Analysis-Carney, boosted by majority government in Canada, aims for US trade deal

By Maria Cheng

OTTAWA, April 22 (Reuters) – After securing a majority government in Canada last week, Prime Minister Mark Carney faces his biggest challenge: redefining trade with the U.S. under President Donald Trump. 

Canada, the U.S. and Mexico must agree by July 1 to keep the deal as is, insulating most Canadian goods from U.S. tariffs, renegotiate it, or hold annual reviews until its 2036 expiry. Carney, under U.S. pressure for concessions, will push for a revised deal this year that addresses tariffs against Canadian steel, aluminum and autos.

Ahead of three special elections swept by Carney’s Liberals last week, the PM said he needed a parliamentary majority to deal more effectively with Trump’s trade war. After a year in office, political insiders and analysts say Carney must deliver on his promise to transform the Canadian economy and negotiate with Trump. While Carney has earned plaudits globally for his call to middle powers to band together against global hegemons and signed new global trade deals, Canadians now expect him to address the U.S. tariffs, along with domestic concerns, they said.  

“Dealing with Trump and negotiating a trade deal with the U.S. is what Canadians hired Mark Carney to do,” said Dan Arnold, a former senior staffer in former Prime Minister Justin Trudeau’s government. “He now has to rise to the moment and show us the fruits of these deals he’s been signing.”  

Polling this month by Nanos Research showed Canadians’ top concerns were the economy and inflation, followed by the country’s relationship with the U.S. 

‘WEAKNESSES WE MUST CORRECT’

As Trump repeatedly threatened to annex Canada as the 51st state, Carney vowed to double Canadian exports to other markets in the next decade and signed more than 20 economic and security deals in the last year, including with China. Ottawa is negotiating an agreement with India.   But Canada still sends nearly 70% of its exports to the U.S. 

In a video message on Sunday, Carney said Canada’s close U.S. ties had become “weaknesses that we must correct.” He said Canadians should look to historical figures such as Chief Tecumseh, who united Indigenous nations across the Great Lakes to resist U.S. expansion and protect their lands during the War of 1812.

“I will never sugarcoat our challenges,” Carney said. He said the U.S. had fundamentally changed its approach to trade and raised tariffs to levels last seen during the Great Depression. 

The U.S. trade representative held meetings in Mexico City this week, but the U.S. and Canada have not held formal talks over the renewal of the North American free trade agreement. 

“It’s time for the prime minister to take the gloves off and start negotiating in the trenches,” said Fen Hampson, professor of international affairs at Ottawa’s Carleton University. He said Carney’s majority would allow him to potentially make unpopular decisions that might be needed to get a deal with the U.S., such as granting the U.S. access to Canada’s protected dairy market or convincing provincial leaders to restock American alcohol.

“If he had a minority, the prime minister might not be able to absorb these concessions,” he said. “But he has the political capital to do it and he can also use his influence to address provincial premiers who have been obstacles,” he said.  

Dominic LeBlanc, the minister in charge of U.S. trade, told a parliamentary committee last week that Canada hopes to clinch a larger agreement on sector tariffs and the North American deal.

Spokespeople for Carney’s office and LeBlanc did not respond to requests for comment. The government has previously said Canada’s dairy supply management system would not be up for negotiation.  

The White House did not respond to a request for comment.

MAJORITY GIVES CARNEY NEGOTIATING ROOM

Diamond Isinger, who focused on Canada-U.S. relations for the Trudeau government, said Carney’s majority should allow him to ride out the uncertainty ahead of the November U.S. midterms, with no Canadian election expected until 2029.

“The prime minister now has time to get to a better CUSMA deal without the fear of a snap election,” she said, using the Canadian term for the trade deal.

Conservative opposition leader Pierre Poilievre, who trails Carney by more than 20 points as Canadians’ preferred leader, said on Tuesday the prime minister “refuses to stand up against these wrong-headed American tariffs,” and said official talks between the two countries have not been held in five months. 

Asa McKercher, a professor of public policy and governance at St. Francis Xavier University in Nova Scotia, said Carney needs to focus on decisions such as the imminent purchase of Canada’s next fleet of fighter jets and projects meant to jumpstart infrastructure investment he announced last year.

“He’s done the world circuit and made some great speeches, but now he has to actually focus on being a domestic politician,” he said.

Carney also needs to do more to address the rising cost of living, said Drew Fagan, a visiting professor at Yale University. Among Group of Seven advanced economies, Canada has the second-highest unemployment rate and the highest rate of food inflation, government data show. 

“This is a country that’s fundamentally getting poorer for many people,” Fagan said. “Given what’s happened in the world in the last 18 months, Carney is not being blamed for the price of cheese and juice. Canadians have put up with a lot but at some point, they will hold somebody accountable.”

(Reporting by Maria Cheng in Ottawa; Additional reporting by Promit Mukherjee; Editing by Caroline Stauffer and Rod Nickel)