Canada’s Role in a Shifting Global Order — with Mark Carney

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0:00:31 Soon enough, high schoolers will be donning those caps and gowns.
0:00:35 But what comes next is less of a sure thing than it was a decade ago.
0:00:41 Students are genuinely questioning if college is worth it and if college is really the right thing for them,
0:00:43 knowing what they know about themselves.
0:00:47 This week on Explain It To Me, a look at the new range of alternatives to college
0:00:51 and how some high schools are setting up their graduates for success.
0:00:55 New episodes on Sunday mornings, wherever you get your podcasts.
0:01:02 What does it really mean to interpret the Constitution in a country that’s constantly changing?
0:01:07 No judge decides a case based on the temperature of the day.
0:01:12 Every judge, however, is aware of the climate of the season.
0:01:17 I’m Preet Bharara, and this week on Stay Tuned, I’m joined by Justice Stephen Breyer.
0:01:21 We get into how judges make sense of the law in a politically charged time
0:01:25 and what that says about the values and pressures shaping today’s Supreme Court.
0:01:27 The episode is out now.
0:01:31 Search and follow Stay Tuned with Preet wherever you get your podcasts.
0:01:37 Episode 344.
0:01:40 Route 344 is a highway located in Columbia County, New York.
0:01:47 In 1944, Danny DeVito was born, and the U.S. sent 100 million cans of Spam to soldiers overseas.
0:01:51 What did the cannibal say when he ate his first can of Spam?
0:01:54 Oh my god, this is the greatest thing since sliced fret.
0:01:57 I like that.
0:01:58 Okay, that’s not good.
0:01:59 You want a dick joke.
0:02:03 Okay, I am sick of getting Spam emails saying I can make my penis eight inches.
0:02:04 I know how to do that already.
0:02:06 I’ve folded in half.
0:02:21 Welcome to the 344th episode of the Prof G-Pod.
0:02:22 What’s happening?
0:02:24 The dog is booked in business.
0:02:26 The dog is a Palm Beach dog.
0:02:28 I’m staying at a place called The Colony, which is sort of,
0:02:35 if the Beverly Hills Hotel had an adjacent property in Florida that was not as nice,
0:02:41 but, you know, sort of like, Glen Eagles has something called Glen Eagles Townhouse in Edinburgh.
0:02:45 If this sounds like a total conversation of privilege, i.e. douchebag, trust your instincts,
0:02:49 but they have a property in Edinburgh that’s not nearly as nice,
0:02:52 this would be the less nice version of the Beverly Hills Hotel.
0:02:56 I think it’s a fantastic, I don’t know, fantastic.
0:02:58 I think it’s an, I’m, hotels are my hobby.
0:02:59 What’s your hobby?
0:03:03 Well, I read a lot of nonfiction, or I do a lot of, no, not me.
0:03:04 I go to nice hotels.
0:03:04 It’s my hobby.
0:03:05 I won’t travel to cities.
0:03:06 I’ll travel to nice hotels.
0:03:09 By the way, if you’re looking for a wreck on any hotel in almost any city,
0:03:11 daddy is where you come.
0:03:15 Anyways, this is a small data point on a larger theme, and that is,
0:03:20 there is an emerging cohort of services, companies, and hotels, and hospitality,
0:03:23 and restaurants that I refer to as 64.
0:03:26 And that is six-star prices with four-star service.
0:03:28 And what’s happened is the following.
0:03:34 The cohort that’s grown the fastest in the United States is not Latinos, it’s not seniors, it’s
0:03:37 the super wealthy, or even just the wealthy.
0:03:38 They have absolutely crushed it.
0:03:41 And these folks like to spend money.
0:03:46 And not only has their income gone up, or their wealth has gone up, but their mentality has changed
0:03:46 since COVID.
0:03:49 It’s sort of, you only live once, YOLO, let’s get out there, let’s travel.
0:03:52 A lot of them had pent-up demand to travel from COVID.
0:03:55 And they realized that, you know, we all meet the same end.
0:04:00 We all come into this world in diapers, we all leave in diapers, but the reality is we all leave.
0:04:02 And so luxury travel has just boomed.
0:04:06 And there’s a natural gating supply constraint, and that’s the following.
0:04:10 To build a luxury hotel probably takes the better part of a decade.
0:04:14 By the time you find the financing, find a location, get the zoning, the permitting,
0:04:17 construct the thing, train, get everyone, it takes 10 years.
0:04:21 So there is a absolute supply-demand imbalance right now.
0:04:24 The Beverly Hills Hotel, where I stay when I go to LA, which is wonderful.
0:04:25 Which is wonderful.
0:04:26 It’s like the Disney of hotels.
0:04:30 You have the Pirates of the Caribbean, and then Space Mountain, you have the counter,
0:04:34 you have the great restaurant next to the pool, then you have the polo lounge.
0:04:35 It’s Disneyland.
0:04:38 You never need to go anywhere else, and I love it because everyone will come see me there.
0:04:40 Pre-COVID, it was about $700, $800.
0:04:42 COVID, it dropped to $400.
0:04:44 I was one of those guys traveling during COVID.
0:04:47 And then now it’s $1,800 for a room.
0:04:51 Six-star travel, and no one feels sorry for anyone here, has seen inflation, I think,
0:04:57 that’s probably greater than any category because massive increase in demand with choked supply.
0:05:02 The outcropping from that, or one of the manifestations of that, is that you can now stay at a hotel
0:05:04 like this one where they have six-star prices.
0:05:06 I won’t tell you what I’m spending in my room.
0:05:07 For four-star service.
0:05:13 And what they do is a cultural phenomenon, and that is they try and throw people at the problem.
0:05:17 And that is they hire a lot of people who are these nice young people that, my guess is they underpay,
0:05:21 that are not interested in being in the services industry for very long.
0:05:23 This is a transition job, and that’s fine.
0:05:26 I parked cars in college, and I was a pool boy at the Mondrian Hotel.
0:05:32 Anyways, the 64 hotels, six-star prices, four-star service.
0:05:37 The problem is when we hit any sort of speed bump, this shit’s going to get wrecked.
0:05:42 I mean, you’re going to see declines in room rates of 70%.
0:05:46 And that is companies have to figure out how much they price.
0:05:47 I think pricing is the hardest thing.
0:05:52 Do they price perfectly to demand and raise prices when they have power?
0:05:57 Or do they decide, like the Four Seasons and some other places, even when they could raise their prices,
0:06:00 they don’t because it pisses people off and creates ill will.
0:06:01 And that’s what they’re doing here.
0:06:06 They’re monetizing the shit out of this place and throwing weddings and bat mitzvahs.
0:06:14 And they are, instead of catering to their current consumers, they’re renting out the pool if they see an opportunity to make another $10,000 or $20,000.
0:06:15 And I get it.
0:06:19 They probably spent a lot of money to buy this place and fix it up, and they’re very ROI-focused.
0:06:21 But they’re trading off goodwill and a reputation.
0:06:30 The Beverly Hills Hotel or the Hotel du Cap would never, ever do anything that gets in the way of the guest’s experience, if you will.
0:06:32 God, just hearing this, I sound obnoxious.
0:06:40 Anyways, this is, you’re going to see in the travel industry and the hospitality industry, a massive decline, I believe, in pricing.
0:06:40 Why is that?
0:06:46 The number of people traveling right now into the U.S. is crashing.
0:06:47 Is crashing.
0:06:48 Why?
0:06:53 Yeah, I used to go watch football games at Uncle Sam’s every weekend.
0:06:53 But guess what?
0:06:57 Uncle Sam is a total asshole, and he’s gone fucking crazy.
0:06:59 So let’s just hold off, and let’s stick at home.
0:07:04 Have you seen those pictures of Toronto International Airport?
0:07:04 I think it’s called Pearson.
0:07:08 During Christmas break from last year to this year.
0:07:09 Last year, packed.
0:07:17 A ton of Canadians trying to get down to Palm Beach or to L.A. or to Naples or wherever or Miami to get some of that thing called sunshine.
0:07:20 This year, lines are empty.
0:07:22 No one’s coming to the U.S.
0:07:23 Literally, tourism is crashing.
0:07:24 And guess what?
0:07:25 All this bullshit.
0:07:29 All this bullshit around trying to bring back our great manufacturing sector.
0:07:31 There are 12 million people who work in manufacturing.
0:07:33 Do you know how many work in tourism in the U.S.?
0:07:34 13 million.
0:07:40 So we have this consensual hallucination that somehow we’re going to restore manufacturing by raising prices on everybody.
0:07:42 Yeah, that doesn’t work, folks.
0:07:53 But what is working is you’re seeing an immediate destruction, an immediate change in the tourism industry that affects and employs 13 million Americans.
0:08:13 So you are going to see not a collapse, but you are going to see real pressure in organizations ranging from Disney to some of the bigger hotel companies to Marriott when all of a sudden the rates have to drop because we are going to lose at the margins a ton of Canadians, a ton of Mexicans, a ton of Europeans who think, you know what?
0:08:16 There are a lot of nice places to travel.
0:08:17 There are a lot of nice.
0:08:18 I know.
0:08:19 Let’s go to Disneyland.
0:08:21 Let’s go to Disneyland in Paris, not the one in Orlando.
0:08:22 Right?
0:08:23 I know.
0:08:24 We want to gamble.
0:08:27 Let’s go to Macau or Monaco instead of going to Vegas.
0:08:27 I know.
0:08:28 I know.
0:08:29 Great city.
0:08:30 Let’s go to London.
0:08:31 Let’s not go to New York.
0:08:34 They have great theater in London, not in New York.
0:08:38 We could not be more stupid right now.
0:08:42 And you’re about to see the helm of the bobsled that’s going to get hurt, I think, first.
0:08:43 Well, I don’t know who’s going to get hurt first.
0:08:45 Who’s going to get hurt first?
0:08:46 I don’t know.
0:08:51 I think travel, I think the travel industry is about to start being in a series of earnings
0:08:53 calls that are just going to get uglier and uglier.
0:08:55 Let’s talk about a few people I talked to this weekend.
0:08:56 Let’s go back to the tariffs.
0:08:57 The big T.
0:08:58 That’s right.
0:09:04 Talk to the CEO of a catalog company that does a lot of housewares and homewares.
0:09:06 And get this, right?
0:09:09 $10 million worth of merchandise on a boat coming in from China.
0:09:17 This person has to show up with a check for $14.5 million, the 145% tariff that was on as
0:09:18 of 10 minutes ago.
0:09:18 I don’t know if it’s off.
0:09:24 But should it stay when the boat actually docks, or the boat, the ship, the tanker, you
0:09:29 know, one of those big fucking things, when it docks at the port of Long Beach, this person
0:09:33 has to show up or their company has to show up with a $14.5 million check.
0:09:35 Otherwise, they can’t offload the stuff.
0:09:37 By the way, most people don’t really understand what a tariff is.
0:09:41 The stuff comes in, and then the person bringing it in has to pay a tariff to the U.S. government.
0:09:44 So this person unexpectedly has to find $14.5 million.
0:09:46 That is not easy.
0:09:47 That is not easy.
0:09:54 And just to add insult to injury, this person has to go find people to go down to the dock
0:09:59 and then hire them to relabel and reprice every single item.
0:09:59 Why?
0:10:03 Because now the supply chain is so sophisticated in China that they have the
0:10:08 factories, so in the labeling and the pricing and the tagging to save time and money.
0:10:14 So this person has to figure out a way to get down there and undo everything on the products.
0:10:14 What does that mean?
0:10:17 This person has stopped all shipments from China.
0:10:21 By the way, unlike many people in the Republicans or people in the Trump administration, my anecdotes
0:10:22 are actually true.
0:10:23 I’m not lying.
0:10:27 Second person I talked to, oh, what is this person doing?
0:10:29 It stopped all shipments from China.
0:10:30 Too expensive.
0:10:32 And it’s going to have to reduce their inventory.
0:10:36 Their inventory is going to go down, which means not only are the products with this huge
0:10:40 tariff going to be marked up, but this person is also going to have to increase their prices
0:10:43 to try and get some of that money back with lower supply.
0:10:47 Maybe she can have a more elastic pricing, increased prices.
0:10:50 So prices are going up, see above inflation.
0:10:53 But then this person is going to run out of product.
0:10:58 Then this person also in their next quarterly earnings call is going to have to puke all over
0:11:02 the earnings call because this person all of a sudden has to say, well, there was this
0:11:05 $14.5 million expense we weren’t even planning on.
0:11:08 That comes right off the bottom line, folks.
0:11:10 So what do you have?
0:11:12 Oh, also some other conversations I had this weekend.
0:11:16 A German automobile manufacturer called What Would You Do?
0:11:17 I’m like, I have no fucking idea.
0:11:19 I can’t predict what this guy is going to do.
0:11:25 A friend of mine from the fraternity at UCLA has built this really lovely little specialty
0:11:27 retail or specialty products company.
0:11:31 You know when you go to a conference and there’s branded shit everywhere and you get those, I
0:11:37 got like 45 fucking water bottles that say Oracle or NetSuite or ZipRecruiter and then
0:11:41 all the banners and all the logos and the cups and everything that’s branded, that’s
0:11:42 a specialty products company.
0:11:45 He’s built a really nice business, but three kids through school employed, I think about
0:11:46 120 people.
0:11:49 I bet it’s a 10 or $20 million business.
0:11:49 I don’t know.
0:11:54 And over the last 30 years, slowly but surely, he’s told me, everything has moved to China.
0:11:58 They just have a better supply chain and they can do shit at a lower cost, right?
0:12:00 He stopped.
0:12:01 He stopped all shipments.
0:12:07 There’s no way he can turn to his customers and say, oh, this, all this logo wear and these
0:12:12 logo fleeces and these banners and this signage for the stage, it was going to cost you $8,000.
0:12:14 Now it’s going to cost you 21.
0:12:16 He just can’t do that.
0:12:20 So he’s going to have to eat all the contracts he’s always committed to, right?
0:12:22 While paying these tariffs, he has to come up with additional cash flow.
0:12:29 He said, Scott, this is reminiscent, but worse, worse than COVID.
0:12:31 It’s like my business has come to an end.
0:12:34 It’s literally my business is coming in.
0:12:35 My guess is he retires.
0:12:40 I don’t think he’s got it in him to try and figure out all the new supply chain relationships
0:12:44 and to come up with the additional capital that’s going to be required to support this
0:12:45 business moving forward at universities.
0:12:47 What’s going on?
0:12:50 Corporations have paused hiring.
0:12:52 What’s a pause?
0:12:54 It’s called non-hiring.
0:12:58 Because if they pause for three or six months, it’s not as if when they fire up again,
0:13:00 they double their pace of hiring.
0:13:04 If you pause your hiring for six months, you’ve basically reduced hiring and employment or
0:13:08 new employment at that company by 50% that year because they don’t catch up.
0:13:10 They just start again.
0:13:15 And what would you do if you’re a large corporation trying to figure out if and what the tariffs will
0:13:16 be and how to plan your business?
0:13:17 Do you hire new people?
0:13:19 No, you think we’re just going to press a pause.
0:13:22 The worst thing about this, well, that’s not true.
0:13:24 There’s a lot of things that are shitty about this.
0:13:28 But we’ve decided to declare war on everyone all at once.
0:13:32 The piece of the calculus that is missing here is the following.
0:13:36 You need to assess when you go to war or you have a negotiation with someone, you need to
0:13:38 assess your strengths, right?
0:13:41 Your own weaknesses and then their strengths and their weaknesses.
0:13:43 And what they have miscalculated is the following.
0:13:47 They think their weakness is their dependence upon us.
0:13:48 What they miss is the following.
0:13:49 They are not self-aware.
0:13:55 And that is Americans’ tolerance for pain is incredibly low.
0:13:59 Women are born with a greater tolerance for pain because they have to endure childbirth,
0:14:00 which word has it.
0:14:05 And I have personal experience, observational experience here, not actual experience, that
0:14:06 in fact, it is the real deal.
0:14:10 Supposedly there’s a hormone that releases right after childbirth that gives women amnesia.
0:14:11 Otherwise, they’d never fucking do it again.
0:14:17 We are the man in this relationship, meaning the U.S. has a much lower tolerance for pain
0:14:19 than China.
0:14:24 China starves or has starved tens of millions of people when they felt it was in the best
0:14:26 interest of the political party or the nation as a whole.
0:14:31 We fucking freak out when we think that the final episode of The Sopranos was a mistake
0:14:33 and start calling our cable company.
0:14:36 This is how stupid these people are.
0:14:37 What do we have?
0:14:40 Let’s review less hiring, more expenses.
0:14:44 The economy is slowing, which I’m sure the president got all sorts of data points on
0:14:44 last week.
0:14:47 But meanwhile, interest rates are going up.
0:14:51 If interest rates and those costs keep going up, it can chase down that consumer sentiment
0:14:52 and that certainty.
0:14:53 And what do we have?
0:14:56 The uncertainty index is at a 40-year high.
0:15:01 Consumers in America feel more uncertain right now than they did when there was a virus that
0:15:02 killed a million people.
0:15:03 Think about that.
0:15:04 Think about that.
0:15:07 Consumer confidence is crashing.
0:15:08 So what do we have?
0:15:09 What do we have?
0:15:10 Less hiring.
0:15:15 Stagflation or threats of stagflation, which is Latin for we’re headed towards a depression
0:15:16 if we’re not careful.
0:15:19 We have retailers who don’t know how to plan their business.
0:15:25 And we have an administration that has no ability to actually assess the current situation
0:15:27 and what our strengths are and our weaknesses are.
0:15:32 There is no better opponent than someone who overestimates their strengths and is aggressive
0:15:34 and gets into the ring with you.
0:15:38 And quite frankly, just isn’t as strong or as quick as they think they are.
0:15:42 But they have the hubris to believe that they’re awesome so they don’t train that hard.
0:15:42 They don’t think that hard.
0:15:46 They just get in the ring and start flailing wildly.
0:15:46 Guess what?
0:15:51 In about three months, if not sooner, we’re going to wake up and all we’re going to see
0:15:52 are bright lights.
0:15:54 We’re going to be flat on our ass staring up.
0:15:56 And all we would have heard is the ding.
0:15:57 And what was that ding?
0:15:58 Stupid tariffs.
0:16:01 This is the definition of stupid.
0:16:07 OK, with respect to tariffs and today’s episode, arguably one of our most important interviews
0:16:10 or I don’t know, I think I think this means we’re big time.
0:16:10 We’re big time.
0:16:16 We speak with Mark Carney, Canada’s 24th prime minister and leader of the Liberal Party sworn
0:16:17 in this March.
0:16:21 We discuss with the prime minister of the country’s economic outlook how Canada fits into a shifting
0:16:26 global order and whether the U.S.-Canada relationship can be repaired amid rising trade tensions.
0:16:29 I really enjoyed this conversation with the prime minister.
0:16:34 He’s clearly a very intelligent guy, thoughtful, especially enjoying the end.
0:16:36 I asked him some questions more personal in nature.
0:16:42 We’ll ask Prime Minister Carney his thoughts on our relationship and where we go from here.
0:17:02 Prime Minister, where does this podcast find you?
0:17:04 I’m in Montreal right now, Professor.
0:17:10 The majority of the world spends their news is 10 minutes domestic and 20 minutes international.
0:17:13 In the U.S., we’re kind of self-absorbed, narcissistic.
0:17:15 We don’t talk a lot about other countries.
0:17:20 I think most people have heard of you, have seen you on TV, but don’t know much about you.
0:17:22 Can you give us sort of your backstory, your origin story?
0:17:23 Sure.
0:17:29 So, I was born in the Arctic, the north of Canada, a place called Fort Smith, Northwest Territories.
0:17:34 I grew up in Edmonton, and those who might follow hockey was the days of Wayne Gretzky when
0:17:35 he was playing for the Oilers.
0:17:36 That was when I was a kid.
0:17:42 I went away to university in the U.S., and then I worked on Wall Street or versions of Wall
0:17:42 Street.
0:17:46 I worked for Goldman Sachs in London and Tokyo and New York and ultimately Canada.
0:17:51 And then I went in about 20 years ago to become the deputy governor of the Bank of Canada,
0:17:56 which is the equivalent of the Federal Reserve in the U.S., and ended up being the governor
0:17:58 during the financial crisis of 2008.
0:18:02 So, worked with, you know, through that process of the financial crisis.
0:18:05 We had a, quote, good financial crisis.
0:18:10 If you can have a good financial crisis in Canada, we got through it better than anyone else, emerged
0:18:10 stronger.
0:18:18 And then, ultimately, I kind of, slightly bizarrely, I was asked to become governor of
0:18:18 the Bank of England.
0:18:21 So, I became the first foreigners governor of the Bank of England.
0:18:26 And I did that through the period of the Brexit referendum, as it turned out, and the aftermath
0:18:26 of that.
0:18:31 And then came back Canada 2020, right in the middle of COVID.
0:18:35 You had a, I think you probably had a better experience during COVID if I, listening to
0:18:38 your podcasts, if I read it correctly, than I did.
0:18:42 And then I worked, I worked, did a lot of work on climate change for the United Nations, sort
0:18:47 of pro bono, and organizing the financial sector to help address climate change.
0:18:50 But also, at the same time, I worked for Brookfield, which is a big asset manager.
0:18:52 And I was chair of Bloomberg.
0:18:58 And then, as of the start of January, I first ran for the leadership of the Liberal Party,
0:19:01 which is one of the main parties here.
0:19:04 And winning that, became prime minister about a month ago.
0:19:06 And now I’m running for election.
0:19:10 We have much, last point, much shorter elections than the United States.
0:19:15 Our campaign is 37 days, and we’ve got two weeks roughly left to go.
0:19:19 So, a big friend of the pod is Ian Brenner, the geopolitical strategist.
0:19:25 And he was on the pod last week, and he described you as a, open quote, generational mind for
0:19:27 Canada on the global stage, close quote.
0:19:33 In your view, what role does Canada play on the global stage?
0:19:37 So, we play, I mean, we play several roles.
0:19:39 We’re a member of the G7.
0:19:43 In fact, we are chair of the G7 this year, so I’m chair of the G7.
0:19:47 We’re a member of the Commonwealth, which is the old UK grouping.
0:19:52 We’re a member of the Francophonie, which is the, obviously, the Francophone grouping of
0:19:53 about 60 countries.
0:19:59 So, we have our role in several different, let’s call it organizations, self-appointed organizations
0:20:00 or groupings.
0:20:07 I think one of the roles we play potentially in the new or the emerging global order is partly
0:20:09 based on, you know, our assets.
0:20:14 We are an energy, an emerging energy superpower in all forms of energy.
0:20:18 We’re one of the largest critical mineral suppliers in the world.
0:20:19 We’re pretty good in AI.
0:20:23 A lot of people claim that we’re, you know, but we’re, I think, legitimately claiming that.
0:20:30 And so, we can play a role as a country that believes in open markets, open systems, believes
0:20:33 in trade, open ideas, diversity.
0:20:40 We can play a role with like-minded countries to kind of reconstruct that bit of the international
0:20:44 order, which has been, I’m in Montreal, they would say bouleversé.
0:20:51 It’s been upended in the course of, more intensively in the last few months, but a process that
0:20:54 really began with the financial crisis 15 years ago.
0:20:57 And just for our listeners, the elephant in the room is terrible, so I’m going to get to
0:20:58 that.
0:21:04 But I want to start with, if you were to, so typically in the U.S., and I imagine the same
0:21:08 way in Canada, when a new leader is elected, assuming you get elected, they have sort of a
0:21:14 honeymoon period and an opportunity to get more done in their first year, more grace, if you
0:21:17 will, than in the next two or three years.
0:21:21 What would you identify as the two or three biggest issues facing Canada, and what’s your
0:21:21 agenda?
0:21:25 If you could pick two or three things you’re really going to go hard at your first year as
0:21:26 prime minister, what are those things?
0:21:32 As you just suggested, I’ll set tariffs aside and focus in on three things.
0:21:36 First is having free trade actually within Canada.
0:21:43 We have basically 13 economies here, 10 different provinces and territories, all with their own
0:21:43 rules.
0:21:48 Hard to move credentials and sometimes goods and services across the country, far harder
0:21:49 than it should be.
0:21:53 So a process, a very quick process of free trade.
0:21:58 And by the way, just to put orders of magnitude on this, a reasonable estimate of the economic
0:22:03 benefit of that is bigger than the economic hit from the worst version of the Trump tariffs.
0:22:06 So we can kind of give ourselves more than others can.
0:22:09 Second thing is we have a huge housing problem here.
0:22:15 And particularly, obviously, for your younger Canadians, first and foremost, we need to double
0:22:16 the rate of housing.
0:22:21 And we need to, I won’t go into all the details, I’m happy to, but we need some major reforms
0:22:22 in order to do that.
0:22:26 We can do it in a way that actually leverages, you know, the Canadian supply chain technology
0:22:31 and all the lumber we potentially won’t be able to send southbound to the U.S.
0:22:35 And then the third thing, look, the world’s fluid.
0:22:37 I’m afraid this kind of comes towards tariffs.
0:22:42 But I think the trading system is going to get reordered fairly quickly.
0:22:47 And so in the course of the first year, the question is, well, who are we going to deepen
0:22:50 our relationships with other than the United States?
0:22:54 And those relationships, last point, are both economic and security.
0:22:57 The world’s a much more dangerous and divided place.
0:22:59 Security concerns are top of the list.
0:23:04 So who in Europe or European Union as a whole, UK, who in Asia, where are we going to partnership?
0:23:11 If I can say one last thing, Scott, is, you know, just being shaken so hard by what’s
0:23:18 happening in the United States, Canadians are very open to all of those priorities.
0:23:20 Like people are up for big things.
0:23:23 They’re coming together and they’re willing to do big things because they know they have
0:23:25 to do big things because the world’s changed so much.
0:23:28 Well, let’s use that as a segue into tariffs.
0:23:33 So I haven’t checked my Apple Watch in the last two minutes, so I don’t know the state of
0:23:34 things right now.
0:23:38 Now, you’re, my understanding, Canada’s our largest trading partner, no?
0:23:41 We tend to be obsessed with China, but you’re our largest trading partner, no?
0:23:43 We’re your most important, yeah.
0:23:44 Yeah.
0:23:46 So give us the state of play.
0:23:51 You’re the man representing our largest trading partner economically.
0:23:58 As, to the best of your knowledge, describe the state of play between what is happening
0:24:00 between the U.S. and Canada.
0:24:02 Where does it sit at this moment?
0:24:09 So I’ll start with the bad news or the, as we would call it, the unjustified news, which
0:24:10 is what tariffs are in place.
0:24:17 We have still in place today tariffs that were originally justified because of fentanyl, fentanyl
0:24:20 coming across the border from Canada.
0:24:26 Just for the listeners who haven’t tracked this, less than 1% of the fentanyl imported into
0:24:27 the United States comes from Canada.
0:24:32 In fact, you’ve got a sophisticated audience, so I can say things like 19 basis points of
0:24:34 the fentanyl comes across the border from Canada.
0:24:39 We’ve taken major steps to reinforce the border, drones, helicopters, other things, and it’s
0:24:44 fallen by a further 90, 9-0% over the course of the last three months.
0:24:49 But those tariffs hit a wide range of goods in Canada, hit a wide range of goods, and there’s
0:24:51 a few carve-outs for that.
0:24:55 But, you know, it’s hitting hundreds of billions of goods, and those are 25% tariffs from the United
0:24:56 States.
0:25:00 Then we are also caught, secondly, we’re also caught in the steel and aluminum tariffs,
0:25:05 which are this, quote, national security tariffs, so-called 232 tariffs.
0:25:08 We are the largest supplier of aluminum in the United States.
0:25:13 We’re one of the most important suppliers of steel to the United States, and you can roll
0:25:17 those up into hundreds of thousands of jobs in the U.S., depending on Canadian steel and
0:25:18 aluminum.
0:25:22 And then the third thing is we are caught in the auto tariffs.
0:25:27 As people probably know, but I’ll just personalize it, well, they wouldn’t know this fact.
0:25:32 There was something called the AutoPAC, which was signed the year I was born, you know, 60
0:25:32 years ago.
0:25:38 And we have had an increasingly integrated auto system with the United States for 60 years.
0:25:39 It got tighter with the Canada-U.S.
0:25:42 Free Trade Agreement 40 years ago, and then with NAFTA and the successor.
0:25:48 So literally, you know, these companies and the supply chains, the main parts suppliers, they’re
0:25:50 virtually fully integrated.
0:25:57 And now into the middle of this is coming 25% U.S. tariffs, which are, you know, in an
0:26:01 industry, as you know, that has, you know, 5%, 7% margins.
0:26:04 I mean, this is absolutely damaging.
0:26:06 So we have three sets of tariffs.
0:26:11 We are not subject yet to the so-called reciprocal tariffs to the U.S.
0:26:17 So the state of the relationship is strained, to say the least, because all of these tariffs
0:26:21 are in violation of what you call USMCA.
0:26:24 We call KUSMA, the same trade agreement.
0:26:31 The good news or the better news is that three weeks ago or so, President Trump and I spoke
0:26:36 and we agreed that following the Canadian election, there would be the beginning of a negotiation
0:26:40 of a comprehensive, a new comprehensive relationship, economic security.
0:26:45 So we are in the queue, so to speak, for those discussions.
0:26:52 It strikes me that these actions are about to inspire what they envision, that is a tremendous
0:26:56 amount of dealmaking, but dealmaking around us.
0:27:03 It just seems logical, and this is a thesis, and I want you to validate or nullify it.
0:27:09 But if I’m a G7 nation and I have a trading partner that I used to be able to count on,
0:27:13 that was mutually very prosperous, and now I just not only can’t count on them, but have
0:27:18 no idea who I’m waking up next to, that it’s incredible motivation to start establishing
0:27:20 dialogue with other nations.
0:27:27 Respond to that thesis, is Canada aggressively and actively trying to reroute around America
0:27:27 right now?
0:27:35 Well, I would say, you know, trade is a world of and, so, you know, it’s a positive
0:27:39 sum game, as you know, or both sides, you do it right, both sides win, it’s not a zero sum
0:27:39 game.
0:27:46 So I might not choose the phrase around America, but obviously, you know, look, if we’re, if
0:27:50 we’ve got excess capacity or we have things we’re going to develop, I’ll use the example
0:27:56 of critical minerals, where we’re a big player, who are, with whom are we going to trade?
0:27:58 Who can we rely on?
0:28:04 You know, we’re, we’re, we’re sitting here, we supply 70% of the potash to the United States,
0:28:08 you know, one of the most important components of fertilizer, 70%.
0:28:12 And there is a 25% tariff being put on potash.
0:28:17 So when you think about it, well, geez, maybe I might want to take another, I’ll call it
0:28:20 a commodity, even though critical metals and minerals are more than that.
0:28:24 If we’re going to develop those, maybe we want to develop them with a supply chain to
0:28:26 someone who’s not going to slap a tariff like that on.
0:28:28 So that I’m validating your thesis.
0:28:34 We, we, yeah, we have begun to intensify discussions with other, other countries, other trading blocks.
0:28:38 We have a pretty good set of trading, trade deals in place.
0:28:39 We have a free trade deal with Europe.
0:28:40 We have a free trade.
0:28:45 We’re part of the trans, what was called the Trans-Pacific Partnership in Asia.
0:28:48 So we have a number of those, but we, we’re, we’re looking to reinforce them.
0:28:54 Um, and look, we’re, we are hopeful, maybe hopeful isn’t the right word, but we’re open
0:29:01 open is a better way to put it to, um, a restart of the U S trading relationship, um, provided
0:29:06 there’s willingness on the other side and we can come to one of those positive, positive sum deals.
0:29:12 So I would imagine you speak to a lot of other G7 leaders or G20 leaders.
0:29:19 What’s the general consensus around American leadership right now?
0:29:26 And I realize that you have more restraint and are a bit more or tangibly more diplomatic,
0:29:33 but what is the thesis among this group of world leaders around what is going on here?
0:29:35 Uh, how do they explain it?
0:29:37 How do you explain it to each other?
0:29:38 Or can you explain it to each other?
0:29:43 Cause quite frankly, here in the U S a lot of this doesn’t even make sense to us.
0:29:45 And, and this is our leadership.
0:29:52 Well, I think the first thing is to recognize as, as I have said, and, uh, a number of those
0:29:59 other leaders have said, including G7 leaders is that the system as we knew it is over, right?
0:30:04 When the anchor of the system is fundamental, has done a series of measures, uh, that the U S has
0:30:07 done, but also set out a series of objectives.
0:30:11 And I’ll come back to that, uh, but the set of a series of objectives that are just inconsistent
0:30:14 with the way the system has been operating for decades, right?
0:30:17 Basically since the fall of the Berlin wall intensified since then.
0:30:21 So you recognize that that system anchored on the U S is over.
0:30:24 That then leads to how do you react to it?
0:30:28 There’s partly the negotiation with the U S and which you’ve been focused on, but then it’s
0:30:30 also, how do we deal with each other?
0:30:34 Which we’ve also touched on in terms of what the U S is trying to accomplish.
0:30:40 I think it’s, uh, you know, I take, uh, go back to, uh, uh, Peter Thiel of, uh, 10 years
0:30:45 ago saying, take Donald Trump literally, uh, and seriously, but take him literally and seriously.
0:30:52 And, you know, they looking to, um, to balance, uh, where to the extent possible to balance trade,
0:30:57 which is not the way we think about things, but is the way the U S thinks about things.
0:31:04 And, you know, you do get into odd situations like Canada, where we actually run a, America
0:31:07 has a trade surplus with Canada in goods.
0:31:12 The only reason there’s an overall deficit with Canada is because of basically oil imports.
0:31:16 Well, if you don’t want our oil imports, that will be a bit of a problem for a period of time.
0:31:21 Cause you know, the only other option for the refineries that take Canadian oil is Venezuela.
0:31:25 And that’s, uh, you know, they’re just banned those, uh, those imports as well.
0:31:30 So there it’s not, the logic isn’t entirely consistent.
0:31:30 Let’s put it that way.
0:31:35 But I think at the core recognizing this desire for more balanced trade.
0:31:42 And so from the U S administration question, I think in our mind is there are some industries,
0:31:47 autos, particularly aerospace would have another element of this.
0:31:52 Um, and then a number of commodity and there are a couple of industries that are so integrated
0:32:00 that it’s hard to see why for us competitiveness, let alone North American competitiveness, it
0:32:01 makes sense to pull them apart.
0:32:03 That would be our argument.
0:32:08 And then there’s other industries, uh, forest products, uh, steel, aluminum as three big examples
0:32:11 where we’re, uh, uh, agriculture potash.
0:32:12 I gave that example, nickel.
0:32:17 I could go on where we’re such huge suppliers and such a safe, secure supplier.
0:32:23 Again, it doesn’t really to us make sense that that would be displaced or tariffed.
0:32:28 So, you know, we’ve seen that this, uh, the trade policy is evolving as, uh, some of these
0:32:30 choke points become more evident.
0:32:33 And, uh, you know, I suspect, I suspect we will see more.
0:32:40 Maybe I’ll say one other thing if I could, which is, it strikes me a bit in the, in the
0:32:48 consistencies of, uh, U S policy is a desire to have some minimum tariff if possible, um,
0:32:51 which has a revenue raising element to it.
0:32:56 And I think, you know, tied into, uh, U S tax policy, that is, uh, that is also a possibility
0:32:56 here.
0:33:01 My understanding is about 99% of our trade is tariff-free and that 1% is around things
0:33:02 like dairy.
0:33:07 Haven’t we largely been kind of a trade-free zone between Canada and the U S today?
0:33:08 Yeah.
0:33:09 Yeah, we have.
0:33:13 And then we have, you know, like any trading partners, you get the odd trade irritant and,
0:33:17 uh, you know, trade dispute, but we have processes to deal with those.
0:33:23 And so we had a, uh, you know, we have, uh, on, ongoing things around forest products,
0:33:26 sometimes, uh, steel and aluminum and, you know, that’s handled.
0:33:31 But yeah, trade is basically, uh, tariff-free and, you know, when it, when it’s your biggest
0:33:35 trading partner, pulling that apart is, is, is quite costly.
0:33:40 It’s costly for both, you know, from a Canadian perspective and, you know, I’m out on the road,
0:33:41 I’m, I’m running for office.
0:33:42 I’m talking to lots of Canadians up and down.
0:33:49 There is a very strong sense of, yeah, this is going to cost us, but we’re willing to take
0:33:52 the price to restructure our economy in a different direction.
0:33:58 Like, it’s been such a sense of, uh, I mean, the word that’s used is betrayal.
0:34:03 So, you know, we signed a deal, we’ve had this partnership, we observe it in good faith,
0:34:07 we set up businesses, we, you know, we know lots of Americans, we like Americans, we listen to
0:34:09 American podcasts, you know, there’s such a thing.
0:34:15 And all of a sudden, you know, we get these, uh, you know, these attacks is, which is the
0:34:17 way these, this is viewed is okay.
0:34:22 So it’s going to cost us for a period of time, uh, and we’ll build out and, uh, build with
0:34:23 others.
0:34:26 We’ll be right back after a quick break.
0:34:36 Unwrap the early days of your favorite hockey stars with Tim’s new retrospective rookies
0:34:41 hockey cards featuring exclusive NHL and PWHL players and retired legends.
0:34:45 Collect them all only at Tim’s at participating restaurants in Canada for a limited time.
0:34:53 We borrow money from Chinese peasants to buy the things those Chinese peasants manufacture.
0:34:56 That is not a recipe for economic prosperity.
0:35:01 Vice President J.D. Vance defending the Trump administration’s tariffs on China hit China
0:35:03 squarely below the belt.
0:35:05 And China hit back with memes.
0:35:06 Cue music.
0:35:16 Americans on assembly lines at sewing machines in fields, eating chips, drinking Coke, looking
0:35:19 ill-prepared for factory work, to put it politely, which the memes are not.
0:35:24 China’s argument since this trade war began is that America cannot win it.
0:35:27 China is tougher, more resilient, and better prepared.
0:35:35 On Today Explained, as this trade war escalates, we ask, what if that’s true?
0:35:42 Today Explained, every weekday.
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0:35:55 This is Kenny Beecham, and playoff basketball is finally here.
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0:36:03 adjustment that can make or break a championship run.
0:36:05 Who’s building for a 16-win marathon?
0:36:07 Which superstar will submit their legacy?
0:36:11 And which role player is about to become a household name?
0:36:15 With so many fascinating first-round matchups, will the West be the bloodbath we anticipate?
0:36:18 Will the East be as predictable as we think?
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0:36:56 You were the first non-Brit to serve to run the Bank of England.
0:36:59 You’re sort of the Bo Jackson of global economic leadership.
0:37:05 I’ve compared this, and it might be a crude analogy, but I want you to add some color or
0:37:06 fill in the blanks here.
0:37:11 I’ve described these tariffs as the biggest own goal since Brexit.
0:37:18 What similarities do you see, and how does that inform how you respond to this and be what
0:37:19 you think ultimately the outcome is?
0:37:24 Well, I think there are a lot of similarities.
0:37:28 And it starts with the economics of what’s happening.
0:37:33 Actually, briefly describe Brexit, because just give us the headline news on Brexit.
0:37:38 So the headline on Brexit is for a variety of reasons, and many of them not to do with
0:37:41 economics, although it was sold as an economic, you know, win.
0:37:49 But a lot of people, you know, because of reasons of identity and others, voted in 2018, if I’ll
0:37:50 get my dates right, 2016, I guess.
0:37:51 No.
0:37:54 For the UK to leave the European Union.
0:37:59 And the UK was even more tightly bound in trade and economic relationships with the European
0:38:04 Union than Canada is with the United States, including free movement of labor, easy movement
0:38:08 of the capital, huge trade going both ways.
0:38:10 And you never had to get your product.
0:38:14 If your product met the product standard in the UK, you didn’t have to worry about it.
0:38:15 You could sell to any country in Europe.
0:38:21 And so the decision taken, as I say, for a variety of reasons, narrowly, but taken to leave
0:38:22 the European Union.
0:38:26 And I remember when it happened, in our view at the time, and remember, this was during
0:38:31 a period where it was interest rates were at rock bottom, inflation was too low, people
0:38:32 were worried about deflation, blah, blah.
0:38:37 Our view was, okay, what’s going to happen is the economy is going to slow, unemployment’s
0:38:41 going to go up, inflation’s going to go up, and we at the Bank of England are going to have
0:38:43 to raise interest rates when this happens.
0:38:45 And by the way, the currency will also go down.
0:38:47 The currency went down by 20, 25%.
0:38:50 It’s still on the floor relative to where it was.
0:38:56 Still on the floor because you had a big negative trade shock, a big loss of wealth, basically,
0:38:57 future wealth.
0:38:58 And the currency market priced it first.
0:39:02 And exactly what we expected to happen, happened.
0:39:06 I mean, it happened to happen roughly at the same time as COVID was finishing.
0:39:12 But you had a big, again, I’m relying on your audience, a big negative supply shock to the
0:39:18 economy because you ripped up trading relationships and the productive capacity went down relative to
0:39:19 where demand was.
0:39:21 So that was inflationary.
0:39:26 And a combination of that meant UK rates are higher and it’s got a bigger inflation problem
0:39:28 it has had than other economies.
0:39:33 When you look at what’s happening in the US, the friction put into its trading relationships
0:39:35 is going to cause the same thing.
0:39:39 It is going to slow the rate of growth of that economy.
0:39:41 It is going to affect the dollar.
0:39:44 It has affected the dollar negatively, as we’ve seen.
0:39:46 It’s going to push up prices on the margin.
0:39:52 And so slower economy, higher inflation, higher interest rates, all things being equal.
0:39:57 Now, there’s a big caveat with what I did, or there’s a qualifier is a better way to put
0:39:57 it.
0:40:02 The UK was a much more open economy, much more dependent on Europe.
0:40:05 The US is more of a closed economy.
0:40:08 It depends on the world, but it is, it’s different orders of magnitude.
0:40:10 So it’s same direction, different orders of magnitude.
0:40:15 So there’s, I think there are a lot of, a lot of parallels here, and I guess maybe the
0:40:19 other parallel, if I can add one more, which remains to be seen.
0:40:25 But the UK, I would say, and you’ll get, I’ll get hate mail from UK, some UK listeners, but
0:40:31 I would say based on the polling, it’s pretty well understood that the economic impact of Brexit
0:40:32 has been negative in the UK.
0:40:36 Let’s say two thirds of the people now understand that.
0:40:41 But the path back to being closer to Europe is very difficult politically.
0:40:43 It’s hard to build, rebuild that consensus.
0:40:44 They move very slowly.
0:40:50 And you think about the situation in the world right now for the UK, boy, there’s a lot of
0:40:55 logic being closer to Europe from a trade perspective.
0:41:00 And even from a security perspective, they built this sort of what’s called a coalition
0:41:05 of the willing with respect to Ukraine, because the UK, the US is pulling back from support
0:41:05 for Ukraine.
0:41:10 By the way, Canada has stepped up and is part of that largely European coalition of the willing
0:41:11 alongside Australia.
0:41:14 So there’s a logic to going back to that.
0:41:16 But it’s hard to go back once you’ve broken up these relationships.
0:41:22 And, you know, so the next six, 12 months, in my judgment, are going to be quite important
0:41:25 for the United States and for the global trading system.
0:41:32 Because the question is, OK, we understand that there is a big change, a big break with the
0:41:32 old system.
0:41:34 But how much of a break is it going to be?
0:41:41 And is there going to be a relatively open trading system for, I’m using quotations here
0:41:44 for those listening, like-minded countries, broadly like-minded countries?
0:41:49 You know, I think of the G7 as being pretty like-minded countries, not surprisingly.
0:41:53 You know, we value liberty, free speech, open markets in general.
0:41:57 So are we going to have a relatively open system amongst ourselves?
0:42:01 Or is it only going to be with a few countries?
0:42:02 Or is it going to be with no countries?
0:42:04 I mean, that’s kind of what to play for here.
0:42:10 And, but the system won’t, it won’t revert to what it was previously.
0:42:18 When we’re talking about these tariffs, there’s a general sense that, or at least a talk track
0:42:24 from the Trump administration that the U.S. has been taken advantage of by its trading partners,
0:42:29 including Canada, that they’ve just got the better end of the deal and that tariffs will
0:42:34 help restore some sort of parity or equity in the relationship and respond to that.
0:42:38 Well, I mean, we don’t, obviously we don’t see it.
0:42:45 We don’t see it in the following respects, because really, again, the way the Trump administration
0:42:49 has defined being, quote, taken advantage of is, do you run a trade deficit?
0:42:53 And we can argue about that definition.
0:42:58 I wouldn’t, if I lead on my economic training and my experience, I would say, well, that isn’t
0:43:01 being taken advantage of, it’s mutual exchange.
0:43:04 But the U.S. runs a surplus with us.
0:43:06 The U.S. sells more to us.
0:43:09 If anyone’s being taken advantage of, we’re being taken advantage of, right?
0:43:11 Because, I mean, by that definition.
0:43:17 And the only place where they run a deficit is, yes, we do ship oil to the United States.
0:43:22 Now, we happen to ship oil to the United States at a big discount to global prices.
0:43:30 So we’re being taken advantage of, again, on that definition, on the goods trade side.
0:43:33 And we’re getting taken advantage because we’re selling oil at below good prices.
0:43:35 So we, you know, we want our money back.
0:43:36 No, we don’t.
0:43:39 We still see the broader benefits of the relationship.
0:43:44 And, you know, I don’t think that, I’ll go back to the auto sector.
0:43:51 It’s not going to feel taken advantage of, as if these tariffs stay in place.
0:43:56 And, you know, as you say, you got to check your phone every once in a while just to see
0:43:57 where things stand.
0:44:02 There’s a possible exemption on the auto parts side that’s coming in in the United States,
0:44:07 which we would have said right, well, we did say right from the start would have to happen
0:44:10 because the whole system will grind to a halt without it.
0:44:15 So some of the mutual advantages will become more, are becoming more apparent.
0:44:19 And hopefully the U.S. administration can continue to be nimble.
0:44:25 My understanding is that you ship us cheap energy or cheap oil.
0:44:27 You’re obviously a very resource abundant nation.
0:44:32 We apply our IP and refining capability and then we sell it at three times the cost.
0:44:34 It sounds like it’s been pretty mutually beneficial.
0:44:36 Yeah, no, that’s absolutely right.
0:44:39 How do you see this playing out?
0:44:45 If you were tempted to speculate what the relationship is around global trade and tariffs
0:44:49 on a macro level and then specifically with Canada and the U.S.,
0:44:55 when you try to plan an economy similar to the way the CEO tries to plan a business,
0:44:58 what are you expecting?
0:44:59 You have to do scenario planning.
0:45:00 Nobody knows.
0:45:03 But what do you think are the most likely scenarios for how this plays out?
0:45:09 Because I mean this sincerely, Prime Minister, we’re all befuddled by this.
0:45:14 The majority of people who understand economics are having a difficult time seeing how this
0:45:16 is a big win for the U.S.
0:45:20 We’re just, we’re having a difficult time understanding how we win here.
0:45:26 Maybe more people come to the, they claim there’s 75 nations lining up to cut deals with them.
0:45:31 Is that the sense you get, that nations are lining up to cut a deal with us right now?
0:45:39 Well, the short answer, I, I, I don’t know the, I don’t know is on that second question.
0:45:42 There’s a few things that happen here.
0:45:48 One is that there’s a risk premium in U.S. assets that wasn’t there before.
0:45:51 And the question is, how big is that risk premium going to sell?
0:45:52 Where is it going to sell?
0:46:00 And, and that in part is going to depend on how coherent the new system is, you know,
0:46:07 and, and is there, does the U.S. credibly commit to a new system or a series of deals?
0:46:12 Remember, we’re, you know, we have a, we have a trading deal with U.S. that was signed by the
0:46:17 current president, um, and, uh, and which, which isn’t being, you know, observed.
0:46:20 So, so I think that’s one thing is there’s a risk premium on U.S. assets.
0:46:25 And if there’s a risk premium on U.S. assets, then the cost of all other assets around the world
0:46:26 is greater, right?
0:46:30 Like since we’re still priced off of, uh, priced off of U.S. treasuries, for example.
0:46:31 So that’s one thing.
0:46:37 I think second is, um, I do believe that there are a series of like-minded countries.
0:46:42 We very much like the U.S. to be part of that group, but like-minded countries who will develop
0:46:45 deeper trading and security relationships as a consequence of this.
0:46:47 Uh, it’s the world of second best.
0:46:51 It’s not what we would all want, but it’s the logical thing to do.
0:46:57 Third thing that’s going to happen is that, um, there is going to be much greater focus.
0:47:01 And I know this for a fact, and well, this will be a fact if, if, if, uh, my party is
0:47:06 successful in the elections, uh, a much greater focus on, uh, domestic drivers of demand.
0:47:10 So building at home, building big infrastructure, building millions of houses, building, you know,
0:47:16 building out our own economies, um, more, more, uh, domestic procurement, right?
0:47:22 In a world where we’ve got excess steel and aluminum capacity, which we will, uh, if the
0:47:25 U.S. doesn’t change on trade, well, guess who’s steel and aluminum we’re going to buy?
0:47:31 Um, uh, for a variety of things, uh, guess what defense procurement we’re going to do?
0:47:38 Uh, you know, right now we spend about 75% of our defense dollars go to the United States.
0:47:45 That, you know, doesn’t make a lot of sense, uh, if we settle out in a, in a more, um,
0:47:48 arm’s length relationship with the U S and that’s true.
0:47:50 If it’s true for us, it’s true for Europe.
0:47:51 It’s true for the UK.
0:47:58 Um, and so we’ll all move more domestic and more with each other and the degree to which
0:47:59 that happens.
0:48:01 So this is a world just to be clear.
0:48:05 And you, uh, I think you intuitively understand what you get this from the start.
0:48:08 We’ve got a world where we have higher risk premia, right?
0:48:10 It’s cost of capital is more expensive.
0:48:14 And we’ve got a world where people are doing second best things.
0:48:15 Countries are doing second best things.
0:48:19 So it’s a world that’s more expensive and it’s more, it’s not our target.
0:48:24 To use a fancy word, like it’s not totally in and of yourself, but it’s, you’re putting
0:48:28 a much greater emphasis on, uh, taking care of yourself.
0:48:33 Um, uh, we’ll do that and we’ll do it with like-minded countries and, uh, uh, and move
0:48:34 forward.
0:48:39 The surveys I’ve read said that two thirds of Americans still think of Canada as an ally.
0:48:42 We’re sort of like, oh, you know, Trump, let boys will be boys.
0:48:48 We still love Canadians, but two thirds plus of Canadians no longer see the U S as an ally.
0:48:54 I mean, quite frankly, it feels like Canadians are just pissed off that they feel the term
0:49:00 used was betrayed and that even if we’re, even if we’re able to establish, go back to
0:49:05 normal, hasn’t the knife, you know, isn’t it the knife gets pulled halfway out of the back,
0:49:07 but this injury takes years or decades to fail.
0:49:15 I mean, what is the vibe, if you will, around how Canadians feel about Americans and how long
0:49:18 do you think it gets, it takes us to repair this relationship?
0:49:20 I certainly recognize those figures.
0:49:29 Um, there is a feeling here that, uh, that the, it’s the actions of the U S there’s, there’s
0:49:29 several things.
0:49:31 One is the trade actions.
0:49:35 Secondly, was this long period and I’m, I’m not going to repeat the phrases that were used,
0:49:41 but these threats to our sovereignty are very sovereignty, which, you know, kind of unique.
0:49:45 There’s us in Denmark who’ve suffered actual threats to sovereignty.
0:49:50 I guess Panama, we roll ourselves in with that and that’s, you know, on your hierarchy of
0:49:54 betrayals, threatening somebody else’s sovereignty is pretty much the top.
0:49:57 Uh, I guess the top is acting on that threat.
0:50:00 Um, so, uh, uh, so that’s all mixed in.
0:50:08 Um, I think secondly, what has been striking has been the relatively muted response in the
0:50:13 broader U S to these steps, right?
0:50:19 Um, you know, the CEO class, if I can put it that way, the other major influencers, stakeholders
0:50:24 and the, uh, that’s changing a bit, but it was pretty quiet for a long period of time.
0:50:30 Um, so, you know, and when you look at that from this side of the border, you think, oh, okay,
0:50:34 well, this is more deeply held or the friendship is less firmly rooted.
0:50:36 It’s like any relationship.
0:50:42 I think if it’s, uh, when you have a, a loss of trust, it, you know, it can be repaired to
0:50:43 a degree.
0:50:47 It takes a period of time and it takes action to replace that, you know, it’s more than
0:50:48 more than fine words.
0:50:56 I, I think that, uh, that action can start with, uh, in May, the prime minister of Canada
0:50:58 at that point, we’ll meet with, uh, with president Trump.
0:51:01 Uh, I want to be the prime minister of Canada at that point.
0:51:04 I’m working hard to get there, but, uh, uh, uh, and they’ll sit down and say,
0:51:10 start a process of, um, redefining that relationship and, and, and building trust out from that.
0:51:12 We’ll be right back.
0:51:27 It really seems like tariffs are about to make just about everything more expensive.
0:51:32 And so this week on the Vergecast, we’re trying to figure out not only which gadgets do you need
0:51:38 to buy right now before they get more expensive, but also what can tech companies big and small
0:51:44 do to cope in complicated, uncertain times when it seems like nothing makes sense and the money
0:51:48 changes every day and all they want to do is ship gadgets.
0:51:54 The future of gadgets in a tariff world all this week on the Vergecast, wherever you get podcasts.
0:52:01 Looking for a political show that doesn’t scream from the extremes?
0:52:05 Raging moderates is now twice a week.
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0:52:08 Oh my God!
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0:52:16 Hosted by political strategist Jess Tarlov and myself, Scott Galloway.
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0:53:34 By the way, I absolutely love Vivian Tu.
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0:53:46 We’re back with more from Prime Minister Carney.
0:54:00 So just as a means of not or taking advantage of the fact that we have you on this podcast, we have real problems in the U.S. around income inequality.
0:54:06 For the first time in our nation’s history, a 30-year-old isn’t doing as well as her parents was at 30.
0:54:09 Tremendous polarization politically.
0:54:10 People just don’t like each other.
0:54:13 I mean, I would argue that comparatively the nation’s actually done quite well.
0:54:17 But what ails us, the call is coming from inside of the house.
0:54:19 We don’t like each other within America.
0:54:25 You’re asked to be a journeyman and come be Treasury Secretary or head of the Fed.
0:54:30 What policy plans do you think the U.S. should adopt?
0:54:37 And then I want to use that as a jumping off point to what are the biggest economic challenges the candidate faces and how you plan to address them.
0:54:43 Well, I think the, okay, you go to the heart of, I mean, that’s a big, big question.
0:54:45 I guess the way I look at it as follows.
0:54:48 I mean, I’m going to come at this from an odd angle maybe.
0:54:58 But when I look at what’s going to drive economic prosperity, productivity, growth for the next 25 years, what are the big drivers of that?
0:55:00 I’d put down three big drivers.
0:55:01 AI, no insight.
0:55:03 I’d put it at the top of the list.
0:55:07 Probably the life sciences revolution where I’m less expert.
0:55:10 And I would put carbon.
0:55:12 I would put drive towards lower carbon.
0:55:19 The U.S. has taken a step back from that for the moment, but it’s going to come back because the underlying issues around are there.
0:55:28 And so, okay, if those are some of the big things that are going to drive economies going forward, and the U.S. can have mastery in all of those.
0:55:40 But the question is how broadly that’s going to be shared within the U.S. across various social strata and how ready people are going to be to take advantage of it, right?
0:55:50 So, you know, is AI going to be, you know, purely an elite or largely an elite operation, or is AI going to be used to train a lot of people to do a number of things?
0:56:10 I mean, I know that sounds very Panglossian or, you know, techno-optimistic, but it is, the question is whether it’s a deliberate policy that’s steered by the federal and local governments in a way that are going to ensure that, you know, in Appalachia, you’re learning skills that are consistent with that.
0:56:18 And or, you know, the energy transition over time, but it’s not a term that’s used anymore in the U.S. as far as I can tell, but it will come back.
0:56:24 If I can flip it back, Scott, to us, we have the same set of issues or set of drivers.
0:56:25 Those are global drivers.
0:56:29 On top of that, we have a series of things such as I mentioned critical minerals.
0:56:30 We have large conventional energy.
0:56:36 So how are we balancing all that in a way that builds the jobs as we move out?
0:56:41 One of the things, I’ll say two other things which are related but distinct.
0:56:44 We got to sort out our housing issues in this country.
0:56:53 We have a massive economic, we have absolute social need, but we have a massive economic opportunity to create a new industry, new way of building houses and at scale and driving that.
0:56:55 And we’re going to, we’re going to shoot on that.
0:57:09 And I guess the last thing I’d say, which candidly worries me a bit about the United States and gives me greater comfort or strength in Canada is a word I’m not sure you’d like to use anymore, which is around diversity.
0:57:15 We have a huge, huge opportunity here because we’re one of the most diverse countries in the world.
0:57:20 We value diversity, we get a very strong sense of equal rights in a broad sense.
0:57:22 We can be a magnet for talent.
0:57:33 And as the U.S. is pushing out brains, if you will, and, you know, it’s quite a hostile environment in the academic world in the United States now, we can take advantage of that.
0:57:40 And then that cascades down through, you know, the AI revolution, life sciences, other elements.
0:57:43 Broadcasters, creative class, Scott, come up here.
0:57:46 Whether it’s now, it’s now above zero.
0:57:49 Creative has done a lot of work in that sentence, prime minister.
0:57:54 So the, look, you have a housing crisis, we have a housing crisis.
0:57:58 And it seems like leaders have agreed that it’s a crisis for the last 10 years.
0:58:04 Now, I read that housing in Vancouver is a percentage of the average salary is the third most expensive city in the world.
0:58:08 And that so much of it is in zoning and nimbyism.
0:58:15 And you’re, the previous prime minister, you know, they wanted to address the housing crisis.
0:58:17 What’s the friction point?
0:58:18 Is it capital?
0:58:18 Is it labor?
0:58:19 Is it zoning?
0:58:25 What is different about what you’re proposing that is going to register any more progress than previous administrations?
0:58:28 So it’s, it’s all of the above.
0:58:31 And so you attack it in a, in a comprehensive way.
0:58:37 I’m going to simplify in terms of restriction zoning development charges.
0:58:39 And we work at multiple levels of government.
0:58:41 It’s part of the reason why those costs are there.
0:58:42 They come from the municipal side.
0:58:50 And so in effect, we put up a bunch of money, just put up a bunch of money to commit, to cut the development charges in half.
0:58:50 Okay.
0:59:00 So that, and that’s subject to a series of other restrictions being removed, but we will, we at the federal level, we’ll, we’ll pay for that to, to be cut in half.
0:59:11 The second thing, uh, I mean, we believe very strongly that, uh, I mean, productivity for, in the Canadian housing, uh, sector construction sector basically is flatlined for the last 20 years.
0:59:11 Okay.
0:59:13 We’re still building houses like we did before.
0:59:20 And given the scale of what we need to do, you know, we got to move much more rapidly, particularly in urban density and other things.
0:59:27 So, you know, modular prefab housing, um, mass timber, other innovations that are there, they exist.
0:59:33 And so one of the things we’re going to do to kickstart that industry, and this is Canada’s, not the United States.
0:59:35 We have a different attitude toward these things.
0:59:39 We have a problem with, uh, deeply affordable housing, right?
0:59:42 Social, certain countries you might call social housing.
0:59:47 Uh, we’ve, we, we just have not built that for decades, basically in effect.
0:59:49 And so we need to, we need to catch up.
0:59:56 And so what we’re doing, part of what we’re doing is we’re going to build huge amount at that level.
1:00:13 And set the, the, the, the, the specs, if you will, for that we’re going to build and we’re going to build by, you know, on our balance sheet or as a developer, and we’ll set the specs for that, which drive the industry upstream in prefab, mass timber, et cetera, which gets the economies to scale there.
1:00:19 Um, but by and large, we will rely on private sector build, uh, we’ll make a bunch of land available.
1:00:28 We’ll make cheap capital, 25 billion, uh, for developers in this case, which is bigger money up here, cut those development charges in half, drive that.
1:00:33 And then we will give tax breaks to people buying their first time home.
1:00:40 So basically they’re getting 5% off their first, first time home, which, you know, from a down payment perspective starts, starts to add up.
1:00:45 So attacking it both on the supply demand side, the way we look at it is.
1:00:55 This is generational, like the scale of the problem is generational such that we are building out a huge pipeline of apprentices in the skilled trades.
1:01:03 And one of the core messages I give virtually every time I speak, so I’m going to do it now is this is going to be a great time for a career in the skilled trades in Canada.
1:01:06 Cause we’re going to build for the next 25, 30 years.
1:01:09 Like we are going to add, if we get this right.
1:01:13 And we intend to three to four points of GDP of investment.
1:01:15 That’s a huge number, right?
1:01:15 It’s possible.
1:01:19 We used to invest at that scale relative to GDP in the early seventies.
1:01:20 We can do it again.
1:01:21 You know, we can finance it.
1:01:23 Um, we got all the pension funds.
1:01:27 We’ve got lots of money to finance it, but we need to, we need to kickstart it.
1:01:30 And of course it’s not, it’s housing is we start with housing.
1:01:34 It’s not just housing, it’s energy, it’s other, other elements, but that’s what we’re going to do.
1:01:39 So we want to get young people into the skilled trades at scale.
1:01:41 We’re going to pay for all their apprenticeships.
1:01:43 We’re going to work with the unions to pull them through.
1:01:48 We’re adding a bunch of capacity at post-secondary education so they can get these trades at a scale.
1:01:53 So we’re getting the hundreds of thousands, which again, in the U S doesn’t seem like a lot, but in Canada, these are big numbers.
1:01:56 Let’s talk a little bit about climate and energy.
1:02:06 You’ve evolved, uh, from being a climate finance advocate to scrapping the consumer carbon tax and calling for Canada to be an energy superpower.
1:02:08 How have your views changed on this?
1:02:12 Uh, I wouldn’t, I wouldn’t say my views have changed, uh, to be honest.
1:02:15 So, I mean, it’s, uh, it’s very results oriented.
1:02:22 So the consumer carbon tax, uh, in Canada was responsible for about 6% of our emissions reductions.
1:02:26 So 94% of the work was being done elsewhere.
1:02:33 Now it sent a signal to households, but it, it, it just wasn’t that important.
1:02:41 Um, but it was quite divisive because people, you know, viewed it as a tax and they, they saw the tax with the tax.
1:02:44 They didn’t all give credit to the rebates that they were getting.
1:02:48 And so it politically, it was unhelpful, was undercutting the overall message.
1:02:52 So we got rid of that, um, uh, a few months ago.
1:02:54 Um, it was the first thing I did actually, when I got into office.
1:03:02 Um, but what we, what we are doing is making sure that the carbon market for large emitters works well.
1:03:07 So, and that, um, and, and we’re large emitters work well.
1:03:21 And as a consequence of that, we’re getting them in effect to pay people for this, what will happen if we’re elected to pay people for, you know, driving EVs, retrofitting their homes, uh, uh, the other, you know, climate smart choices.
1:03:31 And then on top of that, there is a big element, uh, uh, big IRA type element to our climate strategy, investment tax and credits and others.
1:03:41 So we’re looking basically and having, you know, reasonable success with this, where we’re putting out, you know, a dollar federally, and we’re getting four to $5 of private investment on top of that.
1:03:56 Um, and you know, what’s really relevant to us, aside from caring about the climate and people up here do care about the climate as a whole, um, is that we think that this is going to be a fundamental driver of competitiveness.
1:04:02 And if you look at who we’re going to be trading with more over time, Europeans, the Brits, others, guess what?
1:04:03 They care about this.
1:04:08 In fact, as you know, with carbon border adjustment mechanism is coming into, in Europe.
1:04:15 And so we take a view that, okay, we’ve got to do this medium long-term for competitiveness because that’s where the world’s going.
1:04:18 Secondly, the Europeans and others are going to want us to do this.
1:04:21 Thirdly, actually, we’ve got a lot of the technology.
1:04:25 So part of being an energy superpower is around small modular reactors.
1:04:29 Um, I mean, we’re a big hydropower, uh, we’re decent on hydrogen.
1:04:33 We could get better carbon capture and storage, all these things we can do.
1:04:36 And I guess the last point, which goes back to the U.S.
1:04:40 Is, you know, right now, and I’m going to grossly generalize, the U.S. doesn’t care about climate.
1:04:42 Six months ago, it cared about climate.
1:04:43 Guess what?
1:04:45 You’re going to care about climate again down the road.
1:04:54 And when you care about climate down the road again, we want to be in a position where we’re much more competitive, uh, and maybe have leapfrogged a number of U.S. companies.
1:04:57 So I just want to do a quick lightning round.
1:04:59 Advice to your 25-year-old self.
1:05:03 You got 10, 15 seconds with your 25-year-old self.
1:05:04 What would you say to yourself?
1:05:06 Uh, you know, relax.
1:05:09 It’s, uh, and, and, and stay focused on what you like.
1:05:13 I mean, I’ve probably spent more time doing things I didn’t really love than, uh, I should have.
1:05:19 Uh, you got a chance to go back and meet with someone who you’ve lost or who’s no longer around.
1:05:21 Who would that person be, and what would you say to them?
1:05:26 Well, I think with, I, you know, be my, I’d be my father.
1:05:26 I’d say I love him.
1:05:33 You’re at the end of your life, not going to walk on the beach again, not going to get to hang out with your wife, your kids.
1:05:35 What does success look like for you?
1:05:38 When you, when you look back, what is the box you want to have checked?
1:05:49 I think strongly the answer to that is that you’re, you’re proud of the values of, of your children and people who’ve worked with you.
1:06:01 I mean, I think that is the only real legacy, the extent to which you have influenced how others treat others in the world and, and, and how they, how they, how they react in the world.
1:06:06 That’s, I wrote a book and that was the, uh, that was the conclusion of that.
1:06:12 Mark Carney is Canada’s 24th prime minister and leader of the liberal party sworn in this March.
1:06:21 Uh, as an economist, uh, prime minister Carney steered the bank of Canada through the financial crisis and later became the first non-Brit to run the bank of England.
1:06:27 Between those roles, she served as UN special envoy to climate action and finance and as vice chair of Brookfield asset management.
1:06:33 I’ve trust a lot of Canadians are listening and I feel comfortable speaking for a lot of people.
1:06:38 And that is Americans understand the largest undefended border in the world is the U S Canadian border.
1:06:39 That’s for a reason.
1:06:49 I love that question that, uh, uh, Warren Buffett’s friend was a, uh, Holocaust survivor said the way I judge my friends is I asked one question who would hide me.
1:06:53 A lot of Americans remember that Canadians hit Americans in the Iran hostage crisis.
1:07:04 And I hope that, uh, your listeners and your voters recognize there is a huge swath of Americans that think of you, not as, not as even as a friend, but as siblings.
1:07:15 And that we, uh, we hope and are committed to maintaining what is arguably the, one of the strongest alliances in history that I don’t want to say, don’t take what’s going on seriously.
1:07:22 You have to, but there are a lot of Americans down here who are, who are brothers and sisters in arms in Canada.
1:07:25 You, we really do think of you as, uh, as a sibling.
1:07:28 Thank you, Scott.
1:07:45 Algebra of happiness, porn.
1:07:50 Uh, it’s something there’s not a lot of research on because no one wants to be known as the porn professor.
1:07:56 I spoke with Dr. Anna Lemke, I believe on this podcast, and it strikes me.
1:07:59 I’m meeting more and more people who have are struggling with an addiction to porn.
1:08:05 And what I would suggest is to tell people not to engage in porn is a little bit unrealistic.
1:08:10 That’s like telling someone to go stop drinking, which my doctor told me when I had high blood pressure a few months ago.
1:08:11 And I’m like, yeah, that’s going to happen.
1:08:12 I’ll reduce my drinking.
1:08:13 Why don’t we stop there?
1:08:18 Anyways, it’s not about my high blood pressure, which by the way is under, under control now.
1:08:19 That’s good news.
1:08:23 Hard to imagine me with high blood pressure at the age of 40, 60.
1:08:32 Anyways, I think sexual desire and that want and that hunger, if channeled correctly, can make you a much better man.
1:08:35 And the last thing you want to do is reduce that fire and that hunger.
1:08:42 And that is wanting to mate, wanting to be attractive such that you can find a partner to have a relationship and ultimately possibly have sex with.
1:08:50 I think if channeled correctly, and it usually, in my opinion, usually is channeled correctly, can make you want to be and become a better man.
1:08:58 And so anything that dampens those fires, whether it’s additional porn consumption or depression, that’s just a bad idea.
1:09:08 Because life is about taking risks, and because women pay a much greater downside or have much greater downside risk from sex, specifically pregnancy, than men.
1:09:11 I mean, they’re in it for 25 years if they get pregnant.
1:09:13 We’re in it for at least seven seconds, right?
1:09:16 And I’m not suggesting anyone engage in male abandonment.
1:09:18 But the downside risks for women are just much greater.
1:09:22 So as a result, they have a much finer filter, meaning they are choosier than men.
1:09:22 Okay, fine.
1:09:25 But there’s an upside to that.
1:09:31 And that is if you want to have a relationship with somebody, it forces you or inspires you to be a better man.
1:09:33 Maybe you work out a little bit more.
1:09:34 Maybe you have a plan.
1:09:37 You articulate a plan around economic viability.
1:09:39 Maybe you learn how to open.
1:09:41 You learn how to take risks.
1:09:48 The most frightening piece of data I’ve seen recently is that 51% of men, 18 to 24, have never asked a woman out in person.
1:09:52 That is so upsetting for me.
1:10:01 I think a lot of the skills you develop and the characteristics you develop around trying to find a mate make you a better man across a number of dimensions.
1:10:03 You develop a sense of resilience.
1:10:06 If you want to ask a lot of women out, get used to rejection.
1:10:12 And if you want to be successful in the world of mating, much less professionally, get used to rejection.
1:10:13 That is a skill.
1:10:15 Learn how to talk to strangers.
1:10:16 Learn how to open.
1:10:17 Learn how to smell nice.
1:10:19 Learn how to not have bad breath.
1:10:22 Learn how to groom yourself.
1:10:27 Be able to articulate a plan for why you might someday be able to take care of children.
1:10:31 Show that you’re disciplined and you work out, which means you show up.
1:10:33 These things make you a better man.
1:10:42 And anything that reduces the hunger, the desire, the drive, the fire to make you a better man, you want to modulate it.
1:10:49 In sum, I’m not going to tell you not to consume porn, but my brothers, you want that fire to stay alive.
1:10:57 I think a big part of the reason I graduated from college, quite frankly, is I used to go on campus every day because I wanted to see my friends at North Campus UCLA.
1:11:03 And also there was a non-zero probability that I might meet someone that ultimately I might have a romantic relationship with.
1:11:04 And that was very motivating.
1:11:10 And had I had on-demand porn on my phone and my computer, I don’t know if I would have gone on campus as much.
1:11:18 And with a 2.27 GPA, it wouldn’t have taken a lot of less campus presence for me not to have graduated from college.
1:11:19 So what’s the bottom line?
1:11:21 Porn, okay.
1:11:23 But modulate.
1:11:30 That fire, that desire can be channeled and should be channeled into making you a better man.
1:11:36 This episode was produced by Jennifer Sanchez.
1:11:38 Our intern is Dan Chalon.
1:11:40 Drew Burrows is our technical director.
1:11:43 Thank you for listening to the Prop G Pod from the Vox Media Podcast Network.
1:11:48 We will catch you on Saturday for No Mercy, No Malice, as read by George Hahn.
1:11:54 And please follow our Prop G Markets pod wherever you get your pods for new episodes every Monday and Thursday.