Good morning. Canada is laying the groundwork for USMCA talks while Trump rewrites trade policy one hazy deal at a time – more on that below, along with Victoria Mboko’s Cinderella run at the National Bank Open and a potential Air Canada strike. But first:
Today’s headlinesOpen this photo in gallery:
Mark Carney at the Gorman Brothers Lumber sawmill in West Kelowna, B.C., yesterday.DARRYL DYCK/The Canadian Press
TradeThe art of the super vague deal
Mark Carney won’t be rushed into imposing retaliatory tariffs on the United States. Pressed by reporters yesterday in Kelowna, B.C., about when the measures were coming, the Prime Minister counselled patience and shifted focus to another prize. His priority is to “preserve” and “reinforce” the United States-Mexico-Canada Agreement, he told them. “There’s a bigger picture there.”
Carney dispatched Finance Minister François-Philippe Champagne and Foreign Affairs Minister Anita Anand to Mexico City this week for trade talks with Mexican President Claudia Sheinbaum. He’ll follow them down for his own discussions soon. Both Sheinbaum and Carney have repeatedly emphasized their commitment to USMCA, and little wonder: The deal significantly dilutes the impact of Donald Trump’s blanket tariffs on U.S. imports. The Bank of Canada estimated last week that 100 per cent of our energy exports, and 95 per cent of everything else, are USMCA-compliant. That means they can keep crossing the border duty-free.
Of course, the U.S. President isn’t especially keen on USMCA – back in February, Trump said he read the agreement and wondered, “Who would ever sign a deal like this?” (He did, at the start of 2020.) With that deal set to expire next year, Ottawa signalled that USMCA renewal talks could start as early as this fall. But Trump hasn’t shown much enthusiasm for the finer points of trade negotiations. He’s more interested in getting countries to hand over their cash.
Invest or perish?
Last Wednesday, Trump fired up Truth Social, where he prefers to conduct the bulk of his diplomacy, and zeroed in on South Korea. The republic “is right now at a 25% Tariff, but they have an offer to buy down those Tariffs,” Trump posted. “I will be interested in hearing what that offer is.”
A few hours later, he had his answer: South Korea agreed to make US$350-billion in American investments, at least according to the President, and purchase US$100-billion of liquefied natural gas. In exchange, Trump dropped his tariffs on South Korean exports to 15 per cent. He’s used the same playbook on Japan, which announced US$550-billion in U.S. investments and got back 15-per-cent tariffs. He ran it on the EU, which pledged US$600-billion over the next three years for a (predominantly) 15-per-cent rate.
European Commission President Ursula von der Leyen sits with Donald Trump in Scotland last week.Evelyn Hockstein/Reuters
The actual terms of these agreements remain murky. U.S. officials claimed that 90 per cent of the profits from Japanese and South Korean investments would “go to the American people” – news that came as a surprise to Japanese and South Korean negotiators, who said that most of their investments would be in the form of loans. Meanwhile, the EU deal isn’t so much a rock-solid commitment as a hopeful suggestion. The European Union has no power to sink money into the U.S. or compel European companies to do so. Instead, it reached that US$600-billion figure by tallying up the amount that private European companies have said they might be willing to invest in assorted sectors across the States.
Putting a bow on it
You won’t be shocked to learn that Trump views the EU deal differently. When asked yesterday about its details by the hosts of CNBC’s Squawk Box, the President said, “Well, there are no details,” then reconsidered and settled on, “The details are $600-billion to invest in anything I want.” That’s not true, but Trump was undeterred, insisting that the money is “a gift, not a loan, by the way,” since the EU “has been ripping us off for so many years that it’s time they pay up.”
And if they don’t? If those investments fail to materialize? “Then they pay tariffs at 35 per cent,” he said, seemingly plucking a number out of the air. Trump has variously threatened the EU with 20-per-cent, 50-per-cent and 30-per-cent tariffs, so this rate could be something new. Or maybe he simply misspoke. Maybe he really meant 145 per cent, like the tariffs he imposed on China before backtracking after about a week. Or maybe the math doesn’t ultimately matter as long as Trump can go on TV – or Truth Social – to trumpet a lucrative deal. At the end of the CNBC interview, almost in passing, Trump bragged that NATO leaders “do whatever I want.” It certainly doesn’t hurt if the President sees it that way.
The Shot‘I always want to reach for the championship.’ Open this photo in gallery:
Victoria Mboko in her quarterfinal win on Monday.David Kirouac/Reuters
Victoria Mboko entered the National Bank Open in Montreal as a wild card, but after orchestrating one upset after another, the 18-year-old Torontonian plays Wimbledon champ Elena Rybakina in the semifinals tonight. Read more about Mboko’s Cinderella run here.
The WrapWhat else we’re following
At home: Prime Minister Mark Carney said Ottawa would provide $1.2-billion in support for Canada’s softwood lumber producers to deal with the hikes in U.S. trade duties.
Abroad: Eight decades after the U.S. dropped an atomic bomb on Hiroshima, Japanese survivors are speaking out about nuclear sabre-rattling around the world.
Strike? The vast majority of Air Canada flight attendants voted for a strike action yesterday, which could see them walk off the job later this month.
Theft? Ex-Rolling Stones guitarist Mick Taylor says the New York Met has his lost Gibson Les Paul. The museum disagrees.
Suds? Molson Coors cut its financial forecasts for the second straight quarter, blaming softer demand from U.S. consumers and higher costs for aluminum cans.