Elbows Up: How Canada Is Fighting Trump’s Tariffs

LINDSAY:
Some numbers make you sit up straight. I did just that when I read a poll earlier this month showing that 41% of Canadians see the United States as an enemy country. That poll was conducted just after President Donald Trump slapped 50% tariffs on $27 billion of Canadian exports to the United States.

The anger that so many Canadians feel toward the United States is understandable. Ever since the signing of the 1988 U.S.-Canada Free Trade Agreement, which morphed into NAFTA and later the USMCA, Canada has bet its future on deepening its economic integration with the United States. As of last year, 70% of Canadian exports went to the United States.

Trump, however, has weaponized that integration.

Donald TRUMP:
We have more oil and gas than they do. We don’t need their lumber. We don’t need the things they have.

They need what we have. They need us. We don’t need them.

LINDSAY:
I have no illusions that U.S.-Canadian relations were perfect before Trump took office. To the contrary, they have often been fraught. For much of the 19th century, Canadians feared U.S. conquest as many Americans coveted their northern neighbor. Even after fears of conquest passed, economic tensions persisted. For decades, Washington and Ottawa bickered over fishing rights in the Atlantic Ocean. The United States long resisted construction of the St. Lawrence Seaway, one of the great engineering accomplishments of the 20th century because it threatened the livelihood of U.S. railroads in eastern ports. Tensions continued even with NAFTA and the USMCA. Just ask anyone in the office of the U.S. trade representative about Canadian softwood lumber or Canada’s supply management system for dairy, poultry, and egg production. But the recent turn in U.S.-Canada relations feels different. Canada took a real risk in slapping retaliatory tariffs on the United States. U.S. Treasury Secretary Scott Bessent captured how the Trump administration views the move.

Scott BESSENT:
I had a German shepherd, and there was a dachshund that used to antagonize her at the playground. And it kind of reminds me of that.

LINDSAY:
Canada’s willingness to antagonize its far larger trading partner signals the depth of its concern that its integration into the U.S. economy has left Canadians deeply vulnerable to the whims of the White House. To unpack that concern and decipher whether the tariff war represents a fundamental rupture in U.S.-Canada relations, I turned to my friend north of the border, Rohinton Medhora. Rohinton is professor of practice at McGill University in Montreal and a distinguished fellow at the Centre for International Governance Innovation in Waterloo, Canada.

We discussed how Canadians feel about the taunts that they hear from Trump and his senior advisers, why trade talks broke down last month, whether Ontario and Quebec might invoke the nuclear option and cut off energy supplies to the United States, and whether the talk in Alberta and Quebec about secession is serious. Rohinton also highlighted why retaliation may be Canada’s only path forward and why Ottawa would be looking elsewhere for economic opportunity regardless of how the current U.S.-Canada trade war shakes out. Rohinton, thank you for joining me on the President’s Inbox.

MEDHORA:
It’s good to be back, Jim. Thank you.

LINDSAY:
Rohinton, we’re in a new phase of the U.S.-Canada trade war after President Donald Trump imposed 50% tariffs on about $28 billion of Canadian imports last month and Canadian Prime Minister Mark Carney retaliated in kind. I want to get into the details of why we got more tariffs, but first I’d like to begin with what my kids would call a vibe check. Can you give me a sense of what the public mood is in Canada toward the United States?

MEDHORA:
The public mood is one of frustration and anger over this latest development, and I know we’ll get into this, but it’s a development that actually extends back about nine years to Trump one and the renegotiation of NAFTA. And I would add to frustration and anger trepidation, because when you have an economic, political, cultural, indeed, every sort of relationship as strong as the Canada-U.S. one, the consequences of it rupturing in a major way are immense. And so on the one hand, Canadians are foursquare behind the Canadian government’s response, but there’s also a sense that this cannot be a good thing for either side, but especially not Canada.

LINDSAY:
I’m struck, Rohinton, that you used the word rupturing. That’s pretty close to the language that Prime Minister Carney used in his speech when he talked about U.S.-Canadian relations feeling a rupture and not just a transition. Tell me a little bit more about that.

MEDHORA:
I think that’s right. I mean, one can always parse words, but our prime minister, or indeed any prime minister, is not going to select words lightly. And even though this so-called rupture goes back nine years, and you can say, so isn’t that a solid transition and not a rupture?

I think the sense of rupture is that the underlying precepts of what led Canada and the U.S. to closer integration are being fundamentally questioned. So it’s not just a question of saying we had a trade deal, it wasn’t perfect, so we’re revisiting it. It’s the nature of the moves that the U.S. has made. And especially, to give you one example, using the security argument to place tariffs on aluminum and steel. And for most Canadians, to see us as a security threat isn’t a transition in thinking, it strikes us as a rupture.

LINDSAY:
Well, I will note that those tariffs were first put in place during the first Trump administration. The then-Secretary of Defense, James Mattis, I think shared the view of most Canadians that he found it hard to argue that this was a security threat. But I want to talk a little bit about sort of this history because you did locate things as happening, not just in the last couple of months, but going back to the first term.

MEDHORA:
Yeah. Let me begin by saying, you know, as someone who headed a Canadian think tank at the time, the sense that trade agreements should have an inbuilt revisiting clause is not bad at all. I think the reason we find the WTO and so many trade relationships in stasis is because there was never that kind of rigorous, solid, well-meaning revision inbuilt.

And I think the instinct of the first Trump administration to say, not only should we revisit that deal, which was done in a different era, when, for example, digital technologies barely existed in their current form, was right. To then say, let’s have a six-year revisiting period strikes me as right. To make more central environment and labor considerations, which were annexes in the original NAFTA, again, right.

So the transition to USMCA in many ways, while the two partners, Mexico and Canada, grumbled about it, broadly speaking was right, even though the tendency was to assert more of a US role in, for example, local content and so on. Since then, we had an intervening Biden administration in which the tariffs were removed, but on many other aspects, they kind of underlined the intent of the Trump administration, particularly on the way digital firms and digital technology was treated. So again, one might say there’s a broader US continuity than a person-related one.

Trump two has been, in many ways, much more brutal. Trump two has been an intensification of that thinking, an almost repudiation of what we thought was a deal that we’d struck between 2018 and 2020, along with a whole bunch of rhetoric around Canada becoming the 51st state, the prime minister being the governor, and more recently, of course, these kinds of insults from other cabinet members as well. And so what should be a sensible redefining and modernizing of an economic relationship is now tied up with politics, culture, and national pride.

LINDSAY:
I want to get to the culture, politics, and nationalism in a second, Rohinton, but I want to just go a little bit further on this question of the basic nature of the deal between the United States and Canada, because as I think about the current trade war, I actually go back four decades, back to the 1980s, with the push for what became the US-Canada Free Trade Agreement. It was championed by Ronald Reagan on the American side, and at the time, many Canadians were deeply skeptical and opposed to the idea of deepening Canada’s economic integration with the United States. Part of that most likely had to do with historical memories of the United States trying to take Canada in the War of 1812 and at other junctures during our history, but also I think a fear of Canada being overwhelmed by the American economy and losing its identity.

Nonetheless, Canadian Prime Minister Brian Mulroney got the deal passed, and it really pushed forward this notion that we were going to integrate these two economies. Now it seems the Trump administration is walking away from that idea of integration. Am I missing something?

Am I exaggerating what’s coming out of the current White House?

MEDHORA:
No, Jim, you never miss and you never exaggerate, but I’d add two points to what you said. First, on the historical bit, I’d go even further back than 40 years to 1965 and the U.S.-Canada Auto Pact. That was that first sense on both sides that these two countries were interlinked economically and otherwise, and that was that first ginger step towards integration.

In many ways, the U.S.-Canada agreement in 1988 was a natural, albeit it took 24 years, evolution of that. The second point I’d make about the concern is that at the time that the U.S.-Canada Free Trade Agreement was announced and entered into, there was a strong sense that, yes, on the one hand, we might be overwhelmed by the U.S., but on the other, that there was this huge market, 10 times our own, which was now open to us. On your point about whether Trump is therefore walking away from that, I wouldn’t speak for the Trump administration, but they’d say, no, we’re not walking away from it.

What we’re saying is if you want all of that, then let’s go all the way and either make you a 51st state or de facto make you a 51st state. I don’t see the Trump administration as necessarily walking away from Canada, but wanting to integrate it even further than Canadians might be comfortable with.

LINDSAY:
How would you square that, Rohinton, with arguments made by Secretary of Commerce Howard Lutnick that the United States wants to move auto production out of Canada into the United States? I think actually he told a joint U.S.-Canada commercial summit last year that his goal or the administration’s goal was to see to it that we no longer bought Canadian-made cars.

MEDHORA:
Yeah. I mean, there’s two ways to look at that. One is that that’s the kind of amped-up rhetoric that one uses in the middle of a negotiation to get the outcome.

LINDSAY:
Because the auto industry is very big in Canada, correct? It’s deeply integrated with American producers, GM, Ford.

MEDHORA:
It’s deeply integrated with American producers in effectively two provinces, Ontario and Quebec, some in B.C., but much less. When you look at ancillary industries like energy, then of course the integration becomes bigger. And so on Lutnick’s point about moving the industry completely away, that’s actually an economic decision taken by firms.

And there’s limits to what governments can do there. There might still be an economic reason for some aspects of the industry to be located in Canada. Currently, on average, parts move back and forth between the two borders, Mexico and Canada, something between seven and 14 times before you get a car that says made in America or made in Canada or made in NAFTA.

So there is that. The other aspect of moving automobiles away is, even if you did that, there’s so many other areas in which Canada and the U.S. trade and are connected that although the auto industry would be a big hole, I don’t think it changes the gravity, which is a north-south relationship.

LINDSAY:
So let’s talk about the deal we almost had. In the middle of August, the president announces that he’s going to delay his threat to impose tariffs on Canada because a deal was in the offing, the sense I think most people took away. It was just a matter of crossing the T’s and dotting the I’s.

And then all of a sudden, the deal collapsed. From Canada’s perspective, why do they think the deal didn’t make it across the finish line?

MEDHORA:
You know, I think that week of August 17 to 21, Friday, August 21st being when Prime Minister Carney publicly removed Canada from the negotiations, will be analyzed for a good long time. I think analysts should be upfront in recognizing that we really don’t know what really went on. I am impressed, and I think it’s a good thing, that we don’t have authoritative accounts of what happened that week.

What we have are selective leaks and spin by each side. And I’ll come to what the Canadian version of that is. But we don’t know what deal was on the table.

What we do know, and now I come to your point about what might be the Canadian perspective, is that early that week, we too thought that we had a deal that was all but ready, when key points of it were run by constituencies in Canada, mainly the provinces and business. One has the impression that it wasn’t well received. There was a sense that Canada had given up too much, and so the Prime Minister was under some pressure to either revisit the deal, or at least he understood that this would not be an easy sell.

That’s one side of the story. The other side of the story is what the Canadians have been putting out, that what they thought was a deal begun being revisited. And in the words of one of our negotiators, we thought there was a ghost in the room that had begun speaking as of about Monday or Tuesday of that week, that ghost being Lutnick.

And the implication there is that what Jamieson Greer and his team were negotiating...

LINDSAY:
Jamieson Greer being the U.S. Trade Representative.

MEDHORA:
...did not have the full political and power buy-in in the White House from the President or his Commerce Secretary, and that there were conditions being placed, new ones being placed at the last minute on things like language and culture, which were not acceptable to the Canadians. I’m impressed by the fact that there have not been authoritative analyses of this all. I think only history, many years down the road, will tell us what really happened.

And I’m not of the view, as some are in Canada, that if only the text that we thought we had agreed to is made public, then the public can decide whether we were right to walk away. We’re still in the middle of the negotiation, and it makes no sense to release that text at this point unilaterally, it seems to me. Because each side, I think, in the medium run at least, is looking for a face-saving way forward.

And that’s what I understand to be the current state of play.

LINDSAY:
Rohinton, you know a lot more about trade negotiations than I do, but my sense is, whether you’re talking to the United States and Canada or any other bilateral or multilateral set of negotiations, the general rule is you don’t want your concessions to become public until you have a final deal, because you may want to retract some of those concessions if you don’t get what it is that you want. Is that a fair take?

MEDHORA:
I think that’s a fair take. I think you do not want to cement in things that you might have agreed to, but you didn’t have to in the end, looking to other negotiations. So yeah, that’s negotiations 101.

LINDSAY:
Right, so when you’re in negotiations, everything’s written in pencil until you get to a final deal, then you can put it in ink. There’s one aspect of what you just said, Rohinton, that I want to dwell on just a bit, because I think it sounds strange to American ears. You mentioned that Prime Minister Carney, as he’s conducting these negotiations, he has the outlines of a deal, and he consults with, among others, provincial governors.

My understanding is he talked to the governor of Ontario, Doug Ford, who said, nope, you can’t sign this deal. To an American, it’s hard to imagine the President of the United States consulting with any governor, even a governor of a big state like California, New York, or Texas. So help me understand why Mark Carney, the head of government in Canada, is turning to provincial governors to say, what do you think?

MEDHORA:
Ah, welcome to Canada’s federation. There are federations and there are federations. You are one too.

So is India, so is Nigeria, so is Canada. In the Canadian case, while foreign policy and commerce are distinctly in the federal sphere, the Canadian provinces are powerful in many ways. Historically, they’ve been given a buy-in to even federal affairs, as one might say, a very Canadian curtsy.

There’s that. There’s also the fact that a lot of the implementation of what the federal government agrees to happens at the provincial level. And third, there’s also Canadian politics.

By this, I mean that although now Prime Minister Carney and his Liberal government have a majority in Parliament, that majority is buttressed in many ways if he has support in the provinces. I don’t mean statistically or numerically, but it just helps the case if you have the provincial premiers on board. It is also the case that historically, while we’ve had one province, which is Quebec, that has on and off wanted to opt out of the federation, and so we always want to keep an eye on that, we now have the western province of Alberta, which is energy and in some ways mineral rich, along with Saskatchewan next door.

Alberta also has a bit of a secessionist movement. There’s going to be a referendum next month, which seeks to give the government the power to go further in its negotiations on this and hold a second referendum. And so keeping the federation whole is an important job of any Prime Minister in Canada.

It is in this context that Carney would have consulted or advised the 10 provincial premiers and two territorial leaders about the trade deal, as he would with major business leaders, and I’m guessing big labour as well.

LINDSAY:
Just on that point, Rohinton, I have to ask, do you think the referendum in Alberta is going to pass? I keep hearing that it won’t, but you probably have a better finger on the pulse than I do.

MEDHORA:
No, no, that’s exactly right, Jim. I mean, the numbers I’ve seen are as low as 20% for the referendum. But you don’t want to take that risk.

20% can very easily become 30% and 40%. And at that point, it’s not a question of whether a referendum passes, it’s the fact that you now have this cat out of the bag. In that respect, I should say, we have elections in the province of Quebec next month.

The party that’s currently in power, which I’d call a kind of populist conservative party, is not doing well. In fact, it is the separatist party, the Parti Quebecois, that is leading in the polls and likely to lead a majority or minority government. And its leader, very shrewdly, has said that although his party’s position is to hold a referendum soon after winning power, they will postpone a referendum until after Trump is out of office.

So there’s this sense of cooperation and that this is a time of national crisis when we should band together. But again, that’s just postponing things by two or more years. And the fact that Canada’s federation is noisy and messy by many people’s standards remains.

LINDSAY:
I must say, Rohinton, I am shocked, shocked, to discover that Canada’s democracy is messy and that you have politics north of the border, because obviously that’s not the issue here, south of the border. I want to ask you a question about Carney’s decision to retaliate, because I hear a lot of people suggest that that was an unwise decision and that what he should have done was to channel his inner Claudia Sheinbaum, the president of Mexico, who has essentially tried to avoid getting into a tit-for-tat with the Trump administration. So help me understand why it is that Carney decided to go, how shall we put it, elbows up, to borrow the hockey metaphor, with Trump.

Is it politics, strategy, necessity?

MEDHORA:
I’d say all three, although the first two perhaps more than the third. Again, this is one of those areas, Jim, where historical analysis will be a lot more enlightening than the instant analyses, because we don’t know what the cabinet record is. We haven’t had an in-depth, offline conversation with the prime minister about that.

We’ll have to wait for his memoirs. But on the question you posed, I’d say the economics textbook answer is you’re still better off without retaliation than with. And, you know, there’s all kinds of triangles and rectangles we can show on the blackboard diagram about that.

And I’ve done that in my time. Well, you’re an economist, so I trust you on that one. Trust me, I’ve done that in my time.

But the reason Carney would have retaliated is signaling, one, that we’re not going to just take it. Second, it is a way to show that there are costs on the other side and that we are willing to pay a price, but we’re also going to impose one on you. And third, it might be, and this is my weakest argument, but I think when I look around me at how the rest of the world has reacted, I think there might be something to it.

This is in some ways a signal to others that Canada, which has the most to lose, by the way, I mean, the rest of the world is not as integrated as Canada.

LINDSAY:
70% of Canada’s exports go to the United States.

MEDHORA:
Yeah, 70%, about 20% of the economy and employment is directly related to U.S. activity. I don’t even think Mexico has those kinds of numbers. So there is something there.

And so Carney wants to show that Canada is different, that his elbows up, which he was being pilloried for because he wasn’t doing enough of it. You know, there were a series of concessions Canada made under Carney having campaigned on the elbows up slogan. And so he felt this was a time where if he didn’t retaliate, he would lose all credibility on the negotiating table.

LINDSAY:
I mean, I certainly can understand that because the statements coming out of the White House and the rest of the administration would make it very hard for any Canadian prime minister to turn the other cheek. I mean, you have the president posting on social media, being in hockey gear with a hockey stick over the prime minister telling him to get up. We had an effort to try to block the opening of the Gordie Howe Bridge from Ontario into Michigan.

I have to say, as someone who has had to deal with the old bridge, I can understand why you very much want the Gordie Howe Bridge, not to mention the fact that Gordie Howe is, for fans of the Detroit Red Wings, the icon of all icons. So it’s not surprising to me that Canadian dander has gotten up. But I want to go really to the economic question, Rohinton, which is how significant do you think this latest round of tariffs is for Canada and the Canadian economy?

I realize these are very difficult questions to answer because there are all kinds of substitution effects. People change their behavior and the rest. But I will note that we have something on the order of, I think it’s a 50% tariff on roughly $28 billion worth of exports.

But it only covers, that’s about 5% of Canadian exports. So is this a big deal or is it just sort of a smaller deal that’s painful but not catastrophic?

MEDHORA:
In and of itself, it is not a big deal. But situated in that longer nine-year timeline, the trend is in the direction of saying, the more we give, the more we accept, the more it seems to us we’re going to be hit. And so at some point, there’s a line in the sand.

And this 5% is where that line seems to have been drawn. You’re quite right to state that the economic impacts, which are being modeled by all and sundry, range from mild to severe depending on how the underlying assumptions about substitution and so on, but also the timeline. In the short run, these impacts might be low because you simply stop using the good.

But in the long run, you do need it. And so the costs line up. I was struck by one of the findings in one of the recent polls where Canadians are, as you know, 60% to 75% in favor of the Canadian government’s stance.

Even when they were asked, what if your prices went up by 20%? 60% to 65% of Canadians said, we still did the right thing.

LINDSAY:
Well, that’s easy to see, Rohinton, when polls show that 41% of Canadians view the United States as an enemy. Canadians feel threatened.

MEDHORA:
Yeah, I think that’s the rupture, Jim, that we were talking about earlier. It’s no longer a relationship whose basis is the last 50 or 100 years. It seems to be a relationship where the basis is reset as of a few months or years ago.

And to think of the U.S. as an enemy, for the U.S. to think of Canada as a security threat where tons of fentanyl comes from, statistically completely invalid. But that kind of give-and-take mentality on each other is something that I don’t think Canadians in my lifetime or even a previous generation would remember.

LINDSAY:
Rohinton, to what extent is Ottawa hoping that certain American states and governors in those states and political officials in those states are going to help? Because I would note, if you are Maine, if you are Michigan, just to name two states, you depend an awful lot on cross-border business. And this is going to be painful for Michiganders and for people in Maine.

I will also note, if your kids play hockey in the United States, you’re going to pay a lot more to buy hockey equipment and hockey sticks.

MEDHORA:
It is one of the strategies that the government has almost explicitly announced it is using, which is to work, I wouldn’t say interfere in U.S. politics, but to work on U.S. public opinion and on elected officials who know the consequences of the trade war. And so there are about six or eight states in the U.S. where their primary trade, in fact, is with Canada. We have seen, for example, Senator Susan Collins in Maine, who is in a tough re-election fight, come out against the trade war and some of Trump’s tariffs.

Other politicians, including Republican ones, have also in various ways done that. And I get the sense that they’ve been given dispensation, if you will, by the powers that be to do that, because I think that’s the only way they can survive in their elections. One thing, you mentioned Doug Ford.

One thing that got the Trump administration and Trump himself very upset was this commercial that the province of Ontario, led by Premier Doug Ford, released some months ago in which they quoted the much-sainted Ronald Reagan on tariffs and his view of how bad an idea tariffs were. And so there is this game that Canada is playing strategically, which is to work on U.S. public opinion and work with U.S. officials who see things, of course, they’re Americans first, but who understand why it is in the mutual interest of both countries to not have this kind of situation.

LINDSAY:
Rohinton, do you see any potential for Canada to up the ante? There was a lot of speculation, threats, I’m not sure what the proper word is, that the province of Ontario might cut off energy exports, electricity flowing south, particularly to the state of New York. That hasn’t happened.

Is that something that we could see conceivably, or is it simply too big a deal for Canada to go ahead on that score?

MEDHORA:
Energy is the elephant in the room here, Jim. There is electricity from Ontario and one or two eastern provinces, Quebec as well. There’s also energy and energy-related minerals from Alberta and Saskatchewan.

And this is where, back to our point about Canada’s messy and noisy federation comes in. The premiers of Alberta and Saskatchewan have come out forthrightly and vocally that they would not want to see energy used as a weapon in the trade war. That kind of hamstrings the prime minister, although legally he would have the power to put export taxes on energy exports.

It hamstrings the prime minister, and I’m sure the US side knows that and has internalized it. Would it happen? Every time the question is posed to the prime minister, one gets a combination of all options are on the table, along with, but really we don’t want to go there, we’d much rather resolve this.

That’s a bit of a nuclear option, the energy option.

LINDSAY:
So Rohinton, just looking forward, do you see any way for the United States and Canada to reconcile their competing agendas and interests? Is what we’re experiencing right now just very tumultuous bargaining at the end of the day going to lead to an agreement that leaves both sides more or less happy? Or are we really seeing a rupture in a departure?

And I asked it against the backdrop of the fact that there have been news reports that Prime Minister Carney has spoken to EU officials about Canada potentially becoming an associate member of the EU, whatever that actually means. And I know that shortly after this conversation goes live, the prime minister will be in Strasbourg, France to speak to the European Parliament. And I think it would be interesting to hear what he has to say.

But I guess, you know, are we looking forward to a reconciliation or are we headed to a divorce?

MEDHORA:
It’s going to be something in between. It’s going to be, if you will, a separation. So all of the above, what do I mean by that?

I think tariffs as a source of revenue and as a tool in the new geopolitics and geoeconomics are here to stay. The U.S. has set an example that other countries, who are always doing it too, by the way, will glom onto and perhaps accelerate. I also think the old relationship is over and that the way forward is going to be one or both of two things.

One is going to be a kind of face-saving compromise on whatever that deal was that was abandoned in mid-August. The U.S. has already said that their points about culture and language on labels and so on was not a deal breaker. There’ll be other such.

And that’s why I think it’s important that that text not become public so that no side feels it loses face. The other way forward is going to be the six-year review of USMCA. That might be another face-saving way in which Canada and the U.S., this time including Mexico, come together on a deal. But will it be like the old days? No. Will there be more of a U.S. kind of predominance on things like local content and on regulations? Yes. The unknown here, and many of us, as you know, since CFR and CIGI have been partners in so many things including Council of Councils, is on digital technology. I just don’t know where that’s headed.

But that’s an area in which either Canada gives up some of the sovereignty that it already gave up in USMCA, or it draws a line. Either way, there’s going to be a separation. And I don’t see a way forward without us addressing the digital technology issue.

LINDSAY:
Rohinton, just as a closing observation and question, I want to first thank you for referring to the successor to NAFTA as the USMCA when I know that the convention in Canada has referred to it as CUSMA. So duly noted, I appreciate your kindness on that score. But I want to ask you both as a Canadian and as an economist, as you look at sort of where we’re likely to end up in terms of the US-Canada economic relationship, are we on both sides of the border going to be leaving a lot of economic opportunity on the table?

I say that against the backdrop. It would seem to me that the United States and Canada both have substantially overlapping economic interests, among others, having resilient supply chains, being able to find a way to avoid having their industries basically undercut by Chinese manufacturing. A lot of talk about how China in many ways is sort of exporting its surplus to the rest of the world.

Are we going to look back in 10, 15, 20 years and say, wow, both capitals got it really wrong?

MEDHORA:
We won’t know for 10 or 15, in fact, 20 years. I’d say if one looks at what I’d call the narrow economics, there’s no question that what I call the gravity of a north-south relationship, the economic gravity, is so strong that it overwhelms other considerations. It’s not by coincidence that Canada does 60 to 70 percent of its trade with the US and that the next best, which is the EU, is in the 6 to 8 percent range.

Much gigantic China, 5 to 6 percent. So there’s a reason for that and the reason is economics. The Canadian move to diversify away from this historic trend, which by the way has been a constant in Canadian economic relations for decades, why don’t we move away?

What about the Asian century and so on? We won’t know how that works out for a good decade or two. And at that point it may be that the economics, along with the resilience that comes from diversifying trade partners, is actually a better economic proposition than simply going for the nearest and most tempting short-term economic proposition.

But those are all questions that unfold over decades. And what we’re now seeing is the first few months of that transition.

LINDSAY:
On that provocative note, I’ll close up this episode of The President’s Inbox. My guest has been Rohinton Medhora, a professor of practice at McGill University and a distinguished fellow at the Centre for International Governance Innovation, otherwise known as CIGI. Rohinton, thank you very much for joining me.

MEDHORA:
My pleasure as always, Jim. Thank you.

LINDSAY:
Today’s episode was produced by Justin Schuster and director of podcasting Gabrielle Sierra.