Prime Minister Mark Carney listens as President Donald Trump speaks during a group photo at the G7 Summit in June.Mark Schiefelbein/The Associated Press
Prime Minister Mark Carney said deals U.S. President Donald Trump has reached with other trade partners aren’t necessarily templates for Canada’s negotiations with the United States, given the differences in the trading relationships.
On Sunday, the European Union became the latest U.S. trade partner to reach an agreement with Mr. Trump that locks them into higher tariffs in order to avoid worse threats from the protectionist President.
The EU accepted a broad-based 15-per-cent tariff, with carve-outs for certain industries, and agreed to purchase US$750-billion worth of U.S. energy and invest around US$600-billion in the United States. The agreement left tariffs of 50 per cent in place on steel and aluminum – although EU officials suggested there may be quotas that lower the tariff rate on the metals.
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Politicians, companies and investors in Canada have been watching the progress of the EU deal closely as a bellwether for a possible U.S. agreement with Canada. Like Japan – which agreed to a 15-per-cent baseline U.S. tariff last week – the EU is a major U.S. ally and significant trading partner.
Asked about the EU deal on Monday, Mr. Carney reiterated that Canada will likely face some level of U.S. tariffs going forward, even if Ottawa and Washington can strike a deal, either before or after the Aug. 1 deadline set by Mr. Trump.
But he said that Canada is in a different position than other U.S. trading partners as it enters an “intense phase” of negotiations.
“There are similarities. There are differences. One is geographic proximity,” Mr. Carney told reporters at a press conference in Prince Edward Island.
He also noted Europe’s need to find alternative energy sources after Russia’s invasion of Ukraine, which appears to have shaped the deal.
“Europe needs to fully get itself off Russian energy, so they’re going to buy American energy to help them do that,” Mr. Carney told reporters. “America needs Canadian energy.”
The deal with the EU is the sixth trade agreement Mr. Trump has reached in recent months as he has sought to remake the global trading system with the highest tariffs since the 1930s. He has also made deals with Britain, Japan, Indonesia, Vietnam and the Philippines.
All the agreements left baseline U.S. tariffs in place, ranging from 10 per cent to 20 per cent – a far higher level of tariffs than at the start of the year, but lower than Mr. Trump had threatened. Sectoral tariffs were also left in place, although they were diluted in some cases, with both Japan and the EU securing 15-per-cent auto tariffs, rather than the 25 per cent applied to other countries.
Some details remain unclear as these are not formal trade agreements, but rather handshake deals.
The U.S. struck a framework trade agreement with the European Union on Sunday, imposing a 15-per-cent import tariff on most EU goods.
Reuters
As these deals have rolled out, Canada remains in a relatively privileged position when it comes to access to the U.S. market.
As with every other country, it has been hit with industry-specific tariffs on steel, aluminum and automobiles. But the blanket 25-per-cent tariff that Mr. Trump imposed on Canadian goods back in March has been watered down by an exemption for all goods that comply with rules of origin in the United States-Mexico-Canada Agreement, the continental free-trade pact sometimes known in Canada as CUSMA.
That has allowed the vast majority of Canadian exports to continue entering the U.S. tariff-free. In May, 90 per cent of Canadian goods entered the U.S. without paying duties, according to U.S. Census Bureau data, through some combination of USMCA exemption and other tariff-mitigation strategies.
“All of this is relative, and if Japan and EU are trading with a 15-per-cent baseline, we have to remember that the majority of Canada’s trade with the U.S. is still at a zero-per-cent tariff when it’s CUSMA-compliant. That throughline is really material,” said Matthew Holmes, chief of public policy at the Canadian Chamber of Commerce.
He also pointed to the much higher levels of integration between the Canadian and U.S. economies as another point of differentiation.
“Whether you’re talking beef production, through all of the steps of that, or you’re talking automobile production, the amount of cross-border, back and forth, value creation between Canada and the U.S. is considerable and very integrated. You just don’t see that from the EU, where it’s really a trade in end goods and finished products and some commodities,” Mr. Holmes said.
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The EU deal – which was negotiated by the European Commission on behalf of member states – met with mixed reviews on Monday. The political response in Europe ranged from lukewarm to downright hostile. German Chancellor Friedrich Merz said the deal would hurt both the U.S. and Europe and cause “significant” damage to Germany, but added that “more simply wasn’t achievable.”
French Prime Minister François Bayrou said on social media that the EU had resigned “itself to submission,” while Michel Barnier, France’s former prime minister and the EU’s former chief negotiator for Brexit, called it an admission of weakness: “Weakness in negotiating posture, weakness in the desire for reindustrialization, weakness in the ambition to compete in new technologies,” he wrote on X.
Jacob Funk Kirkegaard, a senior fellow at the Brussels think tank Bruegel, said that the agreement was worse than expected, when looked at purely in terms of trade.
“It basically gives Donald Trump more or less whatever he wants,” Mr. Kirkegaard said in an interview.
But seen in a broader context, where the EU is trying to keep the U.S. on board with the North Atlantic Treaty Organization military alliance and supportive of Ukraine in its war with Russia, the deal had a certain logic, he said.
“This isn’t really a trade deal. It’s kind of a deal that tries to manage or steer, if you like, the broader transatlantic relationship,” Mr. Kirkegaard said. “If you view the deal through those lenses, then it is less of a disappointment, it is less of a lopsided deal. But it does reflect the basic fact that there is a major war in Europe at the moment and the United States remains the military hegemon in the West.”
Mr. Carney has also framed his attempts to reach a trade deal with the U.S. as part of a broader effort to reset both the economic and security relationship between the two countries. He has significantly ramped up military and border spending, and he scrapped Canada’s digital services tax when Mr. Trump threatened to walk away from the trade talks over the levy on U.S. internet giants.
In recent days, both Mr. Carney and Mr. Trump have tempered expectations that a deal will be reached by the Aug. 1 deadline. Mr. Trump has said that the blanket tariff on non-USMCA-compliant goods will increase to 35 per cent from 25 per cent on Aug. 1 if a deal is not reached.
Canadian officials from Ottawa are expected back in Washington for talks later in the week; previous delegations from the capital have included Mr. Carney’s chief of staff, Marc-André Blanchard, as well as Dominic LeBlanc, the minister in charge of Canada-U.S. relations.
“There is a landing zone that’s possible, but we have to get there, and we’ll see what happens,” Mr. Carney said.