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Plus, special edition NP Platformed and First Reading newsletters and virtual events.Unlimited online access to National Post.National Post ePaper, an electronic replica of the print edition to view on any device, share and comment on.Daily puzzles including the New York Times Crossword.Support local journalism.Create an account or sign in to continue with your reading experience.Access articles from across Canada with one account.Share your thoughts and join the conversation in the comments.Enjoy additional articles per month.Get email updates from your favourite authors.Create an account or sign in to continue with your reading experience.Access articles from across Canada with one accountShare your thoughts and join the conversation in the commentsEnjoy additional articles per monthGet email updates from your favourite authorsSign In or Create an AccountorIt wasn’t true in 1914, but the trade war with the United States had better be resolved by the end of this year.If it isn’t, President Donald Trump has pledged to raise tariffs on Canadian autos to 50 per cent on New Year’s Day. If he follows through, it will kill the industry north of the border.The problem is, the more we learn about how Canada and the United States stumbled into this dispute, the less likely it seems that a compromise deal is even possible.Washington’s condition of a minimum 15 per cent auto tariff (down from the current 25 per cent) is something Ontario Doug Ford can’t stomach. His hostility to it means that the deal negotiators on both sides originally struck is no longer acceptable to the Canadian side.The National Post newsletter that doesn’t hold back, giving readers the unvarnished truth on media, politics and culture.By signing up, you consent to receive the above newsletter from Postmedia Network Inc.A welcome email is on its way. If you don't see it, please check your junk folder.The next issue of Right? will soon be in your inbox.We encountered an issue signing you up. Please try againThe bait-and-switch tactics used by Commerce Secretary Howard Lutnick once a deal appeared within reach gave Prime Minister Mark Carney a pretext to walk away, according to multiple sources.Lutnick and U.S. Trade Representative Jamieson Greer were doing damage limitation for the Trump administration last week, blaming Canadian negotiators for making last minute changes that sunk “the best deal possible for Canada”.The day after talks blew up, Carney told Canadians that the U.S. side would only offer the lower 15 per cent tariffs for passenger vehicles, and not for the medium- and heavy-duty trucks that Ford’s new plant in Oakville and GM’s Oshawa plant were designed to build. The change would have made those plants uneconomic over time, the prime minister said.Lutnick said the words “medium and heavy-duty trucks” were not raised in negotiations until 4 p.m. on the Friday talks broke off.Janice Charette, Canada’s chief trade negotiator, told Canadian media outlets that Lutnick was not at the table and that trucks had been part of the discussion all along.In his address to the nation on August 22, Carney also highlighted the U.S. raising language and culture issues, as well as proposing an effective veto on future trade agreements.Charette said that the Americans were asking to remove discoverability provisions that make French-language programming more prominent on streaming platforms such as Netflix.She said the topic of trade alignment came up in discussions and it was unclear whether the Americans wanted to be consulted on Canada’s future trade negotiations with third countries, wanted a sign-off or were seeking a veto.“It was clear that there was an interest on the part of the U.S. in constraining or limiting Canada’s ability to enter into future free-trade agreements for important products like primary steel,” she told CBC.Greer said that the U.S. would not have jeopardized a deal over the discoverability issue and, while the U.S. wants to align tariffs so that Canada does not become a “backdoor” for Chinese steel, there was no specific request in the text.He said the characterization of the discussion as an attack on Canadian sovereignty went far beyond the reality. He pointed out that the 2018 Canada-U.S.-Mexico trade agreement already talked about the potential termination of the deal, to be replaced by a bilateral pact, if a member signed a free-trade agreement with a non-market economy (i.e., China).What to make of it all? I think that the Americans had a deal but, as per Trump’s “art,” they kept pushing, even after it was agreed to in principle.The Netflix discoverability issue was clearly not a deal-breaker for Lutnick or Greer, but it was grasped gratefully by Carney, once he realized that Ford was not going to put American booze back on the shelves as long as there were auto tariffs. As one Canadian official told me: “We really pulled out because Ford was not on board.”The premier admitted as much in his weekend interviews when he said negotiations stopped after he told Carney that it was “a terrible deal for Canada.”The sovereignty issue on steel is also something of a red herring. Canada was, in the words of one State Department official, “deputized” in the trade war against China in 2018, when Article 32:10 was added to CUSMA and gave the Americans undue influence over future trade negotiations. Unless the Americans attempt to apply the provision to market economies like India, the damage has already been done.The question is not whether Canada should align its tariff policies with the U.S. as part of Fortress North America, but how the Americans can insist on a perimeter deal that collectively protects the continental market and still tariff Canadian steel and aluminum. But that scenario remains notional.The deal-breaker was autos. The 15 per cent tariff ends up being an effective 7.5 per cent tariff once U.S. content (typically around 50 per cent of each vehicle) is exempted. But that is roughly equal to the profit margin on a car.Even if heavy-duty trucks were included in the 15 per cent tariff, the prospect is that, over time, the industry will migrate south. The real production giants now are Toyota and Honda, which produce three-quarters of the cars made in Canada. Toyota has called Trump’s tariffs unsustainable and announced plans to double the size of its plant in San Antonio, Tex. Honda is “seriously considering” a new plant in North America— for which, read: the United States.The only way that auto manufacturing in Canada remains sustainable with a 15 per cent duty is if Canadian and Mexican content are also exempted from tariffs, which could reduce the typical effective levy to around 1.5 to three per cent.But why would Trump do that when his express goal is to reshore auto production to the United States?Ford and Carney are both enjoying substantial polling bumps after walking away from a deal. Liaison’s latest poll has Ford’s PCs up four points on the Ontario Liberals; Abacus Data has the federal Liberals up 10 points on the Conservatives, as government approval ratings have risen by four points to 56 per cent.There is satisfaction in standing up to the bully, but there is also a real cost, as the workers at RYAM’s paperboard plant in Temiscaming, Que. are finding out. The magnitude of tariffs means the plant is no longer sustainable, the company said last week, and will close, taking 425 jobs with it.The pressure is not just on Carney and the premiers. Trump is hearing from members of Congress and state governors about the impact of rising prices. The president’s hand-picked Fed chairman, Kevin Warsh, warned on Friday that inflation is running too hot and the central bank has “work to do.” Yields on 10-year Treasury Bonds rose Monday on inflation concerns to their highest level since Trump returned to the White House.All of these factors may persuade the president that a deal would be in his interests ahead of the midterm elections.But he is hardly likely to make a better offer than the one Carney was prepared to accept as “a good deal, if not perfect.”Accepting any deal will sting for Canadians, who know that auto tariffs are illegal under the terms of the CUSMA deal struck in 2018. The pain is compounded by our distaste for the triggermen: be it Trump and his renaming of Lake Ontario, or Treasury Secretary Scott Bessent and his mocking of Canada’s military on Sunday. “What are they going to do, take the two submarines in the Edmonton Mall and sic them on us?” he said on CNBC.But Ford may have to choose between risking the death of Ontario’s auto sector by 1,000 cuts or a certain end by a swift decapitation on January 1, 2027.National Post Join the Conversation This website uses cookies to personalize your content (including ads), and allows us to analyze our traffic. Read more about cookies here. By continuing to use our site, you agree to our Terms of Use and Privacy Policy.