Only Two Countries Said No — Carney Refused To Fold

Hinzugefügt: 2026-05-31

[00:00:00]71.7% Hold on to that number because by the end of this video it's going to mean a lot more than it does right now. This week the top trade official in the United States stood in front of the Council on Foreign Relations and basically told the world that tariffs on Canada are not going anywhere. Not after the July review, not as a bargaining chip. They stay. And the line that's been ringing in my ears since I heard it was this. He said most countries have begrudgingly accepted Trump's tariffs and kept negotiating. But Canada's approach in his words has been different. I want to be up front with you about where I sit on this because I'd rather you know my angle than have me hide it. I think Canada's refusal to just roll over here is the right call and I think the US tariff strategy is on shakier economic ground than the tough talk suggests. You don't have to agree with me, but I'm going to show you the numbers and you can decide for yourself.

[00:00:53]So let's start with what was actually said. The US trade representative, that's the cabinet level official who runs American trade policy, said tariffs will remain on both Canada and Mexico even though both countries are partners in the Continental Free Trade Deal CUSMA. He said negotiations on some sectors like autos will be hard and others less so. And then came the phrase that everyone latched onto. When it comes to accepting these tariffs Canada is in a different spot and it's hard to see where that ends. Now here's why that matters and it's not the reason you might think. For most of modern history Canada hasn't really had the luxury of being in a different spot. When three quarters of everything you sell to the world goes to one customer, you don't get to be difficult with that customer.

[00:01:38]That's not politics, that's just math.

[00:01:40]And for decades that math defined the entire relationship. The United States knew it. Ottawa knew it. Every trade negotiation happened in the shadow of one uncomfortable fact. Canada needed the American market far more than America needed Canada's. That structural imbalance is the thing you have to understand before any of the rest of this makes sense because it's the thing that's quietly starting to shift. When one country holds that much leverage over your economy, every tariff, every frozen negotiation, every offhand comment from a podium becomes a direct hit on your bottom line. So, the real story here isn't the threat. It's why Canada suddenly feels able to absorb it.

[00:02:23]And if you live in Canada, this isn't abstract. This is the price of a new truck. This is whether the plant in your town is hiring or laying off. This is your grocery bill, your mortgage, your kids' job prospects.

[00:02:35]Trade policy sounds like a story for people in suits in Ottawa and Washington. It isn't. It lands in your kitchen. Here's the part that caught me off guard when I dug into it. You'd assume that a country being hit with tariffs on steel, aluminum, autos, and more would be in pure damage control mode. And there is real pain. I'm not going to pretend otherwise. But look at what the export data actually shows. In 2025, the share of Canadian goods exports going to the United States fell to 71.7%.

[00:03:04]That's down more than four percentage points in a single year. And according to Global Affairs Canada, it's the lowest share since the early 1980s.

[00:03:12]Meanwhile, exports to everywhere that isn't the United States jumped about 17%. Let that sit for a second. While Washington was applying pressure, Canada was quietly finding other buyers, fast.

[00:03:24]Now, I'm not going to oversell this because the full picture is more complicated and I'll get to exactly why in a moment. But first, you need to understand what those numbers represent because the headline version, Canada defies Trump, misses the actual mechanism underneath. And that mechanism is the whole story. Where we left off, the US share of Canadian exports just hit a 40-year low while non-US exports surged. So, the The question is, is this luck or is this a plan? I'd argue it's a plan. And here's where I think Carney's background actually matters, not as a talking point, but as a genuine explanation. This is a former central banker. He ran the Bank of Canada through the 2008 financial crisis and then the Bank of England through Brexit.

[00:04:09]That's not a resume that panics when someone at a podium says, "Hard to see where this ends." That's a resume built around one idea. When you're exposed to a single point of failure, you reduce the exposure before the failure happens, not after. And reducing Canada's dependence on the American market is structurally the exact same move as diversifying a risky portfolio. You don't do it because you hate the asset.

[00:04:35]You do it because concentration itself is the danger. So, watch what's happening. Ottawa has set a stated goal of doubling non-US exports over the next decade. The spring economic update reported non-US goods and services exports rose by about $33 billion in 2025 over the year before. That's not a slogan. That's money moving and it tells trading partners something important.

[00:05:00]Canada is open for business beyond North America and it's willing to put real resources behind that. Now, let me steelman the American position for a second because it's not nonsense. The US argument is that it wants to prioritize North American supply chains for national security and that if it can get good terms, it'll give the continent preferential treatment, but tariffs stay as leverage.

[00:05:23]There's a coherent logic to that. If you believe tariffs give you a permanent stick to swing in every future negotiation, keeping them makes sense.

[00:05:31]Here's where I think that logic breaks down.

[00:05:34]And I want to be careful because this is the part people get wrong constantly.

[00:05:38]Tariffs are not paid by the country they're aimed at. When the United States puts a tariff on Canadian steel, Canada does not write a check to Washington.

[00:05:45]The American company that imports that steel pays it. That's how a tariff works. It's a tax collected at the US border, paid by the US importer. So, when you stack duties on Canadian steel, aluminum, autos, and cabinetry, which are exactly the sectors getting hit, you're raising the input costs for American manufacturers who build cars, construct buildings, and make appliances.

[00:06:09]Those costs flow downstream into the price of the finished product, which means a meaningful share of the bill lands on American consumers and American factories. The tariff is designed to look like pressure on Canada.

[00:06:22]Mechanically, a big chunk of it is pressure on Americans. So, the real question isn't whether tariffs hurt Canada. Of course, they create friction.

[00:06:30]That 5.8% drop in goods exports to the US in 2025 is real, and the steel and auto sectors are feeling it. The real question is, who's absorbing more pain over time? The exporter who's actively finding new customers, or the importing economy that's quietly paying higher prices for the same goods?

[00:06:50]When the US trade rep says, "Hard to see where that ends," I think he may be describing his own side's problem more than Canada's. But, here's where it gets complicated, and I promised you I wouldn't oversell the Canadian story, so let me keep that promise. Okay, now forget the clean version of this story for a minute, because this is where the honest analysis lives, and it's not all good news for Ottawa. A new report from the Canadian Chamber of Commerce came out this week, and it complicates the triumphant narrative. Yes, non-US exports rose about 17% countrywide, but dig in and that growth is wildly uneven.

[00:07:24]A small handful of cities did almost all the heavy lifting. Calgary and Ottawa-Gatineau each saw non-US exports jump around 64%. Toronto about 33%.

[00:07:35]Most of the country lagged well behind, and here's the detail that stopped me.

[00:07:40]Most of that growth came from companies that were already exporting, simply selling more abroad, not from new businesses breaking into global markets.

[00:07:48]The number of Canadian firms selling to non-US markets grew by just 6% and roughly 90% of Canadian businesses that don't export still describe themselves as purely local. The Chamber's own warning was blunt. Canadian firms may be adapting cautiously rather than genuinely repositioning. And they may be underinvesting in diversification at exactly the moment it matters most.

[00:08:12]I'm including this because if I left it out, I'd be doing the thing I told you I wouldn't do.

[00:08:18]The diversification story is real, but it's fragile. It's concentrated in a few places, driven by a few players, and nowhere near deep enough yet to replace the American market. Anyone selling you Canada has escaped its dependence on the US is selling you a fantasy.

[00:08:34]What's actually happening is the early, uneven, incomplete beginning of a long shift. And to understand whether that shift can actually work, it helps to look at who's tried it before.

[00:08:45]Diversifying away from an overwhelming trade dependence is not a new idea.

[00:08:49]Plenty of economies have attempted to reduce reliance on a single dominant partner, and the lesson for most of them is remarkably consistent. It's slow, it's expensive, and it only works if you start building the alternatives before the crisis peaks, not in the middle of it. Trade relationships aren't switches you flip. They're infrastructure.

[00:09:09]Shipping routes, regulatory approvals, distribution networks, business relationships, trust built over years.

[00:09:16]You can announce a pivot to Europe or Asia in an afternoon.

[00:09:20]Actually rerouting an economy takes a decade. So, the question for Canada isn't whether the strategy is correct. I think it clearly is.

[00:09:29]The question is whether the country has the patience and the investment to follow through when the early numbers are this uneven and the political pressure to just a deal is this high.

[00:09:39]Now, in fairness to the American side, cuz I want you to hear this clearly, Washington isn't wrong that it holds enormous leverage right now. 71% is still 71%. The US remains by an enormous margin Canada's most important customer and nothing in the next year changes that. If the goal of the tariff strategy was to remind Canada of that dependence, it's working.

[00:10:04]The American negotiating position going into the July review is genuinely strong and anyone telling you Carney holds the better hand right now is letting hope outrun the math. But here's the thing that strong position can't account for and it's the reason I started this whole video with a single number. 71.7% remember? The lowest share of exports to the United States since the early 1980s.

[00:10:26]I told you to hold on to it and here's why. Leverage isn't a fixed quantity, it's a ratio. American leverage over Canada has always rested on that dependence number being high, historically around three quarters or more. Every point that number falls, the leverage falls with it. Not dramatically, not overnight, but directionally and permanently. The US trade rep can say tariffs are here to stay and he's probably right that they are.

[00:10:52]But the value of those tariffs as a weapon depends entirely on Canada having nowhere else to go. And the entire thrust of Canadian policy right now, the diversification targets, the 33 billion in new non-US trade, the central banker in chief treating concentration as the real risk, is aimed at one thing, making nowhere else to go slowly stop being true. That's why Grears comment is so revealing. When he says other countries begrudgingly accepted the tariffs, but Canada's approach has been different, he's not describing stubbornness. He's describing a country that has calculated it can afford to hold a line others couldn't.

[00:11:30]Whether that calculation is correct is the open question of the next decade.

[00:11:34]But the fact that Canada is even able to make it, that's the genuinely new thing here. So, let me bring the whole picture together honestly, both sides on the table. The American position today is strong. The dependence is still enormous. The tariff pain in steel and autos is real, and the diversification underway is uneven, shallow, and concentrated in a few lucky cities. Anyone who tells you Canada has won has not read the data. But the direction of travel is unmistakable, and it runs against Washington's leverage, not with it. The tariffs raise costs inside the American economy as much as they pressure Canada. The dependence number is falling, not rising. And Canada's strategy is being run by someone whose entire career is about reducing exposure to a single point of failure. So, what happens next? Here's my honest read. The July review almost certainly doesn't produce a clean resolution. The US trade rep has already signaled Washington won't just rubber stamp a renewal, and the structure of the deal actually allows for a kind of permanent slow-motion negotiation that could drag on for years. So, expect uncertainty, not closure.

[00:12:42]In the next 6 to 12 months, watch three things: whether non-US export growth broadens beyond those few cities, whether more Canadian firms, not just the existing exporters, actually start selling abroad, and whether the auto sector, which is the hardest hit and the most integrated, gets carved out for any special treatment. Those three signals will tell you whether the diversification is becoming structural or staying superficial. Here's where I land. I think Washington is playing a strong short-term hand in a way that quietly weakens its long-term position.

[00:13:15]Tariffs feel like leverage today, but every month they push Canada to find other markets, they erode the very dependence that made them powerful in the first place. The US trade rep said it's hard to see where that ends. I gently suggest the ending is already visible in the export data. It just takes longer to arrive than a news cycle wants it to. And for us, watching this from Canada, the thing to understand is that the pain is real now, but the trajectory is bending in a direction that a decade from now might make this whole period look like the moment the relationship fundamentally changed. I've laid out my read, and I've shown you the numbers that complicate it. So, here's my honest question for you, and I genuinely want to know.

[00:13:56]Do you think Canada can actually follow through on diversification when the pressure to just cut a deal is this intense? Or does that 71% keep Ottawa at the table no matter what? Tell me where you land, because I keep going back and forth on it myself.