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Mark Carney Owes Howard Lutnick a Debt of Gratitude

Mark Carney Owes Howard Lutnick a Debt of Gratitude

Lutnick may have saved Carney from himself.

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.

“That’s a real Rubicon that it looks like will be crossed,” she told Bloomberg Television.

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.

Canada must now prepare for the larger battle over CUSMA. Before its negotiators return to the table, Canadians deserve a full accounting of what Ottawa had already been prepared to concede. Pierre Poilievre has also called on the government to disclose those concessions. He is right to do so.

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.

Canadians should know too.

Governing by Variable Geometry

Governing by Variable Geometry

As the first anniversary of the Carney government election approaches, one thing stands out: Mark Carney’s impact on the Canadian political landscape has been as rapid as it has been improbable.

In less than a year, Carney not only secured an unexpected electoral victory — reviving a Liberal Party many had written off after of Trudeau government — but went on to build a parliamentary majority through a series of floor crossings. Something no Canadian prime minister had done before.

Part of this success can be explained by circumstance. Donald Trump’s repeated threats against Canada triggered a powerful wave of national solidarity which shows no sign of waning.

But it doesn’t fully explain Carney’s political success.

The question the is, what is it about Carney’s approach that makes it work? And what does that tell us about the current state of our parliamentary democracy?

Carney himself offered part of the answer months ago at the World Economic Forum in Davos. There, he argued for a policy of “variable geometry” — a form of realpolitik built on constant adaptation to shifting power dynamics.

Internationally, the approach was widely praised. It helped solidify his domestic image as a pragmatic, credible, and highly competent leader. That same approach now appears to be taking hold at home.

Across multiple policy areas, a pattern has emerged. Ambitious commitments are announced, then softened, reframed, or quietly set aside as priorities shift. Early signals on climate ambition have given way to a stronger emphasis on “competitiveness.” Promised regulatory clarity on emerging technologies like artificial intelligence remains tied up in extended consultations. Positions on foreign conflicts have shifted in tone and emphasis within days as political and economic pressures evolve.

Individually, these look like tactical adjustments. Taken together, they form a pattern and reveal a deliberate approach to governing – hard-nosed, calculating and grounded not so much in principles as much as in opportunity.

Government consultation offers a good example. In some cases, it expands political space and time — extending timelines without forcing decisions. In others, it contracts — particularly when broader input might constrain executive flexibility.

The contrast with the ongoing CUSMA review is striking. During the 2017–2018 renegotiation, Canada relied on broad, continuous consultations to build a unified and well-prepared negotiating position. Today, many stakeholders describe a more centralized, less transparent process.

A year in, the pattern is clear. When speed and control matter, consultation narrows. When delay is useful, it expands. What emerges is a form of variable governance.

The Carney approach does not operate in a vacuum. It is made possible by the environment in which it unfolds. It is this environment that distinguishes Mark Carney’s domestic realpolitik from the brass tacks pragmatism of a Jean Chretien.

We now live in a political and information ecosystem where attention is fragmented and memory is short. Issues cycle rapidly. Narratives turn over quickly. New announcements displace old ones before they can be fully evaluated.

In that environment, constant repositioning is not punished. It is normalized and forgotten.

And as an economist, Carney knows voters respond rationally. Faced with information overload, they rely on shortcuts — ideology, reputation, perceived competence — to make sense of politics. Increasingly, governments are judged less on coherent policy trajectories than on general impressions.

The shift is subtle but significant, as accountability shifts from programs to perception, and from trackable commitments to reputational cues.

This is where Carney’s approach dovetails with its environment.

His political strength does not rest on the success of his decisions – it is much too soon to draw definitive conclusions on the government’s policy directions.  His success rests on the strength of a brand – foresight, competence, seriousness, control –that he has been able to fashion.

And as long as that perception holds, consistency and outcomes matter less.

A recent example illustrates the point. On February 28, Carney was among the first Western leaders to support U.S. military action against Iran. Within days, as consequences and criticism mounted, the government shifted toward a position emphasizing international law and negotiation. At the same time, it rolled out measures to mitigate the economic fallout of a conflict whose geopolitical and economic fallout were wholly predictable.

In isolation, this looks like recalibration. Seen as part of a pattern, it suggests something else: the ability to occupy successive, difficult-to-reconcile positions without bearing sustained political cost.

The issue is not simply Carney’s style; it is the absence of effective political counterweights.

When opposition parties chase the story of the day — often set by the same accelerated media cycle — they reinforce the system they should be chipping away at. What is missing is not outrage. It is organized memory.

Effective opposition in this environment requires discipline. It requires tracking commitments over time, systematically connecting statements to decisions, and showing the real-world consequences — economic, social, human — of policies.

Not through one-off political hits, but through sustained, methodical work and fresh and credible communication strategies

Because this is the real battleground.

Carney’s governing approach is not just adaptive. It is also well suited to an environment where scrutiny struggles to keep pace.

Put plainly: it takes advantage of a system under strain, where brand perception trumps reality. Nothing will change until that changes.

As long as opposition parties — especially the official opposition — confuse reaction with strategy, the playing field will continue to be tilted in favour of the government.

For the opposition parties, the task ahead is more demanding. It is to rebuild continuity, slow the cycle and make commitments traceable, outcomes intelligible and accountabilities clear.

And a democracy where power can move faster than the scrutiny applied to it is a democracy whose foundations begin to crack.