Deal or No Deal
Cusma is dead! Long live the new world order!
Aug 16, 2025
The gyrations of Trump’s trade war remind me of the popular Howie Mandel TV show from the early 2000s (it has been reprised a few times and reruns were still running on closed circuit at my doctor’s office a few months back). Contestants had to blindly choose suitcases with various amounts of cash up to a million dollars, gradually whittling down the number of cases in the hopes of hitting the jackpot. Trump is playing a similar huckster deal maker role as the US’s trading ‘partners’ scramble for their ‘deal’.
But that’s where the similarity ends. Reality takes over.
Canada’s failure to make a deal by August 1 is not the end of the world – it heralds a new era which will probably be better in the long run. Canada is unique among contestants. No other country has quite as much at stake in terms of how much of our economy is tied to US trade. On the other hand no other country has the same opportunities. We need to find new trading partners … and fast, and every ‘deal’ that Trump makes opens up those opportunities.
In the short term we need to fill in the gaps in our supply chains so we don’t run into the same problems as we have with the US. Having items cross the border 2 or 3 times before completion won’t work when there’s an ocean to cross. Our new partners will be looking for largely finished goods.
All of the ‘deals’ that Trump has made with Japan, the UK, the European Union and all the others have been hold-your-nose interim ‘arrangements’ to bring a fleeting level of certainty to the chaos that Trump has created.
15% tariffs are not ‘a win’ – they are a benchmark – a high one which gives ample negotiating room for Canada in finding new partners. The businesses in those countries are already scrambing for better deals wherever they can get them. In many cases a 15% hike in the price of their goods will price them out of the American market. The US buyer will only keep buying if it can’t find comparable goods for less. Trump’s musing that the supplier will ‘eat’ the tariff may be true in the very short term but it’s not sustainable.
The foreign seller, too, is looking for a something that’s better than the 15% it was going to have to pay to Donald Trump. So both ends of the ‘deal’ are looking for a better price. That shouldn’t be very difficult given that the entire world is looking for the same thing.
If an overseas business is selling something that Canada needs and wants and the shipping costs are less than that 15% then Canada finds a new potential trading partner. The transition will be somewhat chaotic for awhile but Canada already has 0% free trade deals with 51 countries (15 agreements, of which several are multilateral). That includes all of Europe, much of Asia (incl Japan and Korea but not China), and most of S.America and Africa. Canada has also been working on similar free trade agreements with at least 30 more countries. So Canada is a very attractive market and a preferred rate supplier to these countries. There’s not much that we currently buy from the US that we can’t get somewhere else.
So what about the US. At this point Canada has failed to kiss the ring – and that upsets Trump – so he’s jacked up the tarriffs to 35%. Cusma saves us for the moment. (Trump can’t abrogate that ‘deal’ because it was ratified by the US Congress.) However Cusma expires on July 1 next year and it looks almost certain to me that that’s where it ends – any renewal will be at 15 or 25% with no carve-outs. Take it or leave it. The negotiations start this Fall.
I think that Carney has figured this out. Our counter tariffs did not get us a deal and won’t – and if they are hurting Canadian businesses then we should get rid of them – maybe Trump will give us some brownie points.
Inflation pain in the US is what will move the needle and that is just starting to bite. It will bite much deeper as the US gradually finds that the world is leaving them behind as countries find new trading partners. The irony is that Trump started this because of trade imbalances – but as the world discovers new markets and looks to balance their trade with their new partners they will buy even less from the US.
Basically we have about a year to to rework our international trading relationships. I am sure that Canadian bureaucrats and industry representatives are already fanning out across the world – meeting and negotiating withe their counterparts in other countries. Good deals – far better deals than Trump is offering – are out there looking to be found.
The new world order is just beginning.
