Does switching our U.S. Ambassador bring Canada closer to a trade deal?

More likely, it simply telegraphs that we've come to realize there's No Deal any time soon

I don’t envy anyone trying to negotiate a trade deal with 41 million of us “backseat driving” every twist and turn (see representative prior post “Canada has win-win deals it can make to satisfy Trump” Dec. 30-24). As Canada enters the second year of this traumatic phase of our U.S. bilateral relationship, voters remain in the dark about the state of play of both our tariff strategy as well as the CUSMA review deadline of Canada Day 2026.

We’re either talking or we’re not. We’re closer to a deal than ever, or negotiations have been terminated. We’ve got our “elbows up,” or we’re unilaterally ditching the Liberal government’s Digital Services Tax in a effort to get a White House meeting that ends up being of little consequence.

This lack of visibility isn’t new (see prior post “What exactly is Ottawa’s tariff strategy?” Mar 12-25), but it’s certainly weighing on business leaders. If you can’t be confident about either your pricing nor your end-market, what choice do you have but to clamp down over the coming fiscal year?

Algoma Steel (ASTL:TSX) has announced plans to lay off 1,050 workers in March, which could affect another 1,600 families in the Sault Ste. Marie area according to the local Economic Development Corp. Being Canada, local community leaders are looking to the Provincial government to help take the sting out this suffering by moving some Ontario Lottery Corp. jobs from Toronto.

That may not be a bad idea, actually, given that $700k gets you a new four bedroom home in that neck of the woods.

One has to think the Prime Minister was both surprised yet not by Algoma’s news, having just announced a huge transportation subsidy for the domestic steel industry:

In an attempt to lower the cost of Canadian products for domestic buyers, Ottawa said it will subsidize 50 per cent of the cost of shipping steel and lumber across the country by rail. This appears to be in response to complaints by Western politicians and developers that steel coming from mills in Ontario is much more expensive than imports brought in by ship, given the higher rail transportation costs.

Close your eyes and you can picture the large binder on the PM’s desk, filled with advice about which subsidy or bailout is appropriate for whichever sector or employee base gets sideswiped on any given day. As we saw with the Covid-19 emergency assistance programs, most governments will default to propping everyone up with increased deficit spending rather than try to adjudicate the permanence of any particular market force.

Buying time makes sense if you know where you’re going, and that includes going no where in particular.

That’s the only possible explanation for soon-to-be announced replacement of Ambassador Kirsten Hillman by former Blackrock exec. Mark Wiseman, if you put any stock in the Ottawa rumour mill. Less than six months ago, Mr. Carney “not only asked Ambassador Hillman to remain as Washington envoy but to become Canada’s top trade interlocutor with President Donald Trump’s administration.” While it was clear that Ambassador Hillman hadn’t agreed to stay for “an extended period of time,” the PMO must have recognized that the Ambassador’s relationships and institutional knowledge were irreplaceable as they tried to finalize a new deal.

The August 1st trade deal deadline came and went, and things have gone downhill since then. There are only two reasons why Canada would switch out our Ambassador/Chief Negotiator at this stage in the process:

1. U.S. President Donald Trump has soured on our team, perhaps blaming the messengers for what I suspect are tough PMO positions around dairy quotas, suspect foreign policy choices (see prior post “‘The fruits of October 7th’” Sept. 23-25) and auto content rules. We saw a version of that play out under Justin Trudeau, with Mr. Trump referring to then-Deputy PM Chrystia Freeland as “nasty” and “toxic.” He even took credit for her departure from Cabinet: “Governor Trudeau understood that…he actually fired her because of a meeting he had with me. I said, ‘She is so bad. She’s bad for the country,’” Mr. Trump clearly cares about who we send to meetings: Message received.

2. PM Mark Carney has come to realize that we are 12 or 18 months away from a new deal, if any, so he might as well appoint his new U.S. Ambassador now and let them start to build some credibility in Washington. In this scenario, Ambassador Hillman can carry-on as lead negotiator for a time, with Mr. Wiseman enjoying a few months playing the role of “good cop” while he gets his feet wet.

In either case, Canada’s rough economic ride will continue. All of which seems unnecessary when the endgame is already clear — and, perhaps, even palatable:

• The Big Three automakers will repatriate what they can from their existing Ontario assembly lines, which has been obvious for some time (see prior post “How does Enemy #9 wind-up as the #1 Target?” Mar. 7-25). They’ll might even be back three or five years from now, once they’ve had a chance to prove to the White House how much more expensive it is to assemble vehicles in Ohio vs. Oakville. All will be forgiven/forgotten.

• Canada will accept far more U.S. milk and cheese than today, with Canadian taxpayers footing the bill for a decade worth of future “transition payments” to wealthy dairy producers.

• Based on RCAF analysis, Canada picks the F-35 over the Gripen, as reported. It’s not as though Mr. Trump hasn’t already made this a key part of his negotiating mandate globally.

• Canada commits to immediately sign a MOU to acquire 12 new German or South Korean submarines in an effort to shoulder more of NATO’s burden around the Arctic approaches.

• Long before a shovel goes into the ground on any Alberta-Pacific Ocean fantasy, Canadian pipeline firms will add southbound capacity to the tune of 300-500,000 barrels a day. By committing to backfill 50M barrels towards the current ~300M deficit in the U.S. Strategic Petroleum Reserve, President Trump and VP JD Vance will have a story to tell about lowering prices at the pump, while Mr. Carney gets some capex spend on this side of the border.

• Reduce Chinese steel imports to Canada (and therefore transshipment risks) even further.

• Mount a formal version of NORAD to tackle North American fentanyl trafficking, money laundering and illegal migration, with the FBI and RCMP collaborating at the border just as USAF and RCAF do in the skies today. Not a week goes by without Sam Cooper et al exposing some new crime ring.

Easy, peasy, right? Apparently, not, which may explain why we’re apparently prepared to make the change at 501 Pennsylvania Avenue, NW. Domestically, time isn’t Ottawa’s friend; that’s where the politics come into play.

Hesitant as his team might be, Conservative Leader Pierre Poilievre has been presented with yet another opportunity to play a constructive role in this saga with — at long last — a pseudo-official visit to the U.S. Capital. The excuse, of course, would be to deliver a speech to the Press Club or some much, but making the rounds of the U.S. Congress with MPs Randy Hoback and Michelle Rempel would be time well spent. Reminding American leaders how much we value the broader relationship is a non-partisan message.

Depending on his mood, Mr. Trump might even invite Mr. Poilievre over for a Diet Coke; worth the risk of an unpredictable meeting, I say.

According to a recent Abacus survey, the Liberals polled 30 points higher than the Tories on the question of which Party would be better at dealing with the Trump Administration. If there was an election tomorrow, it’d be the same movie.

As the high cost-of-living continues to bite, keeping Conservatives very much in the running (42-40), everyone needs to reconsider their current strategy. Not just the PM.

MRM

(disclosure: this post, like all blogs, is an Opinion Piece)