getting a sense that supply management is, you know, a priority for this administration, a large, you call it contribution, maybe someone else calls it a shakedown in terms of something as kooky as the Golden Dome, a kind of Dr. Strangelove project for the 21st century. These things aren't going to go away. This president is emboldened right now, and I think he's racing against the courts. We saw the U.S. this week, take another step forward on a very important appeal that's going forward that really fundamentally challenges his authority to be a lot of these tariffs. So uncertain, but I think uncertainty itself is one of the big collateral costs that Trump is imposing on the rest of the

world and on Canada. And look, I agree. And we've seen this in the numbers right there, if you are monitoring at the hub, the FDI that is coming for a direct investment that's coming into Canada, and you're telling the story that the uncertainty is a premium that Canadian businesses are paying for this. Look, the bigger picture here is there is not a trade deadline here. It's not inconceivable, first of all. I think it was tough for Carney politically to line up and swallow. what the European Union and the Japanese have swallowed. But the bigger picture here is the three regions of the world

that are the homes, the most advanced economies are North America, the Indo-Pacific and the European Union. Two of those have reached a deal with Donald Trump. And we are more exposed to the United States and any other economy, and we have not. So when you think about it that way, there is real risk to us. Not to sound the alarm bells, we could get a deal in the next month. But if this drags on and this becomes a renegotiation of Kuzma,

as we know that's what it's going to be. I mean, I don't think there's any avoiding that fate. Kuzma is a jump ball right now. And this president will want to express his prayers. And he feels he has a lot of leverage precisely because he now has these deals with Japan and Europe. But it is interesting to think of India, China holding out. I mean, these are big economies. And a lot of it has to do with Russian energy, Russian oil.

We're going to see if the president tackos or follows through on his latest threat to impose crippling sanctions on Russia within a week to 10 days. They would effectively levy large-scale counter-ter tariffs, secondary tariffs on India and China as purchasers of Russian oil. So I don't know, Janice, I had a feeling this week the world's kind of blocks, so to speak, forming up here a bit. You know, Japan is weak. It needs the United States for security reasons. Europe similarly has urgent security needs vis-a-vis the Americans. In some ways, maybe it's not surprising that. they chose to capitulate. But that doesn't mean that the trifecta of Russia, China, and India are

thinking the same way. In fact, it looks like, even though they're not saying it, that they are increasingly coordinating and that they are increasingly resisting. And I think that's going to be the interesting story to watch over the next couple weeks. You know, one more comment on this, to follow that last really important point you make. Let's follow your argument through right to the end. And there's a world with two trading blocks. The United States, Japan, the European Union is in one, Russia, China, India is in the second. This is a tough world for Canada. Canada does not want its principal trading relationships to be with Russia and China, right?

So just to say, let's not underestimate how tough it is for us. The others are willing to pay a price because they need the United States for defense and security. Quite honestly, we don't. We've been able to free ride, and the fundamentals of that have not changed. We're willing to do more because we need access to the U.S. economy in a way those others don't. So this is a tough world, even for us, even if you're right, about the whole deaths here. I was thinking this week back to the 1988 free trade election. And for a long time after that election, I would include myself in that.

that group, there were those of us that kind of ran victory relapse around John Turner and people who had cautioned against deeper economic integration with the United States. We had put forward the argument that, you know, they were kind of fussy, fuddy-duddies, and Canada needed to get on with, you know, continental integration, economic, and frankly, regulatory and otherwise to kind of unleash growth in the country. And that growth certainly followed. And the country, the country remained a country. We didn't lose our culture identity. But boy, you go back and you take another look at that 88 election

and some of the issues that were debated, and you have to wonder if John Turner, George Grant, a whole, you know, I can think of Stephen Lewis, a whole generation of people that we said were on the wrong side of history might not ultimately be proven right. You know, history writes itself, Frederick. and what is right at the moment is often not right with the benefit of hindsight. But unfortunately, we never have that benefit when we have to make the tough decisions.

If you were the prime minister now, would you say, okay, I'm going to antagonize the province of Quebec and give up on supply management in order to get this deal now. The stakes are high enough. I know you are not in favor of Canada saying, oh, yes, we're going to sign up for Golden Dome, even though there's kabuki theater there too, and the price probably will not come due in the life of this administration or in the life of this government. So you could frankly fake it and take that one off the table as well. So I think we are in front now of an existential question,

how important is privileged access to the U.S. market, to the future of this country. I agree, but I'd also say, how important is having sovereignty, is having national self-determination, is having a sense of, frankly, respect about ourselves and what we can accomplish together. So, yes, access is important, and you better bet that the big German auto manufacturers and the French pharmaceutical companies and a lot of big business, a lot of big business, drove Ursula von der Leyen to that humiliating surrender in the Donald J. Trump ballroom of

is Scotland golf course. Whatever. I just always try to challenge some of my priors. And I think in this case, I want to be a little bit careful and have a ear to the ground about where powerful interests in this country might want to take Canada over this uncertain period of time as we close in on these high-stakes-Kuzma negotiations and yes, access to the U.S. market is important. But it's not everything.

It's not the totality of what this country represents of the last 250 years of its history. And I think we have to be careful about the price that we will pay if we put access above all else, above sovereignty, above identity, above a national purpose. I don't disagree with you, Rudyard and I, you know, just to, and this is entirely unscripted on my part when I say this, that's why I think the work that Rudyard and his team are doing at the hub. is really important now because part of what you're trying to do, registered in this coverage, is to make clear what the price is. What are the costs to unpack these so that the public understands?

And I think this is a time now for the public to pay attention and try to understand the costs because this is probably one of the most consequential decisions for this generation. Just finally, before we move on to our next topic for our monk donors, once we say goodbye to our complimentary listeners, which is to pick up on a conversation that we had last week. They got a lot of feedback from our audience, and that was what's happening in Gaza, what the world owes the people of Palestine,

and the situation that Israel finds itself in today, we're going to cover that on the back half of the show. But before we go there, I'm just curious on what you thought about Mark Carney choosing to express that, you know, provided certain conditions, were met over the long term that come this September at the UN, Canada will line up with Britain and France and advocate for the recognition of a Palestinian state. We're going to deal with all of the

good, the bad, and the ugly in the second half of the show. But I'm just curious, Janice, why you think he did that in the final 48 or 72 hours of this supposed negotiation with Donald Trump when one would have known that this would antagonize the president. And sure enough, there was the president's tweet in, you know, in reaction to this, calling out Canada, criticizing us for this decision. That's how the timing is a really interesting question, Roger, because he could have waited until August 2nd or third. It would have had no consequences for the situation on the ground or for Canadian options. But as you say, sovereignty does matter.

And I think that's part of the calculus. You know, I want to emphasize, and I've said this already, Reggie, and I already taken a lot of heat for this in the last 24 hours. I want to emphasize again how conditioned his statement was. And we will impact that in the second half of the show. But frankly, I do not see. this as a legal statement. The lawyers are going to have a field day here and it probably does not meet legal criteria, but that was not its purpose. It is a political statement designed to put pressure on both sides here and it is a reaction to the horrors of what people are seeing. And I've said unequivocally that I think that is right. This is not only... I agree. We're going to get into all that in the back half of the show with our donors. But why do it 72 hours, 48 hours, when he could

have just waited until next week? I mean, surely it was a sign that negotiations were off, that nothing was culminating. Yeah. And I just wonder if there was a little bit of gamesmanship on both protagonists side that Mark Carney wanted to possibly kind of be seen to kind of fall on his sword in a in a valorizing way and go out, you know, on this principle, you know, And like Justin Trudeau used to, used to sometimes court the ire of Donald Trump for domestic political purposes. And then the president is similarly enabled by being able to say to his supporters, well, of course, we're not going to have a trade deal because, you know, I'm going to play more three-dimensional chess and take things that have nothing to do with trade or economics, like whether Canada chooses to recognize a Palestinian state or not, and loop them into, you know, the fervid media debate and discussion not only about tariffs, but about the future of Gaza. and the crisis unfolding there. I think it's impossible to deny that politics played here, right?

Otherwise, clearly the prime minister would have waited until August 2nd. All of this is about action that will take place at the earliest in September if it ever takes place at all, frankly. So to wait until August 2nd, so I think you're completely right. I think there was a recognition this deal was not going to happen. happened by August the first, and then it was all too easy for Donald Trump to do what he did. Now, who's going to get hurt, by the way, which is always what happens when you play politics with big issues?

It will actually be the Palestinians because all those people and all those interests that you talked about, Rudyard earlier, who desperately want a deal with the United States because the economic stakes are so high will turn around and point a finger at who. civilians who are caught up in a crossfire, frankly, not really of their own making in any meaningful way. That is not helpful. And much the same will be in because there are a strong American interests that want to deal with Canada. We don't talk about those enough. But there are, there are, you know, Canadian trade and export benefits, a big chunk of the American business community. And that's why we have the support and we can build those coalitions.

If they see or think, and I think this is a misguided conclusion to draw, that this deal was not consensated over the issue of Palestine, that actually is harmful to the Palestinians. Whoever played politics here shouldn't probably not have done that. Yeah, I agree. Well, let's say goodbye to our complimentary listeners. I thank them for tuning into this first half Friday, focus and let them know that they can get the full-length editions of this show by becoming a monk donor.

You can do that for as little as $25 a year. 50 cents an episode. Come on. That's got to be the best deal in town. If you use that up right now, we will send you an email immediately with a link to listen to the rest of the show, which Janice and I will now convene with our monk donors. So bye-bye to our complimentary listeners. Thanks for listening to this excerpt of the Friday Focus podcast. To get full-length editions of each and every episode of this program, simply go to our website, www.w. The monkdebates.com. Click on the Friday Focus tab in our navigation on the top right of the site.

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