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Mark Carney Owes Howard Lutnick a Debt of Gratitude
The New York Times reported this week that Canada and the United States had agreed on the broad outlines of a trade deal by August 18.
According to the NYT story – the most detailed behind the scenes look to date — Washington would have reduced – but not eliminated – tariffs on Canadian steel, aluminum and automobiles while dropping implementation of other tariffs slated to come into effect on August 19.
For its part, Ottawa was prepared to withdraw remaining countertariffs, encourage provinces to restore American alcohol to their shelves, make administrative adjustments to dairy import quotas and even put Keystone XL back on the table.
Chrystia Freeland had already warned about the risks of being too conciliatory with the United States.
The former deputy prime minister, who led Canada’s negotiations of CUSMA during Trump’s first term, warned that accepting permanent U.S. tariffs despite the existence of a continental free-trade agreement would cross a line no previous Canadian government had accepted.
Then Lutnick entered the picture. U.S. demands escalated. Washington sought concessions touching Canada’s freedom to conduct its own trade policy and set its cultural policies, and refused to extend tariff relief to medium- and heavy-duty trucks.
Carney walked away. And he was right to do so.
But the demands that finally killed the deal do not make the agreement Canada was previously prepared to accept any better.
Crossing the Rubicon
Freeland’s warning matters because it goes to the core of Canada’s economic relationship with the United States.
For four decades, Liberal and Conservative governments alike pursued the same broad objective: constrain overwhelming American economic power through enforceable rules while securing progressively freer and more predictable access to the continental market.
The 1989 Free Trade Agreement, NAFTA and CUSMA all moved in that direction.
Based on publicly available information, Carney seemed prepared to move the other way.
The emerging agreement would have established that Canadian goods could remain permanently subject to U.S. tariffs, provided Washington reduced them to levels Ottawa considered tolerable.
The sequencing that seems to have been contemplated at the start of these negotiations makes this even more troubling. After the talks collapsed, U.S. Trade Representative Jamieson Greer said the tariff agreement was supposed to lead to the “announcement of formal negotiations” over CUSMA.
Think about that.
Canada was preparing to enter negotiations over the future of continental free trade after negotiating several major disputes bilaterally, giving up bargaining leverage and accepting a tariff baseline worse than the market access CUSMA was supposed to guarantee.
A Modern-Day Salome
But how did we get to the banks of the Rubicon? After all, Mark Carney was elected in large measure to stand up to an intransigent American president.
Instead of going in the corners elbows up the prime minister spent much of his first year cleaning the ice for the White House.
First much of Canada’s retaliatory tariff regime was removed. Then came the Oval Office meeting where Carney called Trump “a transformative leader”. The Digital Services Tax disappeared. Then Ottawa accommodated Washington on the Gordie Howe International Bridge. And then Keystone XL was put back on the table.
Like a modern-day Salome, since his election, Carney removed one veil after another, convinced that each accommodation brought the elusive deal closer while leaving him in control of the dance.
But concessions change the power relations.
A bargaining chip surrendered today does not reappear tomorrow. And what Washington obtains under threat can quickly become the starting point for its next demand.
After more than a year of this strategy, what exactly has Canada gained?
Back to Square One
Canada now finds itself remarkably close to where Carney started: the Trudeau government’s elbows-up posture and dollar-for-dollar tariff retaliation.
Except Canada returns there after removing some of its countertariffs, making a series of accommodations and signalling its willingness to accept substantial permanent U.S. tariffs.
We are back to square one, but with fewer cards in our hand and considerably more uncertainty about the future of continental trade.
Carney says America has changed and that his government understood the new reality sooner than others.
Perhaps.
But what did that insight buy us?
After more than a year of short-term accommodations aimed at securing a workable relationship with Washington, Canada is once again facing a trade war – with the much more consequential CUSMA negotiations still ahead.
Before the Next Round
Lutnick, like the president he serves, ultimately wanted too much.
His eleventh-hour intervention blew up an agreement Carney appeared ready to present to Canadians as the product of hard-headed realism.
It may also have saved Carney from crossing the Rubicon Freeland had identified.
Carney has explained at length why he ultimately said no.
He now needs to tell Canadians what his government had already said yes to.
This is not about relitigating a failed negotiation. It is about establishing Canada’s starting position for the next one. Concessions made – or signalled – under threat do not disappear when talks collapse.
Washington already knows how far Ottawa was prepared to go.
One in six Canadians who voted Liberal in last year’s federal election now say they would vote NDP. That’s according to an Angus Reid survey released last week.
At first blush, it might look like the start of a comeback for a party reduced to just seven seats and 6.3 per cent of the popular vote in the last election.
It isn’t. At least not yet.
The question now is whether NDP leader Avi Lewis understands what those numbers mean for his party and its political strategy.
In his first major interview after becoming leader last March, Lewis argued that the NDP now has “wide-open political space” to advance “a really populist left agenda.” The Angus Reid poll suggests he’s looking for votes in all the wrong places.
The wide-open political space isn’t on the democratic left. It’s immediately to his right.
That’s because Mark Carney didn’t make the Liberal tent bigger. He picked it up, stakes and all, and moved it to the right.
Carney’s Liberals now occupy much of the political ground that once belonged to moderate conservatives.
The more the Liberal party occupies traditional centre-right terrain, the more it crowds Pierre Poilievre and the Conservative Party into Maple MAGA territory.
And as long as progressive Liberal voters continue to see Poilievre as the only realistic alternative, most will hold their nose and park their support behind Carney.
But Carney’s strategy has also created a constituency of Liberal voters who no longer feel entirely at home in the party they supported for years.
That is Avi Lewis’s opportunity.
The Angus Reid survey points to climate policy as the immediate catalyst. That’s hardly surprising after another summer dominated by catastrophic wildfires and growing unease over the government’s retreat from signature climate commitments.
But climate is only the entry point. The larger question is whether progressive Liberals still recognize the direction of a party that has repositioned itself across a much broader range of issues.
Nor is the opportunity confined to defining issues such as climate change. Lewis also needs the political agility to respond to the smaller, more transactional decisions that rarely dominate election campaigns but signal a government’s true colours.
Conservatives attacked Carney for negotiating a bad deal with Washington. They focused on the economics.
The real issue for many progressive Canadians was about living up to the Elbows Up slogan.
The message to them was that when Donald Trump applies enough pressure, the Liberal government folds.
That is an argument the Conservatives are poorly positioned to make because of their own complicated relationship with Trump.
The NDP isn’t.
Lewis could argue that the real issue is not the value of the deal but the effect of repeatedly accommodating an American administration that has made bullying Canada part of its political playbook.
That is a message capable of reaching well beyond the NDP’s traditional base and appeal to progressive Liberals.
For decades, the NDP tried to influence Liberal governments by pulling them leftward and measuring success by the number of New Democratic ideas they adopted.
It was a permanent opposition strategy.
If Lewis truly wants to rebuild the NDP, he has to think less like the leader of a permanent opposition party and more like someone assembling the first pieces of a governing coalition.
That coalition won’t be built exclusively from traditional New Democrats. The Angus Reid numbers suggest that process may have started already.
If one in six Liberal voters switched, the NDP’s support would climb from 6.3 per cent to roughly 13.6 per cent.
When 338Canada projected the NDP at almost exactly that level during the 2019 election campaign, it projected the party would win roughly a dozen seats — that’s official party status.
And it’s before the NDP has made any deliberate effort to attract progressive Liberals.
But political opportunities rarely last.
The Liberal Party’s greatest strength has never been ideological consistency. It has been its ability to redefine the political centre before its opponents do.
Lewis now has an opportunity to respond in kind. Not by abandoning New Democratic values but by giving voice to compatible centrist preoccupations.
To paraphrase Mark Carney, Avi Lewis and the NDP need to see the country as it is, not as they wish it was.
