The status quo is not going to cut it for Canadian Prime Minister Mark Carney at his Tuesday meeting with President Donald Trump in Washington.
With an unemployment rate of 7.1%, the highest level in nine years and half a percentage point higher since the start of this year, Canada’s economy is faltering. Steep tariffs Trump slapped on cars, steel and aluminum — key Canadian exports to the United States — are making matters worse.
And Carney’s meeting is happening just as Trump is prepared to deal another blow to the Canadian economy: tariffs on softwood and lumber, among the top goods the United States imports from its northern neighbors.
“It makes a difference to have face-to-face time with Trump,” said Inu Manak, a senior fellow for international trade at the Council on Foreign Relations. The pressure is on Carney to leverage it.
Canadians are increasingly concerned about the cost of living and the overarching state of the economy, according to a poll conducted last week by Abacus Data of 1,500 adults, who ranked the top issues facing Canada.
“There is a necessity on the part of the (Canadian) government to shift away from so much of the focus on Trump and being anti-Trump and really think about what they can do to improve the lives of Canadians day-to-day,” Manak said.
Tariffs on exports to the United States can still raise prices for Canadians because the raw materials cross borders to produce finished goods, said Jeffrey Schott, a senior fellow at the Peterson Institute for International Economics.
That’s why Carney is likely hoping to get Trump on board with new exemptions to sectoral tariffs to help improve Canadian incomes, Manak and Schott said.
Sectoral tariffs are relatively low-hanging fruit under the US-Mexico-Canada Agreement (USMCA), which Trump brokered during his first term and will be under mandatory review next year.
Even with the higher border levies Trump has enacted, goods from Mexico and Canada have been able to come in to the United States duty-free if they are USMCA compliant. Trump reportedly has been aiming to use the higher tariffs he’s enacted on non-compliant Mexican and Canadian goods to sway USMCA negotiations.
“What is at risk is the continuation of that deal or the slow unraveling of that,” said Schott. Carney and Trump on Tuesday could give crucial clues about USMCA’s next chapter.
But, ultimately, Manak said he is not expecting Trump to renew the trilateral agreement and instead expects him to dangle it as “endless leverage” in trade talks with the two nations.
For Carney and Mexican President Claudia Sheinbaum, that means they need to negotiate now with an eye to possible bilateral agreements in the future.
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