Trade deal to leave ‘bad outcome’ for Canada and U.S., ex-minister says

Mark Carney is doing what no previous Canadian leader has done by accepting that President Donald Trump can impose tariffs despite the terms of the North American trade pact, the country’s former deputy prime minister said.

“Canada apparently will have lower tariffs on steel, aluminum, cars and car parts. But tariffs will be in place and Canada will accept the legitimacy of those tariffs. That’s a real Rubicon that it looks like will be crossed,” Chrystia Freeland said on Bloomberg Television’s Wall Street Week With David Westin, to which she is a regular contributor.

United States and Canadian negotiators are meeting in Washington on Friday, trying to cement a deal to ease trade tensions between the longtime allies. The stakes are high : the Trump administration is set to impose new 50 per cent tariffs on hundreds of products from Canada at 12:01 a.m. New York time on Saturday, unless there’s a deal or another delay from the White House.

The countries are discussing an arrangement that would lower U.S. tariffs on imports of certain Canadian steel and aluminum items to 25 per cent from 50 per cent, and cut the headline duty on autos to 15 per cent, people familiar with the matter told Bloomberg News earlier this week. But the final agreement was not done as of Friday morning and the situation remains fluid.

In return, Canada would remove retaliatory measures such as its own counter-tariffs on U.S.-manufactured autos, the people said.

“The idea that tariffs on these sectors would be accepted by Canada, that is a really big deal,” said Freeland, who was deeply involved in the negotiations that led to the Canada-U.S.-Mexico-Agreement (CUSMA) during Trump’s first term. “That is a bad outcome for Canada to have permanent tariffs on our steel, aluminum, cars and car parts — really harmful for those sectors. But I think it’s a bad outcome for the United States as well.”

Canada has enjoyed decades of trade at near-zero tariffs with the U.S. The two countries exchanged $900 billion of goods and services last year, and Canada is the largest export market for many U.S. industries, including autos. Along with Mexico, the countries are part of CUSMA, which Trump called “the best agreement we’ve ever made” in 2020.

Freeland compared U.S. protectionism to Brexit, calling it “self-mutilating” because tariffs on primary metals weaken U.S. manufacturers by increasing their costs.

“Aluminum is basically electricity in solid form. So the U.S. is basically imposing a tax on electricity,” she said.

Freeland is partly responsible for Carney’s rise to power : in December 2024 she stunned the nation with her sudden resignation as finance minister, which proved to be a final blow that triggered the exit of Justin Trudeau. She ran against Carney for leadership of the Liberal Party and lost.

She was part of Carney’s first cabinet but resigned as a lawmaker in January.

Freeland suggested Carney is taking less favourable trade terms from Trump in return for reducing business uncertainty, while acknowledging that many Canadians will feel they’re being “ treated pretty shoddily. ”

• Tentative trade deal proposes tariffs on Canadian steel producers exporting to the U.S., but not on U.S. steel producers shipping here, say sources
• Carney bets Canada can live with tariffs to unlock investment

“The tariffs that had been looming over Canada have been a real Damocles,” she said. “So I think business will be happy with the certainty.”

Freeland warned of the risks of the U.S. conducting lopsided diplomacy with allies.

“What is happening is, steadily, the U.S. is losing by winning. The U.S. is pushing its allies to do things. It may feel good to force someone to do something they don’t want to do, but I think what the U.S. is going to find is when it needs help, it’s going to be harder to get it,” she said, citing allies’ reluctance to join the war in Iran.

—With assistance from David Westin.

Bloomberg.com