Key Takeaways
- The Trump administration is increasing its rhetorical pressure on Canada ahead of looming trade negotiations.
- U.S. Treasury Secretary Scott Bessent warned Prime Minister Mark Carney not to "pick a fight" with Trump over trade talks.
- The U.S. is threatening significant changes to the Canada-U.S.-Mexico Agreement (CUSMA) as it comes up for review this year.
- Carney has been a frequent target of scorn from Trump and his officials since his speech in Davos, where he spoke about "American hegemony" and warned that great powers are using economic integration as weapons.
- The U.S. and Mexico have begun formal discussions on possible reforms to CUSMA, but formal discussions between Canada and the U.S. have yet to begin.
Introduction to the Trade Tensions
The Trump administration is once again ramping up its rhetorical pressure on Canada, with U.S. Treasury Secretary Scott Bessent issuing a fresh warning to Prime Minister Mark Carney over looming trade negotiations. Bessent was at an event in Washington, D.C., where he launched what U.S. President Donald Trump has dubbed "Trump Accounts," an investment vehicle for children. In an interview with CNBC’s Sara Eisen, Bessent was asked about the rift between Trump and Carney over the prime minister’s headline-grabbing speech at the World Economic Forum in Davos, Switzerland, last week. Bessent encouraged Carney to do what he thinks is best for the Canadian people, rather than engaging in "virtue signalling," and warned him not to "pick a fight" with Trump ahead of the trade talks.
The Rift Between Trump and Carney
The rift between Trump and Carney began when Carney gave a speech in Davos, where he spoke about "American hegemony" and warned that great powers are using economic integration as weapons, tariffs as leverage. Trump and his officials have since made Carney a frequent target of scorn, with Trump withdrawing his invitation to Carney to join his newly created "Board of Peace" and threatening to hit all Canadian goods with a tariff of 100% if Canada "makes a deal with China." U.S. Commerce Secretary Howard Lutnick also slammed Carney’s speech as "political noise," saying that Canada has the second-best trade deal in the world and that Carney’s comments were just "whining and complaining."
The Upcoming Trade Negotiations
The U.S., Canada, and Mexico must indicate by July 1 whether they want to extend the Canada-U.S.-Mexico Agreement (CUSMA), renegotiate its terms, or let it expire. The U.S. is threatening significant changes to the agreement, with Trump suggesting that the U.S. doesn’t need the agreement at all, despite widespread support for it among American industries. U.S. Trade Representative Jamieson Greer met with his Mexican counterpart on Wednesday to discuss the CUSMA review, and the pair agreed to begin formal discussions on possible reforms to the agreement, including stronger rules of origin for key industrial goods, enhanced collaboration on critical minerals, and increased external trade policy alignment. Formal discussions between Canada and the U.S. have yet to begin.
Bessent’s Comments on Carney’s Transition to Politics
Bessent also took a swipe at Carney’s transition to politics after serving as governor of both the Bank of Canada and the Bank of England. "In my investment career, I’ve seen what happens when a technocrat tries to pivot and become a politician. It never really works out well," he said. Bessent’s comments come on the heels of claiming that Carney walked back what he said in Davos during a phone call on Monday with Trump. However, Carney denied recanting his message, saying that he meant what he said in Davos and that he told the president he stands by his comments.
Canada’s Response to the Trade Tensions
Carney has said that the blowback from the Trump administration "should be viewed in the broader context" of the upcoming CUSMA renegotiations. Canada is preparing for the trade negotiations, with Carney and other officials working to protect Canadian interests and ensure a fair deal for the country. The Canadian government has also been reaching out to other countries, including Mexico, to build alliances and strengthen trade relationships. As the trade negotiations approach, it remains to be seen how the tensions between the U.S. and Canada will play out, and what the outcome will be for the CUSMA agreement.
