Americanswers! Are the US and Canada in an all-out trade war?

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1:13The Canadian Prime Minister Mark Carney is getting serious and getting blunt. We cannot accept what they've offered and we will not give what they've asked. He's talking about a trade war, but it's a serious trade war. And that is something that we go into in this edition of America Answers. We're not doing it with Matt Chorley this week. He's still away. But we've still got a huge range of subjects. So, for instance, we also talk about America's national debt and efforts to get it down, or at least to try to persuade the politicians that they ought to think about getting it down. And also, what does left field really mean?

1:51Welcome to America Answers. AmeriCast. AmeriCast from BBC News. You hear that sound? Oh, I think when I hear that sound, it reminds me of money. We didn't start this war, but under President Trump, we are finishing it. This is a big cover-up, and this administration is engaged in it. This guy has Trump arrangement syndrome. I have four words for you. Turn the volume up!

2:21Hello, it is Mariana in the worldwide headquarters of AmeriCast in London. And it's Justin sitting right next to her. And it's Anthony flying solo here in the American headquarters of AmeriCast in Washington, D.C. Right. And we go straight to the northern American headquarters, potentially one day, maybe, which is Canada, because we've had a question from Paul who says, When Donald Trump initially placed tariffs on just about everyone, it was proven to be unconstitutional and Congress only can define U.S. tariffs. Now the president's placing 50 % tariffs on Canada. How? Why is this different? Or is he just ignoring Congress again?

2:59Anthony, that's one for you. Well, it's different because he's citing a different law. There are a variety of different laws where Congress delegated or authorized the president to have tariffs power. And the first time he went about doing it, it was a law that dated back to the 1970s. And that use of that law is what the Supreme Court said was illegal. It said that Trump didn't have the ability to impose tariffs as much as he wants, whatever he wants, willy-nilly under this provision. But there are other provisions. They require a little more fact-finding, a longer timeline for implementing them.

3:34And that is what Trump's trying to do now. That doesn't mean that the Supreme Court could come back and say these are unconstitutional as well, and then Trump's back to the drawing board. But it is just going to be a series, apparently, of this administration trying to find new ways of justifying the tariffs that he clearly wants to impose. Yeah. And it is going to bite, isn't it? Because it's a lot of stuff that this 50 percent is going to cover. I mean, obviously, cars are a big ticket item, aren't they? But a lot of other things as well. Cars and steel are the big ones that Trump just announced 50 percent tariffs on Canadian exports into the U.S.

4:11Yes, although I will note in a Truth Social post that he put up just a few minutes ago while we're recording this, he said they're not going to kick in until January 1st, which four months from now, that's a long time for negotiations to take place. A lot can happen in four months, including congressional midterm elections here in the U.S. that could either strengthen Trump's hands, in theory, or totally put a new check on his power with Democrats taking back control of Congress. But there's also other things that Trump wants out of Canada, wants them to drop their dairy tariffs to allow American dairy farmers to sell products there, wants more agricultural exports into Canada.

4:53And so that's been the basis of these negotiations. It just kind of reached ahead in the past week where talks broke down. Canada pulled away, said, you know, we're not going to do this. and Trump now with this new threat with a January 1st deadline seems to be setting the framework for what could be all-out trade war. Yeah, and we had a little snippet of Mark Carney there, didn't we, before we got going. But let's listen a bit more because he is quite invigorated about all of this, more invigorated than the smooth and diplomatic Mark Carney, who certainly we knew when he was governor of the Bank of England.

5:32but he's an all-in-all tougher character now. Let's listen to his longer reaction. We recognised from the start that America has changed. Early last year in this room, I observed that the decades-long process of steadily increasing integration between our economies was over. The gap between partnership and competitor, unfortunately, has remained too wide in recent days. So last evening, I instructed our negotiators to return to Ottawa. We cannot accept what they've offered and we will not give what they've asked. Canada will match Washington's new tariffs dollar for dollar in order to protect Canadian workers, farmers, families and businesses.

6:23Yeah, and Donald Trump responded to that on Truth Social as ever on Sunday by saying, Canada wants the benefits of being a state without being one, three exclamation marks. They have also charged our great farmers for many years, massive amounts of tariffs capitalized. No more. Can I just say, by the way, has anyone seen that really funny meme about the capitalization in truth social posts and how Natalie, who we were chatting about, Donald Trump's aide, who is attracting a lot of attention and discussion at the moment, how there's footage that's been dug up of showing her typing out the truth social posts or typing out posts.

6:57and everyone's like, is she the one that randomly capitalised? Yeah, her capitals. That's amazing. So she did capital tariffs. That's true. That's an important piece of history, at least a footnote of history, that all the capitals came from Natalie Harp. Yeah, Natalie Harp. Or you could say that maybe Donald Trump dictates the posts and specifies the capitalisation. Or maybe she just reads his tone. And so when he says, like, amount of tariffs, she's like, right. To the substance, though, of what Canada can do to the United States or to individuals who do import stuff or buy imported stuff from Canada, is this going to hurt?

7:36I think it will. It can hurt particularly states like Michigan and Maine, which, you know, we talked about a lot recently as two states that have key Senate races in these midterm elections that I mentioned. And they can limit the exports from those states into Canada, put new tariffs on them. They could also use some of their power exports to the United States, which some American, big American states and cities rely on. And that could be a pressure point. I think looking at this, this kind of seems like Mark Carney has called Donald Trump's bluff. He was just tired of getting pushed around. And he's like, fine, we're not going to negotiate anymore.

8:18pulled away. And now the ball's in Trump's court to try to bring Canada to heel. And so you've got this Trump announcement today of these 50 percent tariffs, but not kicking into January. It was an announcement that was cloaked in the typical Trump kind of harsh rhetoric. But the reality is, I think he's trying to keep this from becoming a full-blown trade war because there's so much else going on. I mean, the Iran war still isn't resolved. That's having some very serious effects on the global economy, if the United States goes tit for tat in a trade confrontation with its second largest trading partner in Canada, the economic impact on Canada obviously will be great.

8:57But it's not going to be nothing on the US either. And things already, at least if you talk to Americans here, are pretty hard. And if prices keep going up with this, it could cause some real damage. I mean, the history of trade wars, they really cause upset because they make people poor on both sides and the blame just gets ratcheted up. I mean, to put it mildly, it is odd, isn't it? These two nations that really are so close, just geographically close, obviously, but close in so many other ways as well. It's just the oddest of situation. Yeah. And there's no real constituency here in the US, maybe dairy farmers and a few others that are clamoring for this massive confrontation with Canada.

9:39This is Trump and this is Trump's worldview, the idea that America has economic strength and that we can impose it on those other countries that are ripping us off, in Trump's view. Canada's obviously a big trading partner, so there's more money involved here. And so this is Trump picking this fight. Although, you know, I mean, sometimes wars start by accident, and this feels like one of those trade wars that, if it does happen, was one that neither side really wanted that much, but neither side is willing to back down. And, you know, we talked We've talked about Carney in the past, Justin. We've talked about how he views the role of middle powers like Canada stepping up and putting a check on American power, that someone has to draw a line, someone has to say this isn't OK.

10:27And the mild-mannered Canadians may be the ones who have decided to do it where, say, South Korea or Japan or even European countries have been more reluctant to draw a line in the sand and tell the United States no. Let's move on to this question which we've had from Alistair who asks, now that the US national debt has surpassed$40 trillion and after two failed interventions from the Treasury on bond prices and yen, what realistic options does Donald Trump have to save the situation if he refuses to increase taxes or reduce tariffs? And we should start, shouldn't we, Anthony, with the failed interventions, because they were quite something.

11:05And intervening in the bond markets to do things is always tricky, as lots of governments around the world have discovered. But in a sense, the US should be able to, because it has all the might of being the world's reserve currency and all the rest of it, just apart from its economic might as the only economic superpower, really, even with China biting at its feet. So it's extraordinary, isn't it, that the Treasury Secretary, Scott Besant, made this announcement that they're going to buy bonds, in other words, going to try to raise the price of their own bonds, and the yield is inverse to the price.

11:42So that then brings down these yields, this cost of borrowing for the U.S. in the longer term. And basically, the bond market said, no, we're not going to pay. It maybe lowered the bond prices for a day or two. But the fundamentals, as Alistair points out, are the same. They haven't changed. And the fundamentals are that the United States has a massive debt. I think it's doubled since Trump first took office in 2017 from$20 trillion to $40 trillion. It is spending more than it's bringing in, and that has investors concerned. Also, they're concerned about inflation because of the Iran war, because of energy prices going up, because of trade disputes with Canada, for instance.

12:32If prices go up, then the bond traders demand that treasuries pay more interest to hedge against inflation. So if you don't address that, it doesn't matter what the United States does as far as buying bonds goes. It's going to, prices are going to go up. The bond yields are going to go up. It is a simple kind of fundamental economic reality. Let's listen to what he himself says, because after that basic failure from Scott Besant, he was asked directly what was going on. Let's listen to what he said, because it's an interesting question and an interesting sort of new line on what they thought they were doing.

13:09Did you direct Secretary Besson to intervene in the bond market? No, not at all. No, he's a very capable man. He wanted to do it. He's very good at it. He has a good touch, very good natural touch for the bonds and interest. And he did that. Yeah. The yields have come back up since then. Have you talked to him about another type of intervention? Is that something he will be doing? We have many types of intervention. That's one. The ultimate intervention is our military. And if we have to use that, we will. Yeah. What? It is literally inexplicable, that answer, isn't it? And that's not in any pejorative sense.

13:49It's just, what is he talking about? I don't quite know. The wider context that fascinates me, Anthony, is that when you used to go to Republican Party conventions back in the day, and I'm talking now, I don't know, 20 years ago, 30 years ago, there used to be this clock face with the national debt and and it would increase during the course of the convention and there was a horror about it and a sense that it had to be kept under control and the fascinating thing now is the democrats aren't particularly interested in capping spending they've got all their plans for national health care service and all the rest of it which would be at least initially very expensive but you did associate the republican party or at least a big big and powerful part of it with controlling government expenditure.

14:41And basically, you don't anymore, do you? No, you don't. I mean, it goes back to Dick Cheney in the early 2000s saying deficits don't matter. And then they pushed through tax cuts that, if you remember, there was a budget surplus in the last few years of the Clinton administration in the 90s. And then when W. Bush took back over, they cut taxes and that surplus started to go away. And now it does seem like Republicans don't care as much about the debt. Well, except when Democrats are in control and then they use it as a cudgel to beat Democrats who are proposing their own spending policies. If you remember, the Tea Party rose because of concerns about the national debt.

15:23There were objections to Obama's spending that it was driving up the national debt and things need to be done. But I think Trump is not the first American president to face the cold, harsh reality that it's bond traders who decide what the limits are. And at some point, they have to bend to the bond traders' wills, because if these prices on the treasuries keep going up, it's going to make paying for the American budget deficit, the growing debt, more and more unmanageable. I mean, already we spend, I think it's something like a trillion dollars just financing that debt every year. And it's only going to get bigger if these interest rates keep going up.

16:05Well, it's roughly the same, isn't it, as all of American defense spending, which is staggering, really, isn't it? When you think of the amount that is spent on defense, you think of the incredible way in which the United States is way, way, way ahead of everyone else when it comes to the amount they spend on defense. And you think of the worldwide reach and all the rest of it, albeit that things haven't gone exactly according to plan in iran but the ability of america to do all of that stuff comes at a massive cost but that massive cost is roughly the same is that right anthony as the annual debt repayment now yeah yeah and the debt repayment has gone up considerably because inflation has gone up it was much lower when interest rates were so low that it was actually you know made sense to borrow money because you were borrowing it at a at a premium now it's just That's just not the case.

16:50I mean, to answer Alistair's question, you mentioned things that you could do to address the bond traders' concerns. And one would be to raise taxes to lower the budget deficit. Another thing would be to cut spending, whether it's defense spending or spending on social programs like Social Security, which is the pension program for the elderly here in the United States. Try to reduce health care costs that the government pays. There are hard choices that the government would have to make. Even tariffs, if you increase tariffs, I suppose that would bring in more revenue, reduce the debt, but the risk is that it would drive up inflation.

17:28So it's a kind of grappling with tough choices. There's no easy solution that Besson can wave his magic wand and fix even despite the US's position as a military superpower and an economic superpower. I mean, you hear financiers say, do both of those things that you've just suggested are available to them. But so you should both cut spending and raise taxes. And that then signals to the bond markets, and this is the serious sort of underlying economic point, that you signal to the markets that you are interested in getting control. And that itself then has an almost immediate effect. The thinking goes on yields because people think, oh, well, they've got it under control, so I'm not going to demand such a premium to lend in the longer term.

18:09And that's one side of it. The other, I suppose, though, Anthony, which is worth mentioning, is just the enormous faith that is being put in AI as being transformative of everything. In other words, the growth that comes from AI could itself sort all of this out, the extent to which the politicians might sort of try to suggest to themselves that that's going to be their savior. Yeah, I mean, it's a source of hope, I suppose, but also a source of problems because right now all of that borrowing that these AI companies, big tech companies are doing is crowding out some of the other borrowing and driving up interest rates on bonds across the board.

18:53So yeah, that is part of the problem. It's harder for the government to borrow money when all these big tech companies are borrowing all the money as well. But in theory, if AI does lead to greater productivity, then that drives up tax revenues because all these companies are making money and workers are able to do more with less than in theory. Yes. Let me let's hope. Right. Or it could drive up unemployment and increase the strain on social services because more and more people require government support to make ends meet. You know, this is this it's a very tricky time. It would be a dangerous time, everything being equal.

19:35But when you add on a war in Iran that is bringing instability to energy prices, when you add on these trade wars that could drive up consumer costs and also call into question their current economic order. I mean, I sometimes worry about my kids who are in their teens and 20s, what kind of a world they're going to have to deal with in the decades ahead. Yeah. Should we go for another one? Googly. Yeah, a googly. It comes from Jim in Aberdeen. Last week, Sarah introduced the googly, a cricketing term which Justin explained to American listeners as the equivalent of a curveball, a ploy to deceive or confuse an opponent.

20:13I wonder if Anthony could explain what I assume is another baseball metaphor. An unexpected development is often described as coming out of left field. This certainly applies to the recent successes of the Democrat Socialists or Social Democrats or whatever in a political sense. But in baseball, why is it more surprising for something to come out of left field rather than right field? If Anthony can explain that, then maybe Justin can explain why Trump is, for example, on a sticky wicket in Iran. And before long, you might well have AmeriCast sounding more and more like Test Match Special. No bad thing.

20:53Anthony, take it away. You definitely know more about baseball. Should I try to explain this? OK, well, I mean, first of all, you have to picture a baseball field kind of as a pie slice, right? And the outfield is the area at the top of the pie. You have three outfielders, center field, left field and right field. If you're standing on a plate facing the outfield, right field is one on your right. Left field is one on on your left. Why left field? Something coming out of left field is more surprising. You have to understand how base runners run around the infield to score their runs. They go to first base towards the right, then second at the top, then third on the left.

21:30And then they're running from third to home. If you're running from third to home and you look over your left shoulder, you can see the center fielder and the right fielder if they have the ball, if they have a chance of throwing you out at home plate. The left fielder is right behind you as you're running down the third base line. So you don't really tend to get a good gauge on whether that outfielder has a ball if he's fielded it cleanly. And so coming out of left field could be a throw to get you at home plate that you don't see surprises you, which hence the term something that's unexpected.

22:01That was fantastic. I have to say very good. Yeah. Look, sticky wicket, Anthony. Do you know anything about a sticky wicket? It's a croquet term, right? Or is it a cricket term? No, it's cricket. Oh, it is cricket. I'd love it to be a cricket term. Aren't wickets the thing you hit the ball through in croquet? So one, the sticky wicket would be one that, you know, you can't hit the ball through. But I guess I'm wrong. Are they called wickets? That's so gloriously wrong that we need to keep it in. Are they called the little loops? Anthony is not often wrong about things. And thank goodness he's confused croquet and cricket.

22:36No, it's a cricket thing. And it's because, I mean, fundamentally, it's because the ball spins more or is less easy to track when it spends longer on the ground after a bowler bowls it. So it hits the ground and then it goes up. And if the wicket is wet, i.e. sticky, that... What's a wicket? I'm not a great cricketer, but that... Ah, right, we've really got to start from basic... Do you know what? This episode for AmeriCast is almost none of my special subjects. I know more about football than anybody on this podcast, but I'm really not very good at cricket. The wicket's the bits of wood that they're aiming the ball at.

23:10Got it, OK. Either end. Tell you what, the next time Anthony comes to Britain, let's get him a ticket to go. Playing cricket to the Oval. I'm not sure about playing it. Let's go one step at a time. You should go and watch it first. He can hang out in South London. Village cricket, Anthony, is one of the great English experiences. And we should get him involved in a village cricket match. You know, when I was there last year, I did a batting cage, a cricket batting cage, and it was by the BBC. And so I took some swings with a cricket bat. I had no idea how to score or what I was doing, but I can say it was hard, harder than I thought it would be.

23:45Okay, let's move swiftly on. We've got an email from Elizabeth in Wellington in New Zealand, with record-breaking temperatures in Europe, wildfires raging across parts of Europe and Canada. Do you think it's likely that Donald Trump will be forced to accept the reality of climate change? Whoa, Anthony, that would be quite a turnaround, wouldn't it? Yeah, I think probably not. What's that Upton Sinclair line that it's hard to get people to believe something if their economic livelihood depends on believing the opposite? I think this is, you know, Trump believes that climate change is a hoax. He said this time and time again.

24:21He believes that cold is a great energy source. And he thinks that wind power causes cancer and kills birds. So, yeah, I think it's unlikely, even with all of this evidence that climate is changing and that it's humans that are responsible. Does anyone, is there in your world, Mariana, kind of growing head of steam, or is it just still divided along the lines of people have a set of beliefs and you could say if you believe X and Y, you will believe Z or Z when it comes to climate. What I would say is, as you pointed out there, Justin, the Venn diagram of like, if you believe one thing is a hoax, like if you are prone to conspiratorial thinking on one theme, like believing things were staged or rigged when they weren't, you are much more likely to also believe that other things are staged and rigged.

25:13And so you see that there's a real, for example, the people who thought that COVID was completely not real, like beyond legitimate questions, also seem to be some of the same people who think climate change isn't happening and refute the evidence, no matter how much evidence you give them. I think there's something quite interesting psychological about that, which is actually to do with how people like to disbelieve things that are otherwise quite difficult for us to process. Like the idea that actually the world is getting really hot and we're going to be in a, in a sticky wicket we're gonna be in a sticky wicket situation um more than a sticky wicket situation uh i think people find that really hard to sort of make sense of and they'd rather just believe it's not happening because we as individuals don't necessarily feel like we have huge amounts of control whereas i think that um that's when people then turn to the politicians like trump and they're like well hang on you guys are the people who could make decisions that might infect this but the kinds of people i'm talking about online there are the people in donald trump's fear a lot more than the people who are saying, I'm really worried about wildfires.

26:13Right. And the latest example of this is Nevada, where 90 ,000 people have had to evacuate around the city of Reno, which is in northwest Nevada. It's one of the largest evacuations in the state's history. This fire started, it's spreading, it's about 15 ,000 acres, I think, as of this weekend. The governor, Joe Lombardo, a Republican, has declared a state of emergency and said that this Hawk fire, that's the name of the fire, is spreading quickly and threatening homes and structures. So here we, you know, we had the wildfires last year in California and Los Angeles. We've had ones in Canada that have spread smoke here on the east coast of DC and now this massive one in Nevada and ones in Spain and France.