The Munk Debates Podcast - Friday Focus: Canada's trade war heats up and the Iranians escalate to de-escalate

Episode Date: September 11, 2026

Friday Focus returns from its summer hiatus to unpack two major geopolitical flashpoints.First, the trade war with the United States—and its consequences. There has been a narrowing of the debate around Carney's approach. People are being labelled disloyal for dissenting from his strategy, but we need space for differing views. Tariffs are easy to impose and difficult to unwind. Will Trump turn to more punitive measures against Canada—from natural gas pipelines to banking licenses and work visas? The longer this confrontation drags on, the greater the risk that an already heated situation takes an even more dangerous turn.Then, the Iran war and a sharp escalation over the past week. The Houthis have made major advances in Yemen, seizing critical outposts and tightening their grip on the Red Sea, one of the world’s most important trade routes. After a period of stalemate that was working against Iran, Tehran appears to be pursuing an “escalate to de-escalate” strategy: increasing pressure on the U.S. and driving up oil prices in an effort to force an end to the blockade. Will the U.S. respond by escalating further and increasing the pressure on Iran? How much economic pain can Trump tolerate at home heading into the midterms? And could he simply wake up one day and declare the war over?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.

Tariff stick. They're easy to put on, really hard to take off. It takes decades because look at your balance sheet. They are a steady, predictable source of revenue. Donald Trump said that finally yesterday. I love the revenue. Welcome back to Friday Focus. It is the 11th of September, 26. I'm Rudyard Griffiths, joined in studio by my co-host Janice. Great to see you. Great to see you, Roger, and what a summer. I am hard-pushed to think about one peaceful day. Yeah. I miss these conversations with you. I know our audience did. We got a lot of emails asking when you'd be back. So great to be back here on September 11th of all days, where we mark an important anniversary. And that may color and touch a little bit of our conversation as we try to catch up if we can. half an hour or so on, as you say, a very tumultuous summer. I've got to begin, though,

Janice, with the trade war because this is kind of top of mind for our viewers and listeners. You've taken a bit of flack this week. So have I, frankly, because I think you and I share a similar view that this trade war is not without costs. It has real consequences. And it seems, Janice, and I want your thoughts on this, that there's almost a bit of a closing of debate right now in the country about this trade war, why it's happening, what our response could or should be, how we should approach the Trump administration. The prime minister has used language like we are at war, we are under attack. I'm not blaming him, but the consequence, Janice, I think you felt it, I felt it, is that the range of debate

has shrunk and Canadian seeming tolerance for diverging points of view. view other than a, I guess, a somewhat maximal response to the Trump administration and its egregious threats and actions against Canada. Don't get me wrong. The guy's an asshole. Beyond. Beyond. But let's get your take on this because you're an important voice in the conversation. I think you're absolutely right, Rudyard, and I think your explanation is right. People do feel under attack. They feel our economy is certainly under attack, a 40-year-old experiment, led by Brian Mulrude in the 1980s, a closer integration with the United States is under attack. People's livelihoods are under attack, and when that happens, you use the language of war and attack, you're getting

a very patriotic, emotionally intense reaction from almost everybody. And it's like any war scenario, it closes off debate. And we saw some stuff this week, which was surprising to me, in which people were labeled disloyal for dissenting from a strategy. And I just mentioned that because that is not a good road for this country. to go down. We need space for differing views because leaders like everything else need to hear them. Now, having said that, there is, I think some space is going to open up very quickly because the prime minister, both in the forward guidance, which is great central bank language.

People have asked me, what is forward guidance? You give it as a central bank governor. to investors who are trying to figure out what the bank rate will be. But he did say something, which I think is very important. I am not in favor of tit for tat. Escalation is not constructive. So, and why would he say that? First of all, I think he thinks that, despite what's gone on. But beyond that, he needs to open up space now to find a way

to come back to the negotiating table. The question is when, before the midterms, after the midterms, two years from now, January 22nd, 2029, it doesn't matter. He knows he has to open up space to come back to the negotiating table. So closing off this debate and having a public that wants to go much further and faster than he's going is risk to him, frankly. Well, let's talk about some of these permutations, because on one hand, waiting, either after the midterms

or if you believe Doug Ford in his desire to fight a trade war through to the next presidential election, 2028, 2009, waiting has consequences. Oh, yeah. It courts uncertainty. It courts a business environment, which I think is negative, in terms of capital investment in Canada, in terms of decisions that all these small and medium-sized businesses that are the overwhelming

employers in Canada when you look at total private sector employment, the decisions many of them will make if this trade war drags on in the coming months. So that's my feeling that I agree with you, Janice. We have to find a way back to negotiating table. It has to happen sooner than later. And the extent to which Canadians are in a high dudgeon and certain premiers like Doug Ford are in a high Dutch and this removes, I think, a lot of the political space inside Canada for the prime minister to reopen a negotiation. I don't even know if that's possible at this moment. What's your thoughts on that? Have we in this, and in a sense, maybe this has been a bit of a tactical error that the federal government has made is that by involving the provinces early on in things like

booze, American booze on their shelves, giving them in a sense important levers to press on and off to pull forward or backwards in this trade negotiation, the provinces now have a say. And the premiers, if you look at their poll numbers, like you look at the prime minister's poll numbers, especially in an embattled Doug Ford, at least an embattled Doug Ford a few weeks ago, this trade war is good for them. It might not be good for us economically, but it's good for them politically. Yeah. There's no question. There's huge political upside now to be out front, Captain Canada, whether you're in Ottawa, you're in Toronto, or you're in Vancouver, it doesn't really matter. There's big upside. And there's one other reason to lead to lock in, which is really

what you're talking about. We lock ourselves in, both politically and economically. I have yet to meet the political leader who doesn't get used to tariffs because it's a revenue stream, right? and that has nothing to do with partisan. And that's why I'm actually very pessimistic that even a Democratic president would roll back the tariffs that have been putting place. It's also, Janice, as we talked about, put politicians at the center of the economy.

Yeah. It was one of the reasons it took decades to get rid of them in the 20th century. Yeah. This is catnip. And I mean, Donald Trump loves it. He loves that. the CEOs coming in and genuflecting to him and trying to get, you know, carve as an

exemptions. But let's also understand that it's tariffs, this tariff war in a way privileges, in part, this current federal government's arguments about what the Canadian economy should look like, which is more state intervention, more public subsidies, more public capital being poured into public-private partnerships. There will be this big investment summit coming up in the next week. So I'm concerned here, Janice, that the incentive structure around these trade wars, certainly from my point of view, enables a heavy hand of the state

and a proactive role for politicians who are already inclined and primed to intervene. Yeah. And look, I think regardless of what the leaders' view of, the role of the state is in the economy. So you may have one set of views in county. You have a very different set of views in Washington right now about what the economy should look like in the United States. It doesn't really matter. Tariff stick.

They're easy to put on, really hard to take off. It takes decades because look at your balance sheet. They are a steady, predictable source of revenue. Donald Trump said that finally yesterday. I love the revenue. Well, he's going to give everybody 5,000. if they vote from the election and he made the completely incorrect comment that it would be paid for by the tariffs when the Supreme Court has ordered him to refund those first round of tariffs. I mean, that was just, you know, there's no relationship to truth or evidence or anything like that in that sentence.

But here's the risk when you put tariffs on in any country. Constituencies benefit from them and they line up behind them and they support them. So let's take the well-known aluminum constituency in the United States, which paid a big part in the story we're all living through. There are a minority of aluminum producers who benefit from tariffs. And boy, did they turn up the heat and did they exercise their muscles in that final 72 hours. They are never going to want those tariffs to go away. And in that sense, be very careful. you put on because it's going to take 10 times the muscle to get them off at any point in the future.

So we have to, I'm open here. I'm hoping that we are at the end now of this cycle of retaliation. I'm reading between the tea leaves and we heard words out of Vancouver. Well, they don't really change the balance sheet all that much. They were relatively modest. That sounds to me a little bit like language. We're going to slow this down now. I think so. And in fact, these new tariffs that were announced, you know,

are maybe a billion dollars in terms of Canadian imports. More significantly, though, and this one want to go with you next, is the Trump government is threatening by the end of this month to ban Canadian companies from an important list in the United States that allows state governments and the federal government to jump over. normal procurement processes to access kind of low-bid suppliers. That genus is a $50 billion a year annual hit.

And it suggests to me what my concern is extending this trade war is that there are many more asymmetrical ways that the United States can hit us than we can hit them. Of course, that's true. At $400 billion of goods that we send to the U.S. each year, including oil, that is less than... and one and a half percent of the total GDP of the United States. So while we think our exports are super important and they are,

the size of that economy at over $30 trillion, to me suggest Janice, I worry that the Trump administration is going to look for other more sinister ways to get at Canada. looking at Canadian visas, work visas in the United States? What if they announced a review of Canadian bank licenses in the United States? We have a major pipeline, a major gas pipeline that goes through Michigan, Line 5, into Ontario. It has been a source of a lot of dispute in Michigan, who, the Michiganers, I think they're called, feel that there's an environmental risk. I don't know. I

haven't looked at it closely, but the fact is that it's not a popular pipeline in Michigan. And there could be, I don't know, an environmental review announced on that pipeline. Maybe it needs to be closed temporarily while that review is going on. Well, that's the natural gas that's heating your and my home here in Toronto. So, Janice, I don't know what your thoughts are on that, but there's so many ways, I think, that this can go wrong if we let it go long. So I think that's right, and it comes from a fundamental asymmetry between our economy and that of the United States. 11-1 ratio, 10-1 ratio I've seen, but that's the zone that we're in.

So out of the gate, when you talk about dollar for dollar, we cannot win. Right? We cannot win, because they have 10 times as many dollars as we do. I think, so I'm glad that stopped. That stopped for sure. That was only, first round, that's not going to go on anymore. So what, in fact, is the purpose of tariffs at this point? Because we are economically vulnerable. There's a whole set of things in Donald Trump's toolkit that he has not used yet. And we're right to focus on some of those. What's the purpose of tariffs right now? It's very limited. Can you find those swing states that he's already worried about because he knows what the polls are telling him, where there are senatorial elections that will really matter to him,

and can you find things that are going to put fast enough, and we're talking about November the 4th, that's very short, that will move voters' tariffs, have to be political tools rather than economic tools, because one-to-one, straight. we can't prevail. You didn't mention one thing that I thought would be at the top of your list.

This is president can tell everybody. He's walking away from Kuzva. Now, whether he can without congressional approval, that's a whole different thing. I don't think he can. But it doesn't matter. Think about the uncertainty that would create. So, Janice, then as we wrap up

this first complimentary half of the show, So if you think of where Ken is at, and if we agree that the longer this goes on, the greater the risk to our economy, the greater the risk of asymmetrical responses by the Americans that are genuinely confidence busting, wouldn't that argue that actually we should be escalating? And we should be escalating sooner or not later to try to bring this thing to a head and that we should be looking, frankly, at our own ability to escalate asymmetrically. Potash, uranium, maybe, dare I say, even crude oil. Maybe we should be doing what the Chinese did with rare earth and saying, you know, we're not going to ban exports to the United States, but we're going to launch

an export review with the idea of passing legislation to ensure, I don't know, that child labor is not being used in jurisdictions where we're exporting, you know, and we're exporting uranium, potash, and crude oil. And I think we need to take a close look at the United States and their child labor practices. Does that sound familiar? Yes, it sounds very, very familiar. To me, it's a great point, Richard. It's really a great point.

The issue is that we've got to do it fast, if we're going to do it at all, because it's what's the political impact? And we've got to do it before the midterms, don't we in the way? Yes, that's right. So if we're just going to sit back now and say, well, we're not. going to match dollar for dollar. We're not going to go asymmetrical. We're just going to sit and wait. It kind of sounds, Janice, like we've taken a knife to a gunfight. Well, so let's look at the other side of this. You and I both know we have a referendum on a referendum coming up in Alberta.

Can you just imagine what the domestic politics would be of doing what you just said now? There would be an uproar in Alberta, and there's two jobs every prime minister of this country has. Doesn't matter who you are, what party you come from. First is national unity. I think it's Brian Moore, you've said this. There are two. That one takes precedence over everything else, so we have a Quebec election and a referendum in Alberta that frankly don't make that very plausible, and secondly, managing the relationship with the United States.

Here's the other side of this. This is a change in the United States. Tariffs are not going away. We have to adjust to the fact, and we're not the only ones in the world, but we take the biggest hit. There's no question about it. But we have to adjust to the fact that they're here to stay, okay, what's the best deal we can get with the United States? The notion of free trade gone. It's nostalgia.

It's over. We have to acknowledge it. What's the best deal we get? Well, the deal was, I mean, again, this is going to get me a lot of anger emails, but the deal that we didn't sign on the 21st of August, barring, again, because we don't know, the text hasn't been released, but barring some sovereignty-busting last-minute demand that I don't rule out was happened or is possible. The prime minister was pretty interested in that deal, clearly.

Right up to the last minute. And it maintained tariffs on steel, aluminum autos. And it sounded Janice as if when he started to go around and talk about that deal, two premiers, Eby in particular, Doug Ford, another, the prime minister of Quebec. And when certain sectors began to hear about the terms, most notably the auto industry, I don't know, Janice.

One read of this is that the prime minister quickly came to understand that he could not get the premiers to comply and that he was losing key industries and their backing for the agreement so the political hit to him in agreeing to that August 21st deal was a price too high. I think that's one possible reading for sure.

And I think there's something really important that we have to take away from the drama that went on. This government was serious about that deal literally until 48 hours or 24 hours or 7 hours or 2 hours before, right? So there's a framework that was acceptable to the government. Now, there's something we've never talked about. It's not leaked down. We haven't seen the tax.

One of the issues for me, what did we give on digital sovereignty? because our whole country runs on digital infrastructure now. I would love to know. I think everyone would have had to put a lot of water in their wine and no one would have been happy with the deal, especially given how even before it was broken off, how amped up everyone was feeling about Donald Trump and his behavior over the summer.

Yeah. So you're right. And frankly, the only deals that ever get made are deals that no one is happy with, both on our side of the border and on their side of the border. hopefully and you know let me let me just take a minute here right here what's your back and none of us know there's two stories that are being told uh Donald Trump takes a big hit in the midterms loses the house and maybe some Canadians are hoping comes out really damaged in the Senate

or angrier and lashing out that's right what happens then is he more pliable or is this a wounded angry humiliated Donald Trump with executive powers that extend over a lot of trade. Huge, right? And who says, I didn't care about you guys beforehand. I sure don't care now. I'm going to do anything I want for the next 28 months. It's a call, and none of us know the answer to that question.

Big question. Well, Janice, we're going to take a break from our complimentary listeners and viewers. You very kindly offered to stay on to do a little bonus segment exclusively for monk donors. Janice is one of our great Canadian experts on the Middle East. We're going to catch up on another war that just doesn't seem to end. The Iran-U-S. conflict, even just in the last 72 hours, taking another step up the escalatory ladder. We'll have that conversation exclusively for Monk donors. Become a Monk donor now.

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