This week on the podcast, we discuss Donald Trump’s inauguration and his return to the Oval Office, including his memorandums and executive orders. Joining the conversation is Christopher Sands, Director of the Wilson Center’s Canada Institute, a specialist on Canada, US-Canadian relations, and North American economic integration.

Here are some of the questions Jackie and Peter asked Christopher: What is your reaction to President Trump’s speech to the business leaders at Davos, specifically his remarks about not needing Canadian lumber, automobiles, or oil and gas? President Trump’s inauguration speech mentioned expanding territory; does that mean going to war? The executive order “American First Trade Policy” outlined a process to make trade recommendations by April 1^st. However, President Trump also mentioned February 1^st as the day tariffs could be imposed on Canada and Mexico. Which date do you expect? How important is it for Canada to increase its military spending? Some of President Trump’s executive orders, such as “Unleashing American Energy” and “Declaring a National Energy Emergency,” grant the federal government significant powers—akin to wartime measures—to expedite energy infrastructure development. Do you expect these powers will be challenged in the courts? President Trump has stated that he will end the Green New Deal, and one executive order froze the Inflation Reduction Act (IRA) funds. What is your expectation regarding support for clean energy? Canada currently has a void of federal leadership, and Premiers are filling the gap and going to Washington, D.C.; how is that being viewed in the US?  What are your views on the top contenders for the next Prime Minister of Canada and their ability to negotiate successfully with President Trump and the new Administration?

Content referenced in this podcast:

• The Canusa Street Podcast
• Canada and the United States: Differences That Count, Fifth edition, David Thomas and Christopher Sands

Please review our disclaimer at: https://www.arcenergyinstitute.com/disclaimer/

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LinkedIn: @ARC Energy Research Institute

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Episode 269 transcript

Disclosure:

The information and opinions presented in this ARC Energy Ideas podcast are provided for informational purposes only and are subject to the disclaimer link in the show notes.

Announcer:

This is the ARC Energy Ideas podcast, with Peter Tertzakian and Jackie Forrest, exploring trends that influence the energy business.

Jackie Forrest:

Welcome to the Arc Energy Ideas podcast. I’m Jackie Forrest.

Peter Tertzakian:

And I’m Peter Tertzakian. Welcome back. Well, Jackie, did you get an invite to Davos?

Jackie Forrest:

No. No, I didn’t. But I’ve been watching the headlines. So, as we’re recording, it’s Thursday, January 23rd. Obviously, we had the inauguration on Monday, and it’s just been a wild ride of nonstop news ever since.

Peter Tertzakian:

Nonstop news flow. I missed my flight to Davos and my private plane wouldn’t light up, so I unfortunately, couldn’t make it this year.

Jackie Forrest:

So, you could make it this year?

Peter Tertzakian:

I couldn’t make this year. But due to the virtual world, we’re able to hear all about it and some interesting quotes coming out.

Jackie Forrest:

Yeah. So, obviously this morning, Trump addressed the world’s business leaders and elites at Davos. And there’s a couple of headlines that are relevant. Let’s start with the OPEC one. Headline that he’s asking OPEC to reduce oil prices, and he actually associates it with ending Russia’s war with the Ukraine. Guess if you get the oil prices low enough, then Russia won’t have money.

Peter Tertzakian:

He, being Donald Trump?

Jackie Forrest:

Yes. Donald Trump. Sorry. Yeah.

Peter Tertzakian:

Yeah. Yeah. Well, I mean, I think that there is, as we’ve said in our last podcast, that this is very much a global play and trying to get OPEC to reduce prices. Well, we’ll see how that goes. They certainly can. And be careful what you wish for, because the last time there was drill, baby drill was around September, October 2014. By 2015, the Saudis were flooding the market and the price of oil went to 40 bucks. After which the Permian went into pretty quick decline in production. So, the reality is that in some ways the two things are inconsistent.

Jackie Forrest:

Right. He wants to grow the oil and gas production, but it’s going to be at a price that allows oil and gas producers to want to grow the production. Yeah.

Peter Tertzakian:

Well, exactly. I mean, there’s this thing in the industry called the resource triangle, which means that you can liberate more oil as the price goes up. But the reverse is also true is that given the technology that you have, and certainly the technology has advanced over the last 15 years with horizontal drilling, fracturing and other sorts of techniques.

But the reality is that many of the great plays around the world, not only in the United States, but they do require minimum, and we’ve talked about it on the show, $65, $70 to grow at a meaningful amount. In Saudi, it’s a lot less, and they’ve got spare capacity at the moment. But certainly, if you ask OPEC to drop the price, you’re not going to grow your domestic production.

Jackie Forrest:

Right. Yeah. Well, and hey, here’s another quote more relevant here at home in Canada. He had said some things like he said, that Canada has a $200 billion deficit. Now, it gets bigger all the time. We talked about the $100 billion, and where we weren’t sure where that number came from, because the trade surplus was actually half of that.

But the quote today was, “Canada is very tough to deal with. We don’t need their cars. We make a lot of them. We don’t need their lumber. We have our own forests. We don’t need oil and gas. We have more than anybody.” I mean, United States is the largest producer of oil in the world and gas as well.

Peter Tertzakian:

Yeah. Well, I mean potentially you don’t need any of our stuff. I would concur with that. You have to grow your domestic ability, which would be very costly. But I think that there’s another incongruency in this dialogue. In the same speech, he again talked about Canada being at 51st State saying, “Well, if you don’t need any of our stuff, why do you want us to join the union?” I don’t get it.

Well, actually, I do get the global play, it’s all, and the narrative and the bluster that goes with it. But this is very much a bigger economic reshuffling of the world order that we need to talk about. And I can’t think of anyone better to talk about Canada’s positioning in that new world order than Christopher Sands, director of the Wilson Center’s Canada Institute out of Washington, DC and he is a specialist on Canada-US relations. Welcome, Christopher.

Christopher Sands:

Thanks. Great to be here. Virtually at least.

Jackie Forrest:

Well, Christopher, you’re actually one of the first guests that we’ve had that has their own podcast. So, I think you have your, how do you say it, Canasa? Oh, Canada-USA?

Christopher Sands:

Oh, we call it Canusa, Canusa. It’s named for a street between Stanstead, Quebec and Derby Line, Vermont, where the street is the border, and it’s called something like State Street officially, but the locals call it Canusa Street for C-A-N for Canada and U-S-A for USA. So, I don’t know, maybe we can convince Doug Ford to go with Fort Canusa rather than Fortress Am-Can. It rings nicely off the tongue.

Jackie Forrest:

Well, and so you’ve been thinking about Canada and USA for your whole career, so maybe you could just follow in on the speech that we just talked about, your reaction to some of the comments, and then we’re going to go through some of these announcements and these executive orders, because we have a lot of questions around on Monday’s news as well.

Christopher Sands:

Well, I think the important thing, which won’t surprise anybody, is that Donald Trump is a smart person and a very good communicator, but he’s not a detailed person. And so, he has ideas often that he’ll express that if you factcheck them, don’t necessarily correlate out. And we heard a little bit today about the way in which he reached this massive figure for subsidizing because people say, “Well, if it’s the trade surplus that Canada has at the moment, it generally isn’t a huge surplus, but happens to be high now.”

If that’s it, we’re only talking about 60 billion. Where is this 200 billion coming from, et cetera? And we found out today that president’s numbers are being … he’s including those number in the cost of us defending Canada. So, a big chunk of the defense budget as well is thrown in there against you. So, that’s fine, but it reminds me of the line that Salena Zito, the reporter had about Trump when he ran in the first instance and back in 2016, which was that “His supporters have a tendency to take him seriously, where his opponents take him literally, but not seriously.”

And I think we’re much better off of that former, which is to take the general thrust of his comments as serious business we have to think about. But if we take them too literally, we find they don’t stand up or make any sense. And pointing that out doesn’t convince him to change his mind at all, because he still thinks he’s right on the big picture. So, it makes it challenging, but we’ve been through this before, so hopefully we’ll be able to find our feet.

Peter Tertzakian:

Yeah. There’s a lot of focus on Trump, not surprisingly, because of his larger-than-life presence and his bluster and management by bluster, I’ll call it. But in actual fact that it is, I agree, he’s a very shrewd person without the detail. But there are people in his orbit that don’t get talked about very much that whether they’re Harvard academics or others that are really guiding the thinking here, the strategic global thinking that goes along with tariffs, control of trade routes, geopolitics and everything.

Christopher Sands:

Yeah. No. Absolutely. And I think he has built a base by communicating his vision, and he’s hired people who are extremely smart, who start from those premises and say, “Well, then what do we do about it?” The backward analysis we can debate, but it’s the forward analysis that’s challenging. And so, you look at some of the people that are being brought forward who understand what he wants or who are on his team.

I think one of the people that a lot of Canadians have looked at is Doug Burgum, someone who’s been successful in business and who, from the position of Department Interior, which includes federal lands, is being asked to lead an energy taskforce that’s going to take a look at how do we build that energy. You can put those two together and assume that there’ll be some element of that, which is building out sort of drilling on other activity on federal lands.

Peter Tertzakian:

So, is that a positive of somebody like Burgum, who’s from North Dakota, I believe, certainly understands the Canada-US dynamic being on the border. I mean, he gets it. He gets the North American energy integration and everything else. But how influential is he within this, what I call inner orbit of Donald Trump, which has a lot of also grandiose almost to the point of zealotry in its ambitions?

Christopher Sands:

Well, I think the people that Trump has chosen this time around, he has chosen a remarkable set of communicators, people who can articulate as he can, the vision of where they’re trying to go. He respects Burgum in part because he thinks Burgum’s a winner successful in business. But remember that Doug Burgum was also involved in the Dakota Access Line debates about moving pipelines through North Dakota.

So, he’s very familiar with both the pros and cons of trying to build major infrastructure and instead of going out and trying to take attention away from Donald Trump, he “Let’s Donald Trump run the show.” But I think when it comes to implementing Donald Trump’s vision, people like Doug Burgum do matter, as do people like Marco Rubio, Secretary of State and others, because they will articulate and make Trump look good to the outer world, but they’re also his translators of his vision into action. And so, he does count on them, some more than others, of course.

Jackie Forrest:

Well, let’s get into some of the specifics of these executive orders and we’ll get into that energy emergency one in a bit. But first I wanted to talk to you about his speech, his inauguration speech. Donald Trump’s wanting to expand territory was one of the comments made. There was just basically a lot of expansionists. His admiration for William McKinley who like tariffs, but also went to war and expanded US territory. He referred to the term “Manifest Destiny” and starting the Golden Age of America. He wants the Panama Canal back.

What do you take from this language? Is this beyond economic pressure? Do you think that the US could potentially go to war to expand their territory? What does he mean by this?

Christopher Sands:

Well, I don’t think that he intends to go to war, but he is talking about, I think a number of these issues, to try to draw attention away from some of the trench warfare, getting some of his nominees through. This is going to be a very tough year for the US. We talk about the Republicans being in a commanding spot because they have the majority in the Senate, the House, but it’s a pretty thin one.

And when you have a very small majority in either chamber, you’ll have a hard time getting anything done, but you’ll get 100% of the blame if things don’t get done, because the public will say, “Well, the Republicans are in charge, what lousy job they did.” And we know that within two years when we have midterm elections in 2026, it’s typical that the party that holds the White House loses seats.

So, we’re at the period now where the Republicans have a very thin command of Congress, and they also are expecting potentially to lose that control in 2026 in November. So, in that window, he’s moving fast, unlike the first term, he’s hit the ground running with members for his cabinet already vetted. He’s been moving very quickly, putting a lot of proposals out there.

And it’s part of his communication strategy to flood the zone with so many different things that the media is running after every little story and some of the big brash tales of taking over Greenland or renaming the Gulf of Mexico, the Gulf of America. You can see it online in Canada. They fill the message boards. They’re discussed by both his supporters and his opponents.

And so, going back to that Salena Zito phrase, “I don’t take Donald Trump literally when he talks that way. I just take him seriously that he’s pushing on all those buttons.” In the Canada-US case, I think is classic. He started mocking Justin Trudeau for coming to Mar-a-Lago where other world leaders simply called or made more formal arrangements, came down right away.

He was like a governor of a state. And once he made that comment, then he talked about the 51st state, which is a joke that many Canadians, Americans have kicked around for a while and then he just keeps going. So, he goes from insulting Trudeau, probably where he started, to loosely insulting all Canadians and saying the country wasn’t very good. All of which is keeping people from focusing on other aspects of his agenda. And he sees the media as hostile to him.

He much prefers podcasts and other ways of communicating with the public, and his style works for him. But I wouldn’t take military expansion seriously. I wouldn’t take the idea of Greenland being purchased, although everybody’s rushed in to say, “Well, the US has purchased territory before. Maybe it would try again, building historical case.”

I think most of those are he’s raising an issue. Greenland like Canada, fairly weakly defended in the Arctic, full of critical minerals, can’t allow to fall in the wrong hand. So, he sent a signal there. The Panama Canal, despite the pandemic’s expansion, is still having problems with inadequate water supply, old equipment and questions about whether China is taking over some key parts of the operation of the canal.

Trump has sent a signal. He’s not going to allow that. Will it come to invasion? I doubt it. But the signal he’s sending is mainly to the Panamanians to get their act together and the Chinese to back off. So, he’s worth taking seriously, but I don’t think I’d waste much time on whether literally he’s going to do those things.

Peter Tertzakian:

Yeah. I don’t think the literal going to war extreme is realizable. But I do think using economy as a weapon or economic muscle as a weapon is definitely there. And I mean, if I go down the checklist here, so let’s think about the narratives here. Tariffs, control of trade routes, think Panama, think Northwest Passage. Colonization, think 51st state, think taking over Greenland. Scramble for strategic resource wealth such as in rare earth minerals, oil, gas, et cetera, uranium. Use of corporate surrogates as a surrogate of geopolitical aims. There’s a big corporations controlled by Musk and Zuckerberg and others.

I mean, you’d go “tick, tick, tick, tick.” And then I look back in history and say, “Okay. This is a mercantilist playbook.” And then all the protectionism, basically, let’s shred Adam Smith, David Ricardo for the history buffs on the podcast here, and we’re going backwards to a mercantilist type economy that is very much controlled by the state. I mean, it’s like following almost China’s playbook over the course of the last 15 years.

Christopher Sands:

I’m not sure I would agree with that characterization. I mean, I think you can see echoes, but I’m not sure it’s quite the same. For Donald Trump, there is a sense that the liberal international order was a way in which the US was offering to use its economy to encourage countries to move away from import substitution industrialization towards something like export-led growth. I don’t think there’s a colonial interest here.

On the other hand, if you go back not only to William McKinley, but more importantly to William Howard Taft, the idea that the US would use its economy to draw countries forward is more an echo of dollar diplomacy or the open door in China than it is of any British imperial or other imperial desire to actually govern other people. That’s one of my objections to the 51st state conversation, and I say this really just as a cheapskate taxpayer.

But why should we make Canada a state? You raise this in the opening. What is it that Canada has that we can’t negotiate to get at a fair price? Canadians have always been pretty good partners. Whereas the cost of taking you over or let alone buying Canada, it’s a lot of expense. And I don’t know if you’ve looked at our deficit lately.

Peter Tertzakian:

Okay. What about, maybe it’s not a full statehood, but maybe there’s some protectorate that is interested in like Puerto Rico, American Samoa, this sort of thing?

Christopher Sands:

Yeah. It’s funny. I think he feels that if you were part of the states, you’d be paying your taxes and then he could use that to defend you. But now, he feels like you’ve been free riding. He feels like most of Europe has been free riding in American defense, and that’s not unique to him. It’s been the message that American presidents have delivered the allies since the 1950s. What’s different is that during the Cold War, the equalizer for the west was nuclear weapons, and we had no desire for you or the Germans or anyone else to get nuclear weapons.

So, there was sort of an understanding. You’d make efforts to be a good ally, you’d spend something on defense, but rely on the nuclear umbrella to meet Soviet overmatch in terms of troops and tanks and so on. Well, now, we’re in a different era. Everybody needs to pull their weight. And Canada and maybe Belgium, I think are the last and the least spendy of all of the NATO allies. And he sees that as needing to be corrected. And there’ll be a lot of pressure on Canada’s step on defense.

Luckily, I think a lot of Canadians have realized the world is a scary place and that some spending on defense is warranted. So, how we get there, I don’t know. But I do think that that is not really a change in past policy, very consistent with where the US has been just a little bit more edgy because of the change world situation.

Jackie Forrest:

Well, in the situation right now, correct me if I’m wrong, I think we’re spending about 1.2% or 1.3% of GDP and we’re supposed to be spending two, but Donald Trump has said actually he wants countries to spend 5% of GDP. And so, as we think about this negotiation coming up, how critical is it that we spend more immediately? Because I think there was a plan to spend more, but it was like into the 2030s.

Christopher Sands:

Yeah. I think Canada’s pledged three times to reach 2%. First at Wales which was Stephen Harper, then at Vilnius, and then last year in Washington. And always that’s been a pledge without a plan. And certainly, to be fair to Stephen Harper, it was a pledge as an aspiration. That’s how the Wales commitment was framed. We will all try to get to 2%. It was at Vilnius, it became a 4%.

Peter Tertzakian:

So, let me ask you the question. If magically we said, “Okay. We’re going to spend 5%, we’re going to seal the borders more effectively.” So, do you think he would say, “Okay. Great. We’re done. We’re back to free trade.”

Christopher Sands:

Would that it were so easy. Getting to 5% for Canada would be a huge lift. I think getting to 2% is going to be a big lift. Because …

Peter Tertzakian:

No. I know. But just hypothesize for me for a sec. Just say we did it. Just say we did it. Do you think it’s over, the conversation is over? Because personally I don’t think it is, but that’s my bias.

Christopher Sands:

My guess is it would take you so long to get there that it could become a more positive conversation about how you’re getting there. I think certainly having agreed you’re going to go there has made a difference. And here’s where I would slightly shift the attention. On trade and other things, it’s not really Trump that is the issue. It’s the Congress. And last year, 2024, the Senate Armed Services Committee talked about the need to spend more on defense, and they talked about $880 billion, which was last year’s allotment as being too little.

And the US was going to have to move to a trillion, maybe 1.2 trillion to get there. We are in a terrible fiscal situation, not as bad as yours, but in some ways pretty bad. And we’ve been indulged in that by having the reserve currency. And Donald Trump wants this Department of Government efficiency to cut spending. He wants lower taxes and renew the 2017 tax breaks that he brought in his first term.

Congress will say “More, spending less taxes is a bad situation. And so, how do we square that circle?” The president has made it also complicated because his populism means he doesn’t want to cut Medicare, Medicaid, social security or veterans’ benefits, which those entitlement spending programs are a huge charge of the budget. Then you take defense and you want to expand it with no new taxes, hard to do.

So, his strategy of pushing hard on the allies is to get, what we would call in Congress, an offset. That if Canada is doing so much more that we don’t have to do that or we can do a little bit less, we save money that we can put into our own defense priorities. Getting all the allies to step up means there’s less burden on the US, which means we can still increase, but we don’t necessarily have to raise taxes.

And then the tariff discussions, which oddly we talked about the McKinley Tariff, we could talk about the Smoot-Hawley Tariff 1930, which is getting discussed again, and the 1977 International Economic Emergencies Act. Those all allow him to raise tariff money, which he thinks will and says will help offset lower taxes. They’ll help him to reduce the dependence on the income tax. And we think about McKinley Tariff was the last big tariff before the income tax came in under Woodrow Wilson.

So, the ideas kind of gel, but I think the reason that Canada’s under so much pressure is that Congress is looking for a way to do almost the impossible, which is to do this without raising taxes. Personally, I suspect they’re going to end up raising taxes as well. But if you see Canada and its lack of defense spending as making the US carry more of the burden, and you feel that fiscal pinch, that’s where you get into the head of Congress.

And the way to placate them is to show that you’re doing your bit, so we don’t have to do as much. And I think the percentage or the target number, far less important.

Jackie Forrest:

And tariffs are way to raise money as well. We send about $400 billion to US and buy as much. So, maybe we’ll pay for our military by putting tariffs on all the goods we get from the US, because 25% of 400, that’s $100 billion. That’ll help. But hey, let’s talk quickly. Quick question for you. We had all this confusion on Monday where we heard through the media that we weren’t going to get tariffs till April 1st. Later on, that day, actually an executive order came out that talked about a plan to study the situation and make recommendations by April 1st.

But then late at night while the president was in his Oval Office signing and talking to the press, we learned he had a casual comment, “Well, maybe it would be February 1st.” So, what is the real plan? Do you think the April 1st is the plan, the one that was written down and signed as an executive order?

Christopher Sands:

Well, I was kind of thinking that February 2nd would be the best date, because it would be Groundhog Day, and we’re all back to tariffs again.

Jackie Forrest:

By the way, April 1st is April Fool’s Day, too.

Christopher Sands:

That’s true.

Jackie Forrest:

Interesting date.

Christopher Sands:

You’d have to wonder if the tariffs were announced then, if they were real or not. So, if you look at what he said so far, it matters what kind of authority he uses. Because certain authorities that Congress has delegated for emergency tariffs are ones that are totally in his power because they don’t require a prior study. And a couple of them require going to the ITC and having them do a study and proving that there’s unfair trade practices or whatever, to his term, the amount of the tariff.

Smoot-Hawley, the 1930 tariff allows the president to go up to 50%, no higher in an emergency. There’s more room under the International Economic Emergencies Powers Act, the IEEPA. But that was designed specifically for oil and energy emergencies. That’s why we’ve been talking about energy emergencies in recent weeks because those powers were tied to the oil crisis of the ’70s.

And the 1962 Trade Expansion Act came at a time when we were worried about losing industrial capacity, which is why it made sense under that Act without an investigation to accuse Canada of having national security threatening steel and aluminum, which otherwise makes no sense to anybody. The arcana of the way these bills are written and the way that a president must use certain words to justify using those acts to protect them from being challenged court is what you’re getting.

And it’s very confusing and nonsensical and sometimes quite offensive. Canada’s a national security threat. It doesn’t really resonate with many Americans. But he’s picking and choosing to find that the powers that he can most use. One of the critiques of his first term, even among Republicans, was that he had abilities to do things, but because he understood government so poorly, he didn’t even use the powers at his disposal. And he spent four years nursing that grievance and getting people to tell him, “How can you make the system do what you want?”

And so, he’s coming in with some very creative and challenging interpretations of US law. Congress doesn’t seem willing to assert its authority against that, so far, and you wouldn’t expect that because they’re so tightly divided, not worth their time. So, it’s going to be up to the courts, if anybody, to limit what the president’s able to do under these various bits of legislation.

Peter Tertzakian:

So, right now, we’re fixated on the probability of tariffs, which seems quite high and the amount of the tariff. And now, you’re saying it also depends upon under which laws and acts that can be enacted, but talk about the likelihood of how long the tariffs would lack. To me, that’s the big thing is okay, you put the tariffs on, maybe they’re temporary maybe or whatever. But I personally think this is not a temporary thing.

Christopher Sands:

It’s a risk. Yeah. So, most of them don’t have a provision that they sunset at a particular time. So, you would need a president to make the decision to remove them. Either this one or a future one. They could be blocked in court or held up, that be another option. Or Congress could, I don’t see this happening, but they could decide that they’re going to rescind the early legislation. So, let me take that and think about it in terms of what you could do.

Donald Trump has recently talked about, and you saw this a little bit in Davos, moving up the start of the USMCA review or CUSMA review. That review is due in 2026, but it’s due by 2026, not necessarily in the year 2026. One option, which I think is worth exploring is having a ceasefire before you have peace negotiations in effect to say the 25% tariff on Canada and Mexico needs to be suspended or put on the shelf for now so that we can enter into USMCA renegotiation as soon as possible.

And President Trump has talked about moving that very early in the spring, probably after Jamieson Greer, his choice for US trade representative takes office. So, in that environment … Oh, and I should add, Trump has also talked about whether USMCA needs annual review to adjust rules of origin and other things, which has some pros and cons.

But if he wants to move that start date up, Canada and Mexico will say, “Well, we’re willing to negotiate and move that start date up in exchange for taking those tariffs and putting them to one side.” Now, that still leaves them potentially out there. But if they were just meant to get Canada to the table, they can. And if this problem is trade imbalances, then why not work with a trade agreement that governs our trade to figure out ways to tighten up the rules and in detail, figure out how you want to change those trade imbalances?

I personally, because I had too much economics in school, know that a trade imbalance in the current account is counterbalanced by the capital account. So, not only is Canada selling more to the US than it’s buying, but also Canadians are sending a lot of investment to the US as well.

Peter Tertzakian:

What you’ve been talking about in the last few minutes here is that Trump and his new administration are looking at these institutions that govern trade, the ITC, all the internal laws and so on and so forth. But what we’ve seen in the first few days is basically like a bull in a China shop pulling out of all sorts of agreements like the Paris Agreement, the World Health Organization. So, why wouldn’t you just say, “Okay. We’re not going to abide by anything in the ITC. We’re pulling out of that. We’re pulling out of this.”

Christopher Sands:

Well, luckily the ITC is a US body, so he can’t pull out of it.

Peter Tertzakian:

He could tell all the workers to stay home or whatever.

Christopher Sands:

Yeah. I keep wondering when Congress is going to feel that delegation of tariff authority to presidents needs to be reined in. But Congress has been very poor in recent years defending its own prerogatives under the Constitution. The checks and balances only work if each of the bodies is actually willing to assert their powers against the other. And Congress has been a weak partner, compared to the Supreme Court and to the executive branch lately, which eventually that wheel probably will turn. But I don’t see much stomach in it.

But you could argue this goes back, to some extent, to President Obama, the use of executive orders, which are ruled by fiat, ruled by decree. They’re not a great way to govern a democratic, republic under the rule of law.

Peter Tertzakian:

This speaks to a return to monarchy, which it’s a mercantilist construct. But anyway.

Christopher Sands:

Yeah.

Jackie Forrest:

Just to comment on the fact that he’s even looking at the USMCA doesn’t sound like we’re having free trade if you’re putting 25% tariffs on. So, I do see that as a positive sign that actually showed up in that executive order around a free trade that they were reviewing that. I want to get to a few more questions on Canada. But since you’re on that topic of these executive orders, I’d be interested, Chris, on your view.

I mean, a number of these executive orders, the Unleashing American Energy or calling for an energy emergency were really broad powers. The energy emergency is almost like wartime measures where they can build pipelines without requiring environmental oversight, including things like not worrying about things like species at risk or not worrying if states like on the west coast specifically or the northeast states didn’t like it.

What are the chances that there are legal challenges on some of this and he’s not able to do all these things as it’s written in these executive orders?

Christopher Sands:

Right. So, interesting. Like inside Washington thing, the executive order establishes the direction and then it goes to a secondary, usually the Office of Personnel Management, if it involves people, or the Office of Management and Budget where it gets translated into strict policy guidance. In the case where it falls under a department, you get the department that comes up with the way they plan to implement it, which has to get approval.

Once that’s happened, you can challenge these things in court and depending on the executive order, some of them have been defeated. But generally, the courts have deferred to the president on things, especially when they involve national security, which is the great frustration of the steel, aluminum tariffs of the first term. And national security is an American obsession. It is something that draws broad bipartisan support for Republicans, Democrats, nobody wants to be on the wrong side of it.

And in the case of the energy emergency, there are two things there. One is the 1977 International Energy Emergency Powers Act, which was set up to give broad powers in the case of an emergency, say, an oil embargo, to maybe stop exports for domestic use to figure out how to maneuver things.

But it also coincides with something that Senator Joe Manchin, Democrat from West Virginia had proposed a couple of years ago when this was becoming a very tricky issue over Keystone, which is that there needs to be a power that the president can declare certain infrastructure a national security priority to override local permitting, state objections and make sure that pipelines get built.

And the idea there was to use that federalization to presume and to take over the local powers because it had been too impossible to get to, “Yes. Otherwise.” I think that’s come together in this executive order with a view just designating certain projects as priorities and not have a lot of time spent in court over particular species, et cetera. It’s an experiment. I would argue our system has been quite broken.

We often make bring our hands about Canadians ability to build things, but American ability to build things has been, if anything, worse. And the one area where we can break things up is when we use eminent domain and we bring in the military to build a base or a nuclear waste site. Here, I think we’re trying to use those federal powers. I don’t know if it’ll work.

But there are a lot of people in Trump’s world who feel like stopping everything, nothing in my backyard and nothing anywhere on planet Earth is just not getting us where we need to be. So, this is an attempt at a solution. As always, legislation in a full public debate would be better, but this is the way that we’re trying.

Peter Tertzakian:

Help me out anyway or Jackie [inaudible 00:32:08], what is the emergency? We’ve got the United States plus Canada in oil are now 85% self-sufficient. If you throw Mexico in there, I think it’s pretty close to 90%. Only 5% comes from OPEC countries, which is just like an incredible turnaround in the last 15 years because of the shale oil revolution and the addition of our oil sands. So, natural gas, I think, the country’s completely self-sufficient, electricity. So, where’s the emergency and why is that word even used?

Christopher Sands:

Well, electricity is worth a comment and then I’ll talk secondarily about everything else. So, electricity is a problem because of AI, EVs, all these wonderful two-letter acronyms, electric vehicles, artificial intelligence, and the huge demands. Those are going to put on a current grid. Which in the US the grid is relatively fragile, it has several different zones, and the interconnections between the zones are weak.

We know we need both more capacity and more interconnections to provide resilience. There’s a long story about why we put ourselves in this position. But given that rising demand and the need to meet it, we’re impatient to catch up. And that’ll involve a lot of nuclear power plants in the Midwest, which is probably the biggest energy consuming region without a local source except for some natural gas on the sidelines. So, we’ve used nuclear and other things there.

On oil and other products, the debate is much more global. A concern about how do we provide alternatives to reliance in the Middle East and Russia to friendly allies in Latin America on the Asia-Pacific Rim and in Europe. And Canada, of course, remembered European leaders, Asian leaders coming to Canada and asking for LNG and a limited ability, if any, to deliver it.

Now, we’ve gotten around that to some extent by moving Canadian natural gas in liquefy in the US and shipping it out of US ports. But the need to meet global demand and shore up the US alliance of countries as a counterweight is a reflection of great power rivalry, great power competition being the paradigm that Washington’s looking at the world through.

So, yes, if we were an island unto ourselves, and certainly to some extent we’re a regional production platform, we have energy. But the view that I think Trump takes is that this is an important resource and supply line that we need to provide to our allies in order to keep them in our orbit and keep them from being under pressure from China, Russia, or someone else.

Jackie Forrest:

Now, one of the executive orders, the Unleashing American Energy, it talked about foreign oil, reducing dependence on foreign oil, and that was a national security issue, an energy security issue. As long as I’ve been working in this industry, we always viewed Canada as not foreign oil, and we thought folks in DC saw that as well. Do the Americans now view Canadian oil and gas as foreign?

Christopher Sands:

I don’t think so. I mean, technically, of course, it is. I think the president’s using that rhetoric, and I’m probably older than you both. But back in the ’70s, that was something that a lot of people knew. Depends on foreign oil, dragged us into wars in the Middle East, made us get involved in things we didn’t want to get involved in. And so, he’s name-checking something that will resonate with some voters. Depends on foreign oil is inadequate.

However, we’ve talked about this before. I think believe North America, whether we were talking about energy dominance, energy preeminence or Stephen Harper’s vision of Canada being an energy superpower, this is something that’s very vital to the future of our economies. And I think there’s every reason to believe we could really focus on the more threatening source of oil that we want to get off rather than focusing on Canada, which is as you know, producing a kind of oil that is a little different than what the US has for which there’s very specific demand and a lot of our refineries are eager to refine it. But I don’t think Canada is a primary source of foreign oil when he talks about moving away from foreign oil.

Peter Tertzakian:

Okay. Well, that’s oil. We’ve heard that the Green New Deal has been shredded and the successor to the Green New Deal, the IRA, Inflation Reduction Act, the disbursements of the monies is on ice. So, what do you make of all that and what does that mean to clean energy transition?

Christopher Sands:

It is a dramatic gesture of a piece. It’s not the only one where there was a feeling that the President Biden and his administration were pushing as much money out the door as possible. Any of that money that doesn’t get spent can be redirected to new priorities. And so, it was almost like trying to stop somebody from robbing the bank. Although that money had been authorized, it was supposed to be spent, it was not something that Trump supported.

He felt like he won the election showing that his direction had more popular support and midnight checks going out the door to keep programs going, he resented. That’s why he’s frozen the money. He’s going to try and claw much of it back. The Green New Deal and the IRA specific to the energy provisions, because of course, it’s a sprawling bill with a lot of measures, really didn’t have very much, if any, Republican support and were seen as forcing changes like EV mandates and other things on people who couldn’t afford them.

They were characterized in Trump’s populist rhetoric as making people least able to pay for things, actually paying the cost so that rich people could have Teslas and whatnot. And so, I think that era of industrial policy by subsidy is something that he intends to end and take back as much money as he can. Legally, he may not get all of it back, but he is determined to move away from that kind of industrial policy. That doesn’t mean he won’t do industrial policy. It’s just he has different priorities.

Jackie Forrest:

Okay. So, expect changes coming. One more question before we move away, more to Canada, is you obviously have a void of leadership here in Canada right now with the liberals broguing the parliament and the potential for an election here. And in that void, we are seeing premiers come down. Daniel Smith has come down a number of times and we see a lot of premiers on the TV trying to get towards the American audience. Tell us how is that being received in DC and also what you would recommend a winning strategy would be, because there’s a lot of debate on that right now.

Christopher Sands:

That’s a tough one. A million-dollar question, if ever there was one.

Peter Tertzakian:

Trillion, trillion-dollar question.

Christopher Sands:

On the leadership turmoil, I mean, it does seem like bad timing. Justin Trudeau had run out of Trump’s patience, fondness, et cetera. Trump, I think, showed he was willing to do business with Canada, when Justin Trudeau came down, along with Dominic LeBlanc and others to meet with him in Mar-a-Lago, he wasn’t opposed to a conversation, but he didn’t really like Justin Trudeau. And so, there were no tears that he resigned.

He doesn’t like Chrystia Freeland either, personally, although again, his personal dislike didn’t stop them from doing a very good deal with the USMCA. So, he doesn’t need to like a leader to do business with them. But the fact that Canada is now choosing between two liberal leaders and then will choose between liberals and conservatives, means an administration in a hurry that has 18 months that really matter before we start talking about midterms.

And midterms will probably go against the Republicans as they normally do is going to see the first six months of those where Canada isn’t really able to do anything formally to partner. And so, it’ll react. There’s obviously a prime minister. It’s still Trudeau and there still can be conversations. But in terms of big deals, figuring out how to get to 2% on defense, none of that is going to be possible until we see who’s really running Canada.

And everybody runs different numbers. I assume we’re going to have an election before October 20th, 2025, just because of the logic of that. We’re still talking about a government that’ll come in June right around the time that Canada’s supposed to be hosting the G7 in Kananaskis. And so, it’ll also start with a bang. And what I’m hoping is that the officials in Ottawa, officials at the provincial level are out there starting to think about what they want to hit the ground running with because it’ll really be joining a very fast-moving train.

That’s why I think actually the premier’s stepping up, particularly two conservative premiers, Danielle Smith and Doug Ford, who of course, is thinking of an election shortly, too, because of the relative silence of Pierre Poilievre and the conservatives federally on all the questions Trump. Now, I know that’s message discipline, but there needs to be an answer to what Canada’s going to do on all of this. And with the lack of leadership, it’s been hard to do.

So, I want to give credit to the Trudeau government on one thing, which I think has been really smart. Trump tries to communicate to his voters his resolve to put America first and defend America’s economy, no exceptions, including not Canada, which is why he has this big broad tariff agenda and he talks about it. It’s not necessarily the deal he does, it’s the signaling he makes, and then he makes the compromise to get the best that he can below the surface.

I think Canada has finally started turning that to its own advantage, and Canada has now come up with a retaliation list, a long retaliation list of what it would do if the US hits it with a 25% tariff. Logically, neither side should want to invoke these strategies. A 25% tariff would send the US into spirals of inflation, would wreck the auto industry, would certainly hurt our energy sector. Canada cutting off energy transfer to the US and/or all of these retaliatory measures would start a trade war.

We would just devastate the North American economy and Donald Trump would be a loser and he hates being a loser. So, just on logic, none of it makes any sense. It’s a mutually assured destruction approach like we used to see in the Cold War. And the key is to avoid the destruction. So, my guess is that is Canada communicating to ordinary Canadians, Trump communicating to ordinary Americans.

It creates the Air War. But it’s boots on the ground, the actual negotiation of agreements that will make the difference. And so, I tend to not get flustered by the bluster focus on what concrete proposals are made, and I think we can still come up with a deal.

Peter Tertzakian:

Well, that’s somewhat encouraging, although would you say that the mutually assured destruction would be near term, but given that the Canadian economy is now, last I checked, 1/13th or 1/14th, used to be a 10th the size of the US economy, that in a prolonged economic conflict that we are ultimately the losers.

Christopher Sands:

Yeah. Well, I think a prolonged economic conflict would be very difficult politically to sustain in the US because there’s significant American interest, including American companies that operate in Canada. The private sector, as long as it’s quiescent with Trump looking not to confront him can do very well in this period. But a scorched-earth policy on Canada would lead, I think, the strongest lobby for better Canada relations in the United States to get mobilized. And that is the business community which doesn’t want to see a trade war with Canada.

Not to say that they won’t shrug it, steel and aluminum tariffs, they clearly weren’t willing to fight every battle. But a sustained trade war, I don’t think there’s public support for it.

Peter Tertzakian:

Yeah.

Jackie Forrest:

So, maybe Canadians need to think about working with their American partners, companies that will be hurt most by these tariffs and getting their help.

Peter Tertzakian:

Yeah.

Christopher Sands:

And I think putting a human face on the Canadian question, the more that we think about the people and how they’re affected and so on, that’s what communicates. And so Danielle Smith was a little off message with other premiers and talking about not letting energy be used as a bargaining chip here.

But to the extent that you see Canadian provincial premiers or individual Canadians or Canadian business leaders engaging, that’s the best antidote to othering by Trump, make people realize that the Canadians are real people, they’re already your partners, and why would you mess this up? It really doesn’t make much sense.

Peter Tertzakian:

No, it doesn’t. So, you mentioned Pierre Poilievre and being relatively silent to our knowledge, at least to my knowledge, he has not been down to meet President Trump or spoken to him. Some would say because of his right-wing leanings and rhetoric anti-carbon tax, et cetera, et cetera, that he’s more on the same wavelength. Would he have more sway, as some would say with President Trump? Should there be say, a spring election?

Christopher Sands:

Maybe. Maybe. I mean, the two kinds of conservatism are not quite the same. I think in Pierre Poilievre, and this is seen from my side of the border, which may not be the best perspective. But I mean he’s talked about getting rid of the carbon tax, giving the provinces more autonomy in their areas of exclusive jurisdiction, avoiding fiscal federalism, that sort of thing, shrinking the federal government in its role, all of which could make a lot of sense in Canadian political economy terms, but would leave him less able to spend more on defense and so on.

It’s just a different vibe, although there’s a popular settlement to it, too. That’s why I wish that Pierre Poilievre was spending more time in Washington or had emissaries who were engaging a bit more here. Because figuring out who he is, we have JD Vance who called him a French version of Mitt Romney. And then we have Elon Musk who’s become a fanboy of his videos on X. So, I don’t know who’s going to be more influential. But I think if he spoke for himself, that would probably be the best way to clear the air.

Jackie Forrest:

Well, Chris, we want to know some of his policies as well, so that would be good for us. One more question, which we’re running out of time, unfortunately.

Peter Tertzakian:

Yeah. This is fascinating.

Jackie Forrest:

But we also have Mark Carney who’s thrown his hat as a potential leader for the liberals arguing that he would be the best person to negotiate based on his background in finance and running central banks. How do you think Donald Trump and Mark Carney would get along?

Christopher Sands:

Not well. I mean, one of the first people who would be talking to Donald Trump in the event of Mark Carney becoming Prime Minister would be Nigel Farage, the reform leader in the UK, who despises Mark Carney because of his high-handed blue nose snobbery about the Brexit Movement. And if there’s anybody who’s less populist in North America, I’m not sure who it would be. Maybe there’s a Rockefeller around who’s a little bit more elite.

I think it would be someone who would’ve very little rapport with Donald Trump. Now, Donald Trump often likes the next leader after you get rid of the first one. He was nice to Keir Starmer when he took over in Britain. He likes somebody who’s not the person he didn’t like. So, there might be a honeymoon of about a day or two. But put the two together, and I don’t think it would go well.

Chrystia Freeland, who Donald Trump doesn’t like, might do better, simply because she’s feisty and she fights for her country, puts Canada first. And Trump said several times while he puts America first, he expects other leaders to put their countries first, and that’s the basis of self-respect for any nation and then you do business. So, he doesn’t necessarily hate that and he can do business there.

And then there’s Pierre Poilievre, who I think he’s prepared to be nice to, there’ll be a honeymoon if he becomes Prime Minister, for sure. But I’ve yet to see enough of a plan to see where that’s going to translate into actual negotiating. He may like Poilievre on day one. The question is, when it comes down to negotiation, Trump doesn’t usually give anybody free passes. He puts the squeeze on everyone. And well, we’ll see. We have to see how they do.

Peter Tertzakian:

Well, fascinating insights. Thanks so much for joining us. Christopher Sands, director of the Wilson Center’s Canada Institute. We’d love to have you back. This is a story that’s going to continue playing out over the course of the year.

Christopher Sands:

Thanks very much. It’s a great podcast to be on. And I do listen to it. Hope you listen to mine every once in a while.

Jackie Forrest:

Yes. And we will put a link to your podcast, the Canusa Street Podcast, and that just shows you the integration of our countries. That’s a great example. And we also wanted to mention that you have a recent book titled Canada and the United States: Differences That Count. We’ll put a link to your book as well, and congrats on that new edition.

Peter Tertzakian:

Yeah. Fantastic.

Christopher Sands:

Thank you very much. I co-edited it with David Thomas, who’s a Calgarian. So, couldn’t have done it without my Canadian partner.

Peter Tertzakian:

Okay.

Jackie Forrest:

Great. Well, thanks again and thank you to our listeners. If you enjoyed this podcast, please rate us on the app that you listen to and tell someone else about us.

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