Three ways this Canada-U.S. dispute will end

CBC

15-04-2025

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You'd have to squint till your eyeballs ache, but there is a foreseeable scenario where Canada and the U.S. build a closer relationship out of this ugly moment.
This outcome is far from certain — hence the squinting.
But one influential figure in Washington professes to see it. Donald Trump's first-term trade czar predicted the optimistic scenario last week in Ottawa, speaking behind closed doors.
"Whatever is going on now is not going to last, and it'll be fine," Robert Lighthizer told the Canada Strong and Free Network, a conservative think-tank, on a recording shared with CBC News.
"The relationship between the United States and Canada is going to be as good or better than it has ever been and the business relationship will be fine."
There are three broad potential scenarios after this month's federal election, after which Canada and the U.S. are poised to enter comprehensive trade and security negotiations.
Call them the good place, the bad place and the messy middle.
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The good place? Economic security, military security — Canada gets both, with tariff-free trade restored and the U.S. defence umbrella intact. Canada could even gain new advantages, if the U.S. keeps its tariffs against other countries.
Lighthizer hinted at this. He suggested Canada has gained a competitive edge amid the recent trade war as its tariffs are, generally, lower than those on most countries.
Most products traded under the Canada-U.S.-Mexico Agreement (CUSMA) have tariff exemptions, and Canada and Mexico did not get the same 10 per cent universal tariff as other countries.
"My own analysis is that Canada is better off because [CUSMA] is more valuable than it was six weeks ago," Lighthizer said.
He added a caveat. There are still tariffs on Canadian steel and aluminum.
He didn't mention tariffs on another massive industry, the auto sector, which is now caught in a tangle of exemptions and duties — a Swiss cheese of trade barriers.
Which brings us to the messy middle.
Bleak and bleaker scenarios
It's the in-between scenario and it looks, frankly, like our present purgatory: a relationship corroded by doubt, eaten away by a tariff here and another one there.
"I think [CUSMA] is on life support right now. And I think it will be like that for the next year — at least," Mexican economist Jesús Carrillo told a panel on Monday organized by the Brookings Institution, a Washington-based think-tank.
He predicted the trade pact will survive. Then again, in this messy, uncertain moment, where tariffs shift from day to day, who knows what tomorrow's trade reality will be? Let alone next year's.
Just look at recent appearances by Lighthizer's successor, the current U.S. Trade Representative Jamieson Greer.
In two days of hearings on Capitol Hill last week, he, too, referred to Canada and Mexico enjoying privileged access to the U.S. market, under CUSMA.
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Then again, he also talked about an advantage for the broader Western hemisphere. He said several times that textile production could move closer to home, as Latin American countries mostly had a tariff of 10 per cent, while it was quadruple that in most Asian countries.
But his testimony was obsolete by the time he left the U.S. Capitol. While Greer was still on the witness stand, Trump eliminated that tariff differential, giving almost every country on Earth the same 10 per cent rate.
And that's the messy middle. Our current unstable trading system, being scrambled from one minute to the next by an unpredictable U.S. president, with tariffs on certain products but not others; and it changes day to day.
As Democratic Sen. Ron Wyden of Oregon said, his voice rising: "What. Is. The. Plan? In the last week the White House has been all over the map."
It could be worse. It could be a full-blown, ever-escalating crisis — the bad place. We already got glimpses of that between December and March.
For about three months, Trump kept threatening Canada's economic and national survival, talking about immiserating it so severely it might plead to join the U.S.
He's recently stopped talking about crushing Canada's economy, or forcing it to accept U.S. annexation, or referring to the prime minister as "governor."
We'll know soon whether he intends to resume this, after this month's federal election, when it will become clear whether Trump has changed his tune or has been biting his tongue for fear of influencing the vote.
Impediments to a quick deal
In any case, it will take time to rebuild trust, says one Washington analyst. She likens the process to therapy — Canada and the U.S. will, first, need to air their grievances.
"Right now things are very hot, and we need to give it some time to cool down so that there can be a reset," said Jamie Tronnes, executive director of the Center for North American Prosperity and Security.
"Canada and the U.S. need some time to be able to come to the table and talk about the problems that we've had in the relationship."
The U.S. has longstanding complaints about Canada's failure to meet its defence commitments, from the Arctic to military spending, she noted. Canada, meanwhile, has been angered by these tariffs.
Several other factors could drag this out.
For example, it might take over a year just to start reviewing the CUSMA, if the U.S. follows its own legal processes for the renegotiation. In theory, the U.S. could scale back tariffs while negotiating.
"The mechanisms to change [CUSMA] are not clear," said Carillo, who wondered whether Trump will follow the formal process or seek a quicker deal.
Delays could get worse thanks to a personnel issue: the U.S. trade team is stretched thin. They're juggling talks with dozens of countries — and Greer has been wearing multiple hats, holding different interim roles in the White House.
When negotiations begin, the priorities are no mystery.
Canada's chief goal? Build legal guardrails to stop Trump from firing off tariffs at will — something a few U.S. lawmakers also favour.
It's a tall order. Trump won't be keen to surrender his go-to weapon. After all, he just threatened more tariffs against Mexico, in a dispute over water. He's also studying tariffs on semiconductors and pharmaceuticals.
What the Americans want most
The U.S. has several objectives. It's unhappy with Canada's digital services tax. It will either seek adjustments to, or the end of, the supply-management system for dairy, eggs and poultry.
But its top priority? Scrubbing foreign parts from U.S. manufacturing — especially Chinese steel and auto components, although it could go farther.
Lighthizer was vague on the details in his Ottawa talk, but he called this priority No. 1. Autoss are "the biggest thing," he said. "I hope we tighten it even more."
But he raised another sore spot. Tellingly, he veered off his usual trade lane to take a jab at Canada over defence spending. Canada "does not pay its share.… It just doesn't," he said. "And that has to be addressed."
Those are likely the broad themes.
The U.S. will seek changes on autos, dairy, digital taxes, defence spending, and, just maybe, based on recent sniping from Trump, looser banking regulations.
Canada's top priority? Stability. It may chase extra deals — think softwood lumber — but the main goal is locking in old ties in a world that's anything but stable.
"I think we get to the good place eventually," Tronnes said. She added a caveat, with a touch of graphic imagery.
CUSMA 'is still alive. It is like, you know, many have said it's under a guillotine right now, just waiting to be sliced apart. But I'm optimistic."