Carney struggles to find the answer to Trump

After a stunning election victory on an anti-Trump message, Canada’s PM Mark Carney is adjusting to the realities of dealing with the US. Critics call it capitulation.

‘Elbows Up,’ a hockey phrase, became the campaign rallying cry of Canada’s Liberal Party this spring, whipping up a swell of patriotism in
the face of US President Donald Trump’s menacing posture toward America’s neighbour.

In April, the sentiment lifted Mark
Carney, a prominent economist but neophyte politician, to one of the most stunning electoral victories in Canada’s history. He promised to fight back against American tariffs and stand up for Canadian sovereignty.

But, after just a few months on the job, Carney is facing early signs of trouble as he discovers that being elected on an anti-Trump message does not mean you can govern on one, too.

Since taking office, Carney has tried to hone a firm-but-friendly tone in his interactions with Trump. In two high-stakes in-person meetings, he avoided any
missteps in dealing with the American president, who has repeatedly said he wanted to make Canada a part of the United States and has slapped tariffs on key Canadian goods.

Yet, so far, Carney’s pleasant relationship with Trump has yielded little that’s tangible for Canada.

Unlike the European Union and Japan, Carney has not been able to deliver a trade deal with Trump, who ignored mutually agreed deadlines during the summer to come up with one.

And Carney has offered the United States concessions on some tariffs without, seemingly, getting much in return.

His political opponent, Pierre Poilievre, the Conservative Party leader, is seizing on the lack of concrete results for Canada to attack Carney.

Poilievre was badly defeated in the spring elections, even losing his own seat in Parliament. To win a new one, he had to wait for a recent by-election in a conservative stronghold in western Canada.

But now he’s back. And with Parliament resuming this week after its summer recess, Poilievre has shown a flavour of what he has in store for Carney.

“Since Prime Minister Carney took office, the Americans have doubled tariffs on Canada while they’ve signed deals with Europe, Japan, and other countries,” Poilievre said last month, adding that Carney’s outreach to partners in Europe and Mexico has been little more than “photo ops.” (Poilievre’s claim that United States has doubled tariffs is not accurate.)

“It seems like since Prime Minister Carney took office, it has been American tariffs up and liberal elbows down,” he told the news media in Saskatchewan during a visit in mid-August.

Carney’s own shift in tone and substance when it comes to talking about tariffs has been marked.

“The Americans want our resources, our water, our land, our country,” he said during his victory speech on election night in April. “Think about that for a moment. If they succeed, they will destroy our way of life.”

Carney inherited a policy of retaliatory tariffs against the United States from his predecessor, Justin Trudeau, which he kept in place after taking office.

But over the past few months, and as talks with the US administration have been on and off, Carney started relaxing counter measures against the United States. Canada and China had been the only countries to apply retaliatory tariffs against US goods in response to the Trump administration’s tariff policy.

In June, Carney scrapped a planned digital services tax aimed at big American tech companies after it had angered Trump and caused him to suspend trade negotiations. But the move did not lead to any breakthrough in talks.

And last month, Carney removed some retaliatory tariffs on US goods that fall outside the US-Mexico-Canada Free Trade Agreement, known as the USMCA.

The move, which matched similar US tariff measures toward Canadian exports, effectively restored free trade on many goods traded between the two countries. But both Canada and the United States continue to impose tariffs on each other’s steel, aluminium, copper and vehicles, among other key products.

Carney explained that the move was meant to be a positive step toward renegotiating the free-trade agreement, a process that was not supposed to begin until next year.

Recent public opinion surveys suggest that some Canadians are starting to wonder about Carney’s ability to make good on his campaign promise to effectively deal with Trump’s impact on Canada.

He continues to poll ahead of Poilievre and the Conservatives, but the margin is narrowing. An Angus Reid Institute survey released September 5, for example, showed that Carney’s approval rating had dropped by 6 percentage points to 51%, while his disapproval rating had climbed by 7 percentage points to 41%.

“We went into the summer on a very ‘elbows up’ vibe, and there is still no deal,” said Shachi Kurl, president of the Angus Reid Institute. “Retaliatory tariffs are off, there is a lot of uncertainty and so the ‘elbows up’ has turned into the shrug emoji.”

Yet, she added, “people are still prepared to give him the benefit of the doubt.”

With tariff negotiations up in the air, Carney has introduced a strategic shift for the Canadian economy to reduce its reliance on the United States.

Earlier this year, he ordered changes in laws and regulations to boost internal trade within Canada — it’s often easier for the country’s provinces to trade with the United States than among themselves, to the detriment of the Canadian economy.

And on Thursday, he announced major infrastructure projects that he said
would be fast-tracked, including to increase exports of liquefied natural gas to additional destinations, developing two copper mines, a container port and nuclear energy production.
Several of the projects focussed on increasing fossil fuel production and mining, however, which is likely to anger environmentalists and put the government in conflict with Indigenous people who have land and hunting rights over territory that would be used for some of the infrastructure plans.

But much of that is long-term work, some of which will require huge financial investment with results not being seen for many years.

At the same time, the Canadian economy is showing signs of trouble. The country’s persistently high unemployment rate rose to 7.1% in August — the second highest among the Group of 7 major industrialised nations after France. The economy shrank by 1.6% in the second quarter, more than expected.

Carney recently set aside 5 billion Canadian dollars ($3.6 billion) for a fund aimed at supporting industries that have been hit hardest by the US tariffs.

“The US is really important but it’s not the only important issue in Canada,” said Gerald Butts, a former top official in the Trudeau government who provided advice to Carney during the election and is vice chair of Eurasia Group, a consultancy.

While Canadians are worried about the fallout from the US tariffs, they are also concerned with pressing cost-of-living problems.

“Issues like housing, increasingly the general economic picture and cost of living never went away, and they’ll come back with renewed vigour in the fall,” Butts said, adding, “The government has to show that it’s focused on those issues as much as it’s trying to manage the relationship with Trump.”

Carney seems to know how pressing these issues are for Canadians.

On Sunday he announced a new government agency, Build Canada Homes, endowed with CA$13 billion for different programmes to boost the supply of affordable housing.

“We’re in a housing crisis,” Carney said during the announcement of the new initiative in Ottawa. “And it’s going to take all hands on deck to get us out of it.”