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Front Burner Transcript for July 15, 2025

Host: Jayme Poisson

JAYME POISSON: Hi everyone, I'm Jayme Poisson.

[Music: Theme]

JP: Last week, Donald Trump was busy putting his presidential letterhead to work, writing letters to over two dozen trading partners.

SOUNDCLIP

DONALD TRUMP: They literally just started going out. And I signed the letters. And it's basically telling countries that we are going to give you the privilege to shop and work in our country. And I think it's very good. And in some cases, we'll make deals.

JP: The letters came with a fresh set of threatened tariffs, all with the deadline of August 1st if the parties involved can't come to an agreement. Mexico and the European Union would get 30% on all goods. Brazil was among the highest with a 50% tariff. Canada got a letter too, threatening a 35% tariff on Canadian goods across the board starting August 1st. A Trump official later clarified that this would be on goods not covered by the Canada-U.S.-Mexico Agreement, or CUSMA. Prime Minister Mark Carney responded by saying that he would continue to defend Canadian workers and businesses in these trade negotiations. But how are these negotiations going? And what's going to happen if Canada and the U.S. can't reach a deal? To help sift through the flurry of trade news from the past week, I am joined again by Eric Miller, trade analyst and president of Rideau Potomac Strategy Group.

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JP: Eric, hi, thanks so much for coming back on the show. Great to have you.

ERIC MILLER: Thanks for having me, Jayme.

JP: And I know you're normally based in Washington, but you are in New Brunswick right now.

ERIC MILLER: I am, yes. I'm enjoying the summer, and so of course, tariffs are top of mind.

JP: Fair, fair. So the U.S. and Canada have been locked in trade negotiations. Ottawa had set a deadline of July 21st for when they were hoping to reach a trade deal with Washington, but now, of course, Trump has moved that deadline to August 1st and he has threatened 35% tariffs on Canadian goods. But of course, officials have reportedly said that they will not apply to CUSMA-compliant goods. Given that, how much of an impact could this latest threat actually have?

ERIC MILLER: So in practical terms, if you look at the status quo, goods that are not compliant with the Canada-U.S.-Mexico agreement, the main North American trade agreement, are essentially paying 25% tariffs at present. And so you're essentially looking at a 10% increase. So it is significant for companies that are not using the Canada-U.S.-Mexico agreement for whatever reason, but it's not the end of the world. Because with the vast majority of Canada-U.S. trade being exempted, then the impact will be relatively modest, but still important, particularly in certain concentrated sectors.

JP: Do we have a sense of what's not CUSMA compliant?

ERIC MILLER: Yeah. So when you, when you look at the panoply of Canada-U.S. trade, the first division that you want to make are between those that are under what one could call a special regime. So, softwood lumber, automotive, steel and aluminum. We've heard a lot about these individual sectors. We've heard about copper last week, for example.

SOUNDCLIP

DONALD TRUMP: We did aluminum 50%. Lumber just came out.

ADMINISTRATION OFFICIAL: We're entering that as copper.

DONALD TRUMP: And we did cars. Cars. And now, today we're doing copper.

REPORTER: Copper. And what would that tariff be on [unclear]?

DONALD TRUMP: Uh, I believe the tariff on copper, we're going to make it 50%.

ADMINISTRATION OFFICIAL: 50%.

ERIC MILLER: So these are using an authority under U.S. law called Section 232. Very solid legally, going back to the 1960s. And then you have the other tariffs which are under the International Economic Emergency Act, and essentially that covers everything else. You saw when the trade war began that only about 40% of Canadian exports to the United States use the Canada-U.S.-Mexico Agreement. That number has surged. And so the best reporting that we have is that you're looking at upwards of 80 or even 90% of Canadian exports which are using the agreement. Because they didn't use the agreement before because there was-- the compliance process is more complicated and there are bigger risks if you get the paperwork wrong and you could just use the World Trade Organization standards. So Donald Trump took away that option. So he said the only way to get into the United States without paying a 25% duty is you have to use the agreement. So companies have said, yep, we're going to use the agreement. And those that haven't been using the agreement are madly setting up compliance systems and making sure their paperwork is in order so they don't get charged the 25%.

JP: So given that some 80% of our exports are now using CUSMA, right, and are exempt from these tariffs, what has the real-world or the material impact been of these tariffs on our economy?

ERIC MILLER: So what is potentially worrisome is not the present. I mean, there's certainly, to be clear, there are Canadian companies out there that are using certain inputs from Asia or from Europe. But that doesn't allow them to get into the U.S. market duty-free because they don't meet the, the rules of origin, which are the very technical rules in the agreement which decide who gets benefit and who doesn't get benefit. And so there are companies that make products that, for whatever reason, they just simply can't reach the required thresholds within the rules in order to be CUSMA qualifying. So there are lots of people who work for companies who are exporting products in that situation. And so for them, the real-world impact is very, very significant. But in the aggregate, the impact is relatively modest. Because compared to the status quo, you're looking at essentially a 10% increase, which is not insignificant, but it's not the end of the world. What does get worrisome though, is that the CUSMA exemption is something that Donald Trump has decided to grant. And one of the things we know about Donald Trump, is what Donald Trump gives, Donald Trump can take away.

SOUNDCLIP

DONALD TRUMP: And we were taken advantage of on military. We protect a country and we got nothing for protecting. We'd spend billions of dollars to protect countries. I don't want to go into the countries, but pretty obvious which ones. And they're friendly, or some of them aren't that friendly. I mean, some of them were protecting countries that don't even like us. The whole thing is crazy. But um, if they don't like us, we'll, we'll let them know very quickly.

ERIC MILLER: And so you're looking at the situation where the United States has decided, for a variety of reasons, that goods that qualify under CUSMA and declare as such at time of entry into the U.S. can get this exemption. But he can also decide, if he wants to ratchet up pressure on Canada, to say, we're not going to give that exemption anymore. In addition, in the fall, you have a review process that's beginning for the CUSMA. So when the agreement was put into force, it was agreed that there would be a review six years in. So on Canada Day, 2026, is when the review is required to be completed. And so if, for whatever reason, there is no agreement to renew the deal, or if the United States decides, you know, we just don't wanna do this anymore, and we don't really care about the very technical provisions on winding the agreement, we're just gonna walk away, then all of a sudden that CUSMA exemption disappears and the impact on the Canadian economy becomes potentially catastrophic.

JP: Gotcha. Okay. And just briefly, on the sectors where there are these specific tariffs, steel and aluminum, Trump has now announced, as you mentioned, this 50% tariff on copper last week, set to start August 1st. The U.S. was the largest importer of Canadian copper last year. This is about half of our total copper export value. Like what are the impacts in these sectors, or expected impacts in the sectors?

ERIC MILLER: The impacts are massive, because essentially you're taking a commodity which is already at reasonably high prices. So, nobody I know in the copper business is unhappy right now, because copper is used in everything electrical. So if you're setting up AI data centres, if you are producing electric vehicles, if you're electrifying some other industrial function, all of that requires massive amounts of copper. So on their own, copper prices have gone to very high levels. And then if you're a Canadian exporter, you've got to add 50% on top of that. You also will see, for example, Chile, which is the largest copper producer globally. They will also face a 50% tariff going into the United States. And a big push that the Trump administration has is to try to get a major mine proposal for a place called Resolution Copper in Arizona into-- over the line and into production. So if that happens, Resolution would produce an estimated 25% of global copper output. And so, Donald Trump sees not only raising the cost of everything, but also setting in place the market conditions on getting a major new U.S. copper mine into production. And in addition to the tariff front, they're also working diligently to try to work through the regulatory process to allow that to happen. So there is a U.S. competitor or a competitive project that he specifically has in mind to take up the slack. But of course, if you're British Columbia, which is Canada's largest copper producing province, this is something that is potentially very worrisome. And that production will have to be reoriented to other sources.

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JP: Canada was planning to double its retaliatory tariffs on U.S. steel and aluminum from 25% to 50% if a deal wasn't reached by July 21st. That's not the case anymore, but still, the prime minister and other officials have said they'll continue to try and protect Canadian workers and fight these new measures. How effective have our counter tariffs been so far?

ERIC MILLER: I think they've been reasonably effective. What you saw in the early days, both on-- or in early February, when the tariffs first came into effect and then were postponed, and then in March, is that Canada's willingness to put tariffs on $30 billion of U.S. exports certainly was noticed and certainly was supported by the Canadian public. It certainly enraged the White House. But the White House was asking for something that was politically unrealistic, which is, we get to put tariffs on you and you do nothing to us in return.

SOUNDCLIP

UNIDENTIFIED SPEAKER: So let's take a look at what he's saying, particularly in response to Canada's response in terms of the retaliatory tariffs that Canada plans to impose. Trump writing: "Please explain to Governor Trudeau, of Canada, that when he puts on a Retaliatory Tariff on the U.S., our Reciprocal Tariff will immediately increase by a like amount."

ERIC MILLER: And so, where Prime Minister Carney is now, is he's saying we put tariffs, counter tariffs in place because we're trying to affect change from the United States. So if we are still negotiating a bigger bilateral trade agreement, then we're not going to put those tariffs into effect because that will only inflame tensions. So those tariffs are in the background, they're ready to go in the event that the talks fall apart. But for now, he's driving toward a bigger deal, which will send signals to investors around the world and to other companies looking to set up facilities in Canada, that Canada is a safe bet for selling not only to the Canadian market, but also to the North American-wide market. And so his focus is, how do we get a deal as quickly as possible so that we can begin the process of attracting investment, all well, at the same time, sending Minister Anand to Asia and others to Europe to try to work out arrangements to help diversify Canada's trade. And so, that's the agenda. And why put retaliatory tariffs in place if you're just throwing a punch, but you're not having a bigger strategy behind it.

JP: Well, tell me a little bit about how you're thinking about Canada's strategy when it comes to negotiating. Right now, just a few weeks ago, we saw Prime Minister Carney drop the Digital Services Tax in order to get Trump back to the negotiating table after talks fell apart. His energy minister, Tim Hodgson, says Canada still holds many important cards.

SOUNDCLIP

TIM HODGSON: However, despite what the president may say, Canada has many important cards in these negotiations. And many of those cards, the most important ones, are energy and natural resources. At the G7, it was abundantly clear, Canada has the energy and minerals the world wants.

JP: What do you make of how the negotiations have been going, and um, from your view, what are the cards?

ERIC MILLER: So the negotiations have been going, I guess you could say, reasonably okay. There's a bigger question about what this deal is supposed to do. So first of all, how does it relate to the bigger Canada, U.S., Mexico, North American trade agreement that exists? And so there are some within the Trump administration that want to see a simple bilateral trade agreement -- Canada, U.S. That's something that Premier Ford, for example, in Ontario has advocated for. And so we don't know specifically how this will sit in relation to the other trade agreement that exists, and that's something that's crucially important. When it comes to the talks themselves, I think Prime Minister Carney was put in a very difficult position on the Digital Services Tax. This was a Chrystia Freeland initiative, and certainly supported by prime minister Justin Trudeau. The challenge that he faced was the business community almost universally opposed this. So the Canadian Chamber of Commerce, Business Council of Canada and others, they said, look, this is bad policy. This is not something that we want to be doing. So he had a policy for which he did not have anywhere close to universal backing. And Donald Trump said, we're not negotiating any further with you unless you get rid of it. It was a shrewd move on his part. But that could lead Donald Trump to overplay his hand. And so what are the cards that Canada has? First and foremost, you look at defence, because Donald Trump has framed this agreement as a trade and security framework. So the United States desperately needs Canada's buy-in for its missile defence scheme. And you cannot have an effective missile defence, like the kinds you see in Israel, for example, without Canada's participation because in the age of hypersonic weapons, you need what sometimes gets called 'defence in depth.' So in other words, you need time to be able to react before those missiles hit the United States. So that's something which the U.S. will need Canada's support for. In addition, there's also the questions around what happens to all of that defence spending we've been hearing about. Are you going to see purchases of weapons systems from Raytheon and Lockheed Martin, or are you going to see purchases from large European integrators or Canadian integrators. And so there are questions around who do you buy from and what does that look like. On what we'd see more classically as trade proper, you also have things such as critical minerals, energy. Now, we've seen very much the tensions within the federation between Danielle Smith and the federal government, but Canada still does hold a lot of cards on oil exports. Doug Ford still does hold a lot of cards on electricity exports. You also could see blatant discrimination against U.S. firms. So, for example, U.S. financial institutions. They're chartered to schedule three institutions under Canadian banking law. But you could say, well, maybe, you know, U.S. bank X or Y, you can't do these functions in Canada anymore. And so there's a lot of things that Canada can do to cost the U.S. market share, to cost them money. One of the things that I think Canadians should take heart in, is it doesn't-- I don't mean this as an invitation for hubris, but Canada has for its whole existence negotiated very good trade agreements in asymmetrical situations. So it's always a smaller partner, and it's always found a way to negotiate agreements which secure Canada's market position.

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JP: I realize that I'm asking you to do a bit of speculating here, and there are, you know, many unknowns, but at the same time, I would be very interested to hear your answer because you're super plugged in. You talk to a lot of people around this. Where do you think we are going to be on August 1st?

ERIC MILLER: So you have the bilateral piece, which is... I, I think that you could see the outlines of a framework by August 1st. And so there are kind of four categories of countries that are dealing with the United States right now. First of all are the North American countries, but especially Canada. So, those that are part of the CUSMA agreement that are looking at new frameworks. Then you have those countries like the European Union and Japan that are major global traders that have leverage vis-a-vis the United States and are trying to work out an agreement. How that's going is, it remains to be seen, but by all indications, it doesn't look particularly promising.

SOUNDCLIP

DONALD TRUMP: We've dealt with Japan. I'm not sure if we're going to make a deal. I doubt it with Japan. They're very tough. You have to understand, they're very spoiled. I love Japan. As an example, with Japan, they won't take rice, and yet they desperately need rice. You know that. They won't take other products that we have. But think of it, they need rice so badly but they won't take rice. I think that was an easy one.

ERIC MILLER: Then you have the mid to smaller size countries that are trying to get agreements to secure their position. And then of course, fourth and finally is China, which is sui generis in and of itself. The Trump administration will want to get an agreement with Canada because that will be a signal that it can do big things under this trade framework. To date, they've got agreements with the U.K. and with Vietnam. And so those are important and those will feature very broadly. But in terms of the big marquee deals, Donald Trump has not fully landed those yet. And the Canadian talks have been progressing very vigorously. And so I think there will be a desire on the part of the Trump administration to prioritize getting something over the line that can be pointed to by August 1st.

JP: What are you most worried about, like in terms of what that deal could look like?

ERIC MILLER: So what I'm most worried about, first and foremost, is something that would look like permanent tariffs. And so one of the biggest sticking points in the negotiations is Canada is holding out for long-term duty-free status. So, much like they have now under this CUSMA exemption that we've talked about that would go to 35% on August 1st, Canada is really pushing to ensure that they have long-term duty-free access. Because if that is something that Canada succeeds at getting, it will be almost alone in the world among countries having duty-free status into the U.S. Because the Trump administration has made very, very clear that everybody else is going to get at least a 10% tariff, that was announced on April 2nd on the so-called Liberation Day tariff, where they had the baseline at 10% and then an over tariff depending on the country. Canada wants to avoid having a tariff. And if it succeeds at that, then it will be in a very good position competitively vis-a-vis almost everybody else. So that's going to be the number one headline issue. In addition, there will be other questions around supply management. Now, there'll be different listeners who have different views about the efficacy of supply management and whether it's worth all of the time and effort. But certainly, if you're a large agricultural producer outside of the dairy sector, what you're very worried about is that you'll lose access to the U.S. market for your beef, for your canola, for your fruit and vegetables, because Canada is maintaining its system of supply management. And that's a bigger longer-term discussion. But there may well be situations of asymmetry where the U.S. simply says, we're going to make you pay a very large cost for the purposes of maintaining this regime which benefits a relatively few number of people. And that's not to say that there aren't good policy arguments on either side, but certainly if you're not in the dairy sector, you're really terrified that dairy is going to sink the overall deal and is going to cost the wider Canadian economy very, very significantly.

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JP: Before we go, Eric, you know, putting Canada aside for a moment and just looking at all of these letters that the president sent out over the last week. From like a global perspective, you know, what's your sense of the impact that all of these tariffs could have here? You know, I know Jamie Dimon, chief executive of JPMorgan, recently warned that he thinks the markets are growing kind of complacent around tariff updates.

ERIC MILLER: Yeah. I mean, ultimately, the bigger impact will be a less prosperous U.S. And those who study the Canadian economy generally will tell you that a prosperous U.S. means Canada does pretty well, given the volume of trade from Canada going into the U.S. It will also mean that the U.S. will be much, much less interconnected with the rest of the world. What is going to be really I think fascinating and nerve-racking going into the late summer and the fall is if the European Union, if Japan and Canada and others do not have an agreement, at what point do they start coordinating their responses. Because if the U.S. does put 30% tariffs on the European Union, Europe is already prepped and is ready to go with their retaliation package. But then it becomes a situation of who's going to compel who to give way. And so the markets then begin to see investment opportunities in different parts of the world falling apart. At the same time, you have China becoming less interconnected with the U.S. And so, if Donald Trump is attempting an enormously heavy lift here, but what he could end up with is a U.S. that's very, very isolated. But in his view, he's, he's kind of like the, the guy on the World Poker Tour with the hoodie and the sunglasses pushing all his chips into the middle of the table. And he hopes he's going to win big by convincing everyone to come along with him. But if he doesn't win big, then you end up with tariffs all over the world. And it means for trade dependent countries like Canada, it means a harder path. Because it won't be long until surpluses of goods from certain countries need to find homes in other countries, and then you have retaliation. And so what this means is we get a bit of a tragedy of the commons, and everybody ends up poor and less interconnected and you have a lot more friction in the world economy.

JP: Okay. Eric Miller, thank you so much for this. Really, really appreciate it.

ERIC MILLER: My pleasure.

[Music: Theme]

JP: All right, that is all for today. I'm Jayme Poisson. Thanks so much for listening. Talk to you tomorrow.

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What Trump's new tariff threats could mean for Canada - Transcript

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