David Knight-Legg, a strategic advisor to the Alberta government, energy and financial services firms, joins us to talk about the impact of the Trump administration's trade tariffs on the European Union, China, Canada, and the rest of the world.
00:01:27.640They're handling it a little differently than we are.
00:01:29.660But they're, you know, they're dealing with very similar themes.
00:01:35.100You know, the Trump administration has changed the game and they've done it in ways that no one predicted.
00:01:44.540It's normal for Trump to be unpredictable, if that makes any sense.
00:01:47.680But the the the really interesting dinner table conversations happening in Europe are exactly what it is that they are up to, because nobody believes that the Trump team is either misunderstanding these tactics or fumbling these tactics.
00:02:09.680And most people don't believe that they're doing them for purposes of self-dealing.
00:02:13.560So one of the real sort of debates happening between smart people that understand capital markets are pivoting around what exactly is the strategy here?
00:02:25.560Why is it being ruled out in this way?
00:02:27.360And why have they decided to go to all countries at the same time?
00:03:15.360David, that sounds like the sort of thing we should be thinking about, but come back to the Europeans.
00:03:21.260What are the two possibilities as they try to interpret the president's actions?
00:03:26.760Well, look, I am going to check out newworldpm.com and congratulations to your sponsor because they have been in front of something that one of the companies whose board I sit on managing assets for large family offices was recommending two years ago, which is the importance of dealing with volatility by placing assets in secure categories like precious metals.
00:03:52.520The interesting thing for Canada is that we have extraordinary advantages right now in things like metals and mining, but we don't seem to have a clear plan over how Canada should be leveraging its position relative to the United States, given our unique advantages with the assets that we control as a country, but also our unique advantage in being the number one bilateral trading partner and the number one security partner with the United States.
00:04:17.380Europe is in a different position than Canada is. And I think that's probably the most important0.98
00:04:22.540thing to understand in terms of drawing a distinction between how people react or respond.
00:04:27.740Everybody that is dealing with these tariffs has to react or respond in a way that is
00:04:33.160advisable given their own unique position. And every country has a very different position.
00:04:39.040Every country has unique competitive advantages. It has unique gaps or challenges. It has unique
00:04:46.660relationship to the United States in terms of debt, relationship to the United States in terms
00:04:51.280of trade and assets, and relationship to the United States in terms of security. And I think
00:04:56.440what's unique about what's happening right now is that all of those things are being put on the
00:05:00.620table at the same time. And that is creating extraordinary complexity in how negotiations
00:05:06.040will take place. But at the heart of what's going on is this debate around China. And if you sort
00:05:15.540of take apart the three different things that the U.S. government is doing right now related to
00:05:21.760trade, related to their own debt, and related to security, China is at the center of all three of
00:05:27.240those things. And this is starting to look more and more like a very careful strategy built around
00:05:33.240confronting China. And we're seeing sort of the first inning of what is probably one of the biggest0.99
00:05:38.780great power conflicts playing out over trade, near-shoring, on-shoring, repurposing,
00:05:46.460re-industrialization themes that are going to be part of the lexicon of everybody's language and
00:05:53.660the way these markets are going to trade over the next few years.
00:05:57.180So, if that is the case, I'm not saying I don't agree with you, but if that is the case,
00:06:06.220If this is about China, why did it start with Canada and Mexico?
00:06:12.520I think that the strategy has had a few different iterations.
00:06:19.200And I don't think that somebody going into any sort of chess game knows exactly how responses will play out.
00:06:25.740My guess is that the United States knows that it has the strongest leverage with both Canada and Mexico.
00:06:35.040and is able to manage their relationship and their sort of negotiations with those countries with all of the advantages.
00:06:46.200So, you know, Canada, the Liberal government is trying hard to run against Donald Trump right now.
00:06:51.380And so the language that's being used about the way that Canada will respond to tariffs is, you know,
00:06:57.920bullish on Canada's ability to actually have a response that is not completely self-defeating.
00:07:03.200But Canada has virtually no firepower with respect to the United States or its markets, has almost no leverage with respect to trade and has zero leverage, literally none with respect to security or sovereignty when it comes to security.
00:07:16.880So for the United States, negotiating with China, negotiating with Mexico and Canada is simple and it's straightforward. And anybody looking at the numbers outside of the Liberal Party of Canada's strategy team, which is trying hard to create a sort of a virtual reality around what Canada could do with respect to the United States, knows that Canada has no leverage in this situation.
00:07:41.200We have to do a deal. My advice is that we do a deal that is bilateral, that we reject doing a multilateral deal with Mexico for a third time. I think that was a huge mistake. I think the U.S. would be open to a bilateral deal. And unlike Mexico, we have the ability to open the security files alongside the trade files with the United States and securing what could be the most extraordinary North American decade of prosperity and growth if we do it right.
00:08:06.520but the question is will we do it right you know do we do we have a vision for what canada can do
00:08:13.820and be in the world that includes us actually participating uh without being a deadbeat when
00:08:19.600it comes to nato are we actually going to join AUKUS the submarine warfare unit that our closest
00:08:25.300allies the united states the uk and australia are actively involved with and that we haven't
00:08:31.280earned a seat at the table with yet. Are we going to solve for the deep avoidance we have dealing
00:08:36.940with our own drug crisis and our complicity in the American drug crisis, not based on what our
00:08:43.280porous borders can actually interdict, but based on what is actually happening both with fentanyl
00:08:49.360and with terror interdictions coming through the Canadian northern border. I think there's so much
00:08:55.180for Canada to do. And I think the story is right now, every country is looking at what their
00:08:59.680options are with respect to the United States. Most countries are looking at conciliation and
00:09:05.800dropping trade barriers and doing deals. China and Canada uniquely are looking at retributive
00:09:11.060tariffs and passing them. The US is largely ignoring ours and giving us the same break
00:09:17.680they're giving to everybody else because they're not worried about negotiations with Canada
00:09:21.760long term. What they're really concerned with and focused on is dealing with China
00:09:26.880and coming straight at China on trade, debt, and security.
00:09:32.480Well, I'd like to come back to the China question in a moment,
00:09:35.300but right now we're in the middle of an election, as you know,
00:09:37.840and we have two people, Pierre Polyev and Mark Carney.
00:09:43.940Do you get the impression that they see the situation the way you've just described it
00:09:53.500and are carefully avoiding comment yes they have to it's not even nothing i've said is
00:10:01.500remotely controversial it's canada has had a decade of the worst productivity out of the 40
00:10:08.580advanced economies in the world and we are on track to be the very worst until 2030 and when
00:10:14.240they ran the numbers they said probably till 2060 there is zero chance that canada can engage in a
00:10:20.960trade war with the United States and survive for months. There is nothing controversial about this.
00:10:26.840No serious economist can look at Canada's current position as an economy and say that we have the
00:10:33.100remotest chance of doing anything that threatens the United States when it comes to trade. We have
00:10:37.840zero leverage. We have had a decade of collapse in productivity. We have a GDP that cannot keep
00:10:44.120up with even supplying our own government with enough money to function because it is so poor.
00:10:50.140The debt levels are now eating about probably it's over $54 billion now, probably up to
00:10:55.400it was $62 billion the last time that Christian Freeland decided to resign the day before
00:12:12.960Do you have any sense of where the conservatives
00:12:15.780are on this, Pierre Pellievre and the rest of the conservative leaders?
00:12:24.900Look, I think Pierre is fighting a good fight.
00:12:27.380It's hard for him to get, you know, quality time from our state-run media
00:12:32.220because they know that one of his goals will be to reduce the reliance
00:12:36.540of our media on taxpayer dollars, and they're aware of that.
00:12:42.060And I think that that's meant that they aren't entirely celebrating.
00:12:47.040You know, it's extraordinary to me that somebody who's a politician can pull 15,000 people to an open rally and not have that be the top story of the election so far, because that is just an extraordinary outcome.
00:12:59.800In a former sitting prime minister, Stephen Harper introduced him, very compelling speech.
00:13:04.680And it, you know, it hardly made a ripple in our state run media.
00:13:08.140I think we have a problem as a country in that Canada is currently governed by a party that decided to turn us back to the 1970s and sort of a statist media approach that helps maintain the messaging that they want on things.
00:13:23.920Pierce is fighting uphill against that. He's fighting uphill against having been in landslide territory for months. And then with the passing of the torch from Justin Trudeau to Mark Carney, you know, having somebody that is able to portray himself as a safe pair of hands, you know, literate, financially literate, which is a nice change from Krisha Freeland and Justin Trudeau.
00:13:48.100But, you know, he's also been able to escape taking any accountability for his advisory work for the last five years, which has been the worst five years for Canada, largely due to Mark Carney's ideology on climate alarmism and on deficit and debt spending that has has left us in an extraordinarily bad position.
00:14:09.500So I think Mark Carney has a lot to answer for. I think that the Liberal Party's changing of the guard has worked for them. And I think their close messaging through the media has also worked for them.
00:14:21.700It's instructive to me to note that the number one demographic, the only demographic that Mark Carney substantially leads in is the demographic tends to vote the most, which is everyone over the age of 60.
00:14:35.600That's everybody that still watches TV.
00:14:38.880It's everybody that's retired and has time to watch TV.
00:14:42.000And I think, you know, the alignment between state run media, people in that older demographic that still rely on those older channels for their information and the ability of the Carney election campaign team to run a run a targeted sort of focus strategy around that demographic is instructive.
00:15:04.000constructive, it's telling. I'm disappointed that that demographic of boomers is falling so easily
00:15:12.000for the new version of what has been a bad hand for the country for a decade. But it's been
00:15:19.740tactically effective, and Pierre has to figure out a way to differentiate himself on that front.
00:15:24.020Perhaps this is a good moment for me to remind Western Standard viewers that the Western Standard
00:15:29.160does not accept any subsidy of any kind from the program that David is talking about here,
00:15:37.880which puts, I think, something like $600 million into the so-called mainstream media.
00:16:48.560and you know let's maybe i'll answer that question by referring to categories that we understand in
00:16:56.240canada um when when the trump administration first said we are going to put tariffs on canada
00:17:02.960because of the following things the following things were things that people found you know
00:17:09.580almost unbelievable which was you know your problem with fentanyl uh you're part of the
00:17:14.420fentanyl trade. And so, you know, we sort of said, okay, well, we'll put $1.3 billion into
00:17:20.980border security and we'll help deal with fentanyl. But nobody really believed it was entirely about
00:17:25.640fentanyl because it was, you know, we have an important kind of open border. And so there's
00:17:32.280security issues that we need to address, but we knew that wasn't entirely the case. We also knew
00:17:36.500that, you know, that the trade relationship between Canada and the United States is net
00:17:43.320beneficial to the United States. They have a trade surplus with us of $58 billion until you
00:17:48.460include oil and gas. Once you include oil and gas, they go into deficit, but that is not a real
00:17:53.300deficit because the bilateral trade in energy is one way from Canada to the United States
00:18:00.020at exceptional value to them. They refine and repurpose that and then they make money when
00:18:05.460They export, they consume a lot at an exceptional value below market, below global markets, and then they refine and export a lot and make huge profits on it.
00:18:17.360So we knew that that discussion with the Trump administration wasn't going anywhere.
00:18:22.960And what was interesting to me, two things were interesting.
00:18:25.900One was, you know, our media didn't really dig into the dynamics of the security relationship between Canada and the United States, which I think has four or five different.