The Trade Hub

In this week’s edition: How the U.S-U.K. deal sets the stage for the rest of the world; reading the signals from Washington’s trade talks with China; what Trump is looking for when making a deal.

Noteworthy

By John Stackhouse

It was a good week for Canada—and a better one for Britain. Next week may be another story.

• Mark Carney got some fresh daylight on trade talks and managed to reposition negotiations with Donald Trump as much more than trade. Get ready for a new North American Security Partnership.

• Neither leader threw Mexico’s Claudia Sheinbaum under the bus, but plenty of Mexican business leaders are for her lack of progress with Trump.

• Britain secured its own deal with Trump that was neither big nor beautiful but is suddenly the template that the U.S. will use with other countries. Not unlike pattern bargaining in the auto sector.

• The U.K.-U.S. arrangement is essentially a sectoral handshake. More British Land Rovers for more American cheeseburgers. (Cars for cows, in other words.) The end of the beginning, as Carney might say. But for Britain, it’s a competitive advantage against the EU, especially when layered on top of its much more comprehensive agreement.

• British PM Keir Starmer is hoping to stop in Ottawa mid-June, enroute to the G7 in Alberta, and that’s where reality may bite. Canada-U.K. trade talks have been rocky for a few years, largely because of the farm lobby in both countries. Any bets on Carney serving British cheese, or Starmer sipping Canadian milk?

• That leaves the two allies to focus on defence procurement. Carney has been keen to buy more BAE supplies, as an example, but he also has to keep options open with Trump, who wants Canada (and Britain) to buy more American planes and weapons systems.

• Mark June 16-17 on the calendar for a G7 that will be as epic as the mountains around Kananaskis. Expect it to be largely about security (with a NATO summit to follow in late June), and whether the post-war pillars of democracy will trade with each other as they remilitarize or cut their own deals. Whether Canada and Britain stick together, or get wedged by the U.S., will be one signal.

Need to know

18: Countries that the U.S. is reportedly prioritizing for trade talks.

79: Percentage of Americans who think the USMCA is good for the U.S. economy, according to The Chicago Council on Global Affairs latest survey. That includes 90% of Democrats and 72% of Republicans surveyed.

2,500: U.S. products, including olive oil and wine, that will have reduced tariffs under the U.S.-U.K. Economic Prosperity Deal.

100,000: British vehicles for which U.S. tariffs are lowered to 10% as part of the deal. Rolls-Royce engines will be able to enter tariff free.

The view from Washington

For a good hint as to how the U.S. is approaching its trade talks with China, consider who’s at the table this weekend in Geneva.

In: Treasury Secretary Scott Bessent and U.S. Trade Representative Jamieson Greer

Out: Commerce Secretary Howard Lutnick and White House Trade and Manufacturing Counselor Peter Navarro

Sending Bessent and Greer, perceived as more moderate, indicates that practicality and progress will take precedence over maximalist political ideology. Of note: Bessent landed the leading role after delivering the long sought-after U.S.-Ukraine natural resources deal for the White House.

A few agenda items for this weekend—and future meetings:

• Defence: Beijing’s use of export controls on rare earth and critical minerals target vulnerabilities in U.S. supply chains for semiconductors, fighter jets, submarines, and other products vital for the US defence industrial base.

• Advanced tech: Chinese practices and commercial policies, specifically joint-venture requirements for operating in China and disclosure requirements for attaining licenses, force foreign firms to transfer sensitive IP as a requisite for accessing the Chinese market.

• Shipping: U.S. shipbuilders and maritime workers have complained about Chinese practices that depress shipbuilding costs, specifically low-wage or forced labour and excess supply of shipbuilding inputs spurred by government subsidies.

What does Trump really want?

There will be a few recurring themes as Trump races to close 90 deals in 90 days:

• Reducing tariffs and non-tariff barriers: Trump views the trade posture of many countries as unfair to the U.S. and seeks to reduce tariff and non-tariff barriers wherever possible.

• Purchase agreements: Driven by the need to reduce the trade deficit, deals will likely include purchase agreements—take, for instance, China’s purchase commitment to buy US$200 billion worth of goods (which, ultimately, China did not meet).

• Exemptions: Trump and his team are facing significant pressure to exempt goods considered strategic, necessary, or ones where the U.S. is heavily reliant on imports—from baby powder to car seats. Expect more exemptions blunting the impact of trade actions.

• Investment commitments: Although inward investment will reduce the U.S. net international investment position, Trump likes to see foreign countries and companies invest in the U.S., akin to Taiwan Semiconductor Manufacturing Company’s Arizona semiconductor fabrication facility.

• Exchange-rate corrections: Market observers have been bearish about a ‘Mar-a-Lago Accord’ to correct the trade deficit through coordinated weaking of the U.S. dollar. Not only would such cross-border coordination be unlikely, the biggest target for currency manipulation, China, is highly unlikely to appreciate the renminbi.