00:00Canada says it will enact retaliatory tariffs against the US from September the 8th, but how seriously should the US
00:08take this?
00:09David Hennig is Director of UK Trade Policy Project at the European Centre for International Political Economy.
00:15Lovely to see you again, David.
00:17So, I want to start with this September the 8th deadline.
00:22Is it a real deadline or is it a pressure tactic, do you think, that quietly gets pushed back?
00:27I think it is both.
00:29I think that Canada is deadly serious about taking retaliatory measures against the US.
00:35Political pride, Canada's reputation is regarded as being at stake here.
00:41They have every intention of following through.
00:43But at the same time, they've provided this window, which is an opportunity for maybe for calmer heads to prevail.
00:50At this point, that doesn't look likely.
00:52But what we know with President Trump is that he's quite capable of reversing course and claiming victory.
00:59So, he could do this and he has been given now this two-week period to do so.
01:05I mean, Canada's economy does lean on the US far more than the other way around.
01:10Doesn't that mean that Ottawa has a weaker hand here?
01:14Whatever Carney says about retaliation.
01:17The nature of the integration between the US and Canada means that both sides are vulnerable here.
01:24I've been seeing studies today that suggest that, yes, Canada would take an economic hit from a larger-scale trade
01:32war of the sort that now President Trump is now, saying that he can go higher in tariffs.
01:36But I've seen figures that suggest that after one year, it would reduce growth to zero, but then the Canadian
01:43economy would recover after that.
01:47So, Canadian exports do predominantly go to the US, but the economy is not completely dependent on the US.
01:56And at the same time, the US has dependencies on Canada, for example, for energy imports.
02:02So, if this was to get nastier, then you could actually see both sides suffering economically.
02:09We've talked a little bit with our correspondent about the market's reaction being a little bit flat so far except
02:15for autos.
02:15And I'm wondering if you think that the shock has already been priced in.
02:19You know, because American companies have had years to prepare for this.
02:23You know, are they actually ready or is this about to hit supply chains like a sledgehammer?
02:29No, I think it's the nature of these particular tariffs on which are being increased.
02:36It's only covering 20 billion of imports into the US, and it would only be the same amount of US
02:44imports into Canada.
02:45And at this stage, that wouldn't affect the crucial supply chain dependencies, for example, in the automotive sector, or at
02:53least not primarily.
02:54This is more about final products, summer engineering, but also things like hockey sticks.
03:01So, it's as yet maybe not so serious.
03:04Now, if this gets to the point where those supply chains are affected, where pharmaceuticals, car trade is affected, then
03:13I would expect a much bigger impact from the US stock market.
03:17Well, you know, Carney says he's talking to other people.
03:20You know, if this standoff continues, drags on, who else moves in to fill the gap?
03:26Is this Canada's moment to strike new trade deals elsewhere?
03:30And if so, with whom?
03:32Canada has already been talking with the EU, though that they already have a pretty good trade deal with the
03:40EU.
03:40It's been having conversations with China as well.
03:44It's been trying to work on enhancing other trade arrangements.
03:49So, Canada is already in that diversification place, and it will continue, I think, to work in that way.
03:56They can't, though, ultimately replace the US.
03:59And there is going to be some calculation that at some point, under Trump probably, but even if it's a
04:05successor, the US will at some point take a more traditional, a more reasonable approach, and will not be imposing
04:13these tariffs.
04:14So, that is Canada's long-term bet here, is this is not something that is likely to stay over time.
04:21This is a short-term problem.
04:22It may become a medium-term problem, but no other US administration is likely to behave in quite the same
04:28way towards them.
04:30David Hennig, thank you very much indeed.
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