Is Trump about to wage a trade war with China?

0:02Jon Sopel:This is a global production. If these sanctions against Iran are going to work and secondary sanctions are going to work, it means that America has got to go to war with China as well. I don't want to miss the potential impacts from the Canadian debacle because this has huge supply chain ramifications for the world. Why is he picking a war with its closest friend and ally where Canadians have fought alongside Americans in every war for 100 years? Earlier this year, it looked like the Canadians were going to cede to some of the Trump administration's demands. But then by all accounts, the administration got greedy.

0:44Why would they settle on those terms?

0:47Jon Sopel:And if they're not going to settle, well, then what are you going to do about it? Today we are launching Operation Economic Outcast to foreclose every other option available to the Iranian regime. Treasury has mapped every node, every facilitator, and every network that Iran has used to smuggle oil and evade sanctions. Beginning today, the actions of Treasury and other agencies will tighten the noose and block every potential source of revenue that funds the IRGC and the evil Iranian regime. That is the US Treasury Secretary, Scott Besant, talking tough about what is coming to Iran. An economic D-Day, he called it.

1:34Jon Sopel:But if you're going to choke off Iran's economy, you have to stop them selling oil to China. And are America prepared to take on China as well? Welcome to the News Agents USA. The News Agents USA with Emily Maitlis and John Sopel. It's John. And Miles. And defiance seems to be the watchword, well, at least on your cap. Well, you know, John, I would like to say that it's got positive connotations this week for, you know, any of us in our lives, defying things that we might otherwise disagree with. But this week, I think the theme of defiance is what other countries are doing vis-a-vis the United States.

2:22John, we've got a lot to talk about today. But one of those things is how America's allies and enemies are both defying it.

2:30Jon Sopel:Yeah, I'm really struck by the old sort of diplomatic saying that my enemy's enemy is my friend, in which case Canada and Iran stand shoulder to shoulder against the United States of America because Donald Trump has gone to war with Canada in a trade sense. And similarly, Scott Besant has unveiled something, as we just heard there in the introduction, in a war against Iran. And I kind of question whether there has been a miscalculation or will be a miscalculation on both in the sense that Canada seems pretty damn defiant right now. and Iran is used to suffering pain and absorbing pain. And if these sanctions against Iran are going to work and secondary sanctions are going to work, it means that America has got to go to war with China as well, which is the main market for Iranian oil.

3:29Jon Sopel:And I don't see any appetite on the part of Donald Trump to go to war with China. No. And John, none of this was strategic thinking. All of this, just judging by the press reports, was impulsive and driven by the president's expectation that if he did something extreme, whether it was with Iran and the war or the threats against the Canadians, that they would settle. And I'll save our listeners any hand-wringing about where this originates. I'm going to tell you. I'm going to demystify this right now. Now, I'm going to take you back in time to an Oval Office meeting I had with Donald Trump in 2018, where he spelled out the philosophy that led to this.

4:12And full disclosure, I wrote about this this week in the UK's iPaper. But there was an afternoon we were sitting in the Oval Office and Donald Trump said something that I've repeated before, which was that the one lesson he had learned in business was that you don't threaten to sue someone. if you want something from them. Whether you have a case or not, you just sue them and they settle. This was a lesson he said he had learned in business and that if you just threaten to sue people, they say, pshh, and they blow you off. Those were his exact words. And they said, but if you sue them, they settle.

4:48That may have worked in property management and real estate, John. But Donald Trump has brought that philosophy into foreign policy. And he assumes he can just sue the Iranians, go to war with them and they'll settle. He can sue the Canadians and threaten to ramp up tariffs and they'll settle and bring forward better trade deals. Instead, in both of these cases, friends and enemies are getting sued by the Trump administration and they are defying. They are saying, no, we're not going to settle. And then Trump gets himself into a far worse situation that has no obvious solution.

5:22Jon Sopel:So which is the obvious point to pick up. I mean, And the analysis there is absolutely spot on. But surely there are people around him, Treasury Secretary, Commerce Secretary, wise owls who say, well, hang on, why would they settle on those terms? And if they're not going to settle, well, then what are you going to do about it? Because, you know, it looks like Canada is absolutely serious that though it will suffer great economic pain, it wants to match the sanctions dollar for dollar. And that's going to have a huge impact in the upper Midwest, possibly on energy supplies, oil supplies, the whole, you know, you name it, automotive parts.

6:07Jon Sopel:It could be having a crippling effect on the parts of the US economy, as well as obviously on the Canadian economy. Well, that's right. And I mean, to go back to the analogy, when Donald Trump was in real estate and he used this play against opponents, more likely than not, it only affected the plaintiffs and the defendants. In this case, when Donald Trump uses his sue settle logic, it affects the entire world. I mean, take both of these situations, the war in Iran and the economic D-Day that the Trump administration and the Treasury secretary says they're going to bring to bear and these tariffs on Canada.

6:43These two actions are raising prices for everyone on the face of the planet in one way, shape or form. I mean, the Iranian conflict more than any other, but the increase in oil prices has increased the cost of goods for anything that requires an airplane, a car, a train, any other mode of transportation to move it from point A to point B, to bring it onto your grocery shelves, to bring it onto your store shelves. Huge implications for people around the world. A conflict that was supposed to last days or at most weeks has now gone on for months with no obvious conclusion. Now the administration is flailing, realizing that kinetically they can't end this conflict.

7:23They're moving it to economically. But I don't want to miss the potential impacts from the Canadian debacle because this has huge supply chain ramifications for the world. Automotive parts, parts for factories all around the world, trade between the United States and Canada, the disruption to those supply chains is going to affect people the world over. And of course, worst of anyone, people in the United States of America. I mean, Americans previously had almost exclusive access to Canadian energy and goods at cheaper prices. Now Americans will not have that access. The price will be increased for those goods.

8:05And America's adversaries will essentially get those things on the clearance rack. They will get them on discount. This is the classic cut off your nose to spite your face sort of situation.

8:17Jon Sopel:I suppose the thing about the Canada one, which kind of bewilders me, and this goes back to you talking about 2018, where you were in the administration. I was in D.C. reporting on the administration. I go to the White House Rose Garden for the signing of the USMCA, which was Donald Trump's rewriting of NAFTA because he thought that was a NAF deal, to use the British pun. and he wanted a different trade deal. He gets a different trade deal and now he's back in the White House and he's saying, I've got to rip that one up as well now. Why is he picking a war with its closest friend and ally where Canadians have fought alongside Americans in every war for 100 years and have been the nicest, decent, kind of honourable neighbours you could wish for?

9:07You could not ask for kinder neighbours than Canadians. We have a joke here in the United States that if something's a little bit off about someone, you don't quite know they're too nice. Something's a little weird because they're so nice that the key and lock moment comes when someone else says, oh, they're a Canadian. And you say, ah, now I understand. No one's ever that nice and polite. Oh, it's because they're a Canadian. 160 years of alliance, John. And this is where it started to come apart. As you note, in the first Trump administration, NAFTA was renegotiated. This was supposed to be the end of it.

9:42This was supposed to be, as Trump touted at the time, the mega deal that he got in North America to rewrite the rules of trade between the United States and Canada and Mexico. But then Donald Trump comes back in and his first day in office basically threatens to slap a 25 % tariff on our Canadians, Canadian neighbors. And that's where this conflict began. It has been almost a year and a half of back and forth between those sides with Donald Trump wanting to put out, again, basically a threat made material, like I mentioned earlier. Sue your enemy, sue your opponent, even if you don't have a case, because then they'll settle.

10:25He decided he just wanted a better deal with the Canadians than he had. So he threatened tariffs. And for a moment, it almost seemed like that would work, John, because there was back and forth over the past year between the two sides. Earlier this year, it looked like the Canadians were going to cede to some of the Trump administration's demands. But then all accounts, the administration got greedy. And when the Canadians realized that they weren't going to have favorable terms, they said they might have to look to China and other countries to trade with those countries to get good prices for the people of Canada.

10:58Well, then the Trump administration inserted language into this agreement that basically was a non-compete clause. Think of it as the global equivalent of a non-compete clause that said Canada can't do trade deals with these other countries like China. That was perceived by the Canadians as a last minute poison pill to these negotiations, that Donald Trump was trying to chain them to him where he would continue to have leverage over Canada. And that blew up these negotiations and has now resulted in this situation where there are reciprocal tariffs between the two countries. Billions of dollars in tariffs being applied on the U.S.

11:35side and now on the Canadian side in retaliation.

11:38Jon Sopel:And I think just kind of just digging a bit further into it, it's worth explaining. And how this could affect Americans in such an adverse way. I mean, the big exports from Canada, oil and also lumber, wood for building. And, you know, it's true that America is totally self-sufficient in oil, thanks to Texas, thanks to fracking and all the rest of it. But there aren't pipelines to take oil from Texas up to the upper Midwest, to Michigan, to, you know, to wherever, to Pennsylvania. And so you are dependent on Canadian oil in those parts. And therefore, if you if, you know, it becomes too expensive to import Canadian oil and you can't get it from Texas, then you've got a major, major structural problem.

12:36Jon Sopel:And similarly, the lumber. Yeah, you can. America has got lumber, but it's not as good for house building, which is a key part of the US economy. And so that, too, could be affected by this in a very adverse way. It just doesn't seem to have been thought through. I don't think it was. And look, this in the first term, we had these conversations with the White House with regularity about actions that the president wanted to take punitively against allies as a way to get that leverage. I mean, you mentioned USMCA. Let's talk about our neighbor to the south, Mexico. This happened most frequently with Mexico is the president would propose to us ideas, ways he wanted to punish the Mexicans to get leverage over them.

13:24One of them was at one point he wanted us to seal the entire southern border to any trade, any cross-border trade, cars, crops, you name it. And the president overruled us, announced that this was going to happen. and we had to fly back from a trip and rush to the White House to say, Mr. President, if you do this, it will be devastating to American businesses. It will be devastating to American farmers. It will be devastating to the auto industry. It will be devastating to people in the South who depend on those products. And ultimately, the president was talked down from that. It does not seem that in this case, very similar circumstances with Canada, that there was anyone dissuading him from going forward with this.

14:04If anything, it sounds like he has a team now in the second administration very willing to go along with this, but that will mean they're going to experience the economic hardship that Americans will suffer from all of this. John, one other thing that I want to say, I want to take us back because this is not just an economic debate. There's a big political overlay to this, which is that the Trump administration came back in and started treating a 160-year-old ally like a bully in the schoolyard, or a little kid they were bullying in the schoolyard, namely by threatening to make Canada part of the United States.

14:42I want to play a clip of J.D. Vance earlier in the administration talking about Canada as a 51st state. Canada and China have been the two worst countries when it comes to trade policy anywhere in the world. What a shame that is. China, you of course expect. They're our biggest economic competitor. I would expect that from China. I would not expect that from Canada. We have to remember, Canada is a state, sorry, Freudian slip. That was actually an accident. Canada is a country. When he says Freudian slip, we all know what that means. It means an unintentional admission. Context for listeners, Donald Trump and his team had been teasing that Canada would be the 51st U.S.

15:32state early in the administration, with allies of Trump posting pictures of the American flag overlaid on the country of Canada. This led to, I would say, a rupture, at least culturally, in relations between the two countries.

15:46Jon Sopel:Yeah, it's led to a rupture culturally. It's also led to a lot of Canadians thinking, you know what, I'm not going on holiday to America and I don't want to buy their booze. I don't want to have their wine or beer in our country. It's also led to the king getting involved where King Charles is the head of state in Canada as part of the Commonwealth and has said, sorry, you are attacking our country. you are attacking Great Britain and the Commonwealth if you start attacking Canada. So I do think that political context is absolutely vital. It is that Donald Trump thinks that Canada is not an independent nation or shouldn't be an independent nation.

16:29Jon Sopel:And if it wants to do trade, it does trade on American terms because it is the 51st state. And Mark Carney, you know, is the prime minister because of that view of Donald Trump. You have Pierre Pollyèvre, the conservative who was running for election to become the next prime minister, who was favourite until Donald Trump became president and started saying things like that. And a Canadian said, you know what? Absolutely not. It's striking how high Mark Carney's approval ratings are compared to Donald Trump's. You know, most Canadians think that Mark Carney is in the absolute right place on this.

17:07Jon Sopel:Now, this is before suffering. This is before job losses and all the rest of it. Who knows that might change. But Americans are going to suffer every bit as much as Canadians. It's just that you feel the Canadians are prepared to suffer for this, whereas Americans, I think, feel they're being led into a trade war. And you look at the Wall Street Journal and what they've had to say about it. That is absolutely stupid and has no rationale to it. Well, I've got to say that they picked the wrong fight, John, because if the administration had been strategic about this, they would have known that Mark Carney throughout his career has made one of his overriding missions to talk about economic coercion on the world stage.

17:57He has talked about how the middle powers internationally, the countries like Canada, need to assert themselves and not be bullied into unfavorable economic arrangements. That's literally been something that Mark Carney has talked about throughout his career. The administration picked a fight with a person who was obviously ready to stand up to them on this issue. And I'm not even sure most people in the Trump administration who'd been negotiating with Mark Carney even knew the thing that I just said, even knew enough about his background to know where their opponent on the other side of the table stood on these issues.

18:35And if they had, they would have known that these threats were likely going to be ineffective and probably counterproductive, that they would have the opposite effect. This is literally the moment Mark Carney has been waiting his political career for. Not that he wanted it, not that he welcomes it, but he's been ready to fight this fight. And now that he is, and as you note, politically, that's put him in a vastly better place than Donald Trump. One other person I want to point to is we've got Doug Ford, who, of course, is the premier in Ontario, now picking up on this fight language and standing up to the United States, echoing Carney's language, even going as far as to call Donald Trump a dictator.

19:18Take a listen. Premier Sean Jeffords, CBC News. I know you haven't had an opportunity to see this, but we were just looking at a very fresh post here from President Trump on True Social, taking aim at you personally, taking shots at you, suggesting you should fall in line, that you're a flunky of the Prime Minister. Do you want to respond to these shots? What would you say to the President? No, I don't respond to a dictator like President Trump, a bully like President Trump, as I said before. He's the type of guy in school that would take your lunch money one day, take your toque off your head the next day, and then steal your running shoes.

19:53But I'm not going to take any advice off a guy that's the king of bankruptcies. And he's actually terrifying his own people. John, if they were hoping for compliance from the Canadians, what they got was this. They got defiance from the Canadians. That is what has been happening in spades. Yeah.

20:14Jon Sopel:And I don't know what the word for defiance is in Farsi, but you're seeing something pretty similar from Tehran right now over this kind of new approach by the Americans, as you described when we started our conversation, talking about how, you know, it's no longer kinetic. other, in other words, bombs and bullets, it's going to be economic sanctions in the hope that that will force a surrender over the Strait of Hormuz by Iran. And yet you'd have to say that for that to work, it's going to take the most extraordinary acts on the part of America because, you know, sanctioning Iran alone isn't going to do it because Iran will carry on trading with everyone else.

20:58Jon Sopel:And so America said, no, no, we're going to stop anyone trading with Iran. And as I said at the introduction, that would mean telling China you cannot trade with Iran. And Donald Trump has already had to back down over the export of rare earth minerals when China threatened America. And you can just see the same thing happening again, where this sounds very powerful. It sounds like it's action. It sounds terrifying. And then when you look at it, It starts to come apart in your hands. And it's undoubtedly true that Iranian people are suffering. Apparently, there are very long lines to get fuel.

21:36Jon Sopel:There's no you know that although they are great big producers of oil, there are shortages in the country. There are all sorts of economic hardships being suffered. But all the regime cares about is its self-preservation. And it's, you know, the Iranian authorities have the means and the power to suppress any unrest, as we have seen them do brutally in the past. And so the Iranian regime, utterly ghastly, reprehensible, hideous in human rights and every other sense. But it's all about keeping power. And for the moment, you'd have to say it looks like they are going to maintain power. And it's hard to believe that economic sanctions are going to force the Iranians to bend the knee.

22:22Well, it's going to be the exact same problem that this administration faced when it came to the kinetic fight, which is that the Trump administration was never going to defeat Iran militarily unless it had a way to figure out how to cut off Iranian support from Russia and from China. I've spent the past 15 years monitoring deepening relations between China, Russia and Iran. That's been a big worry for us in the West and in the national security community because the deeper the Iranians are tied to those two great powers, the more likely they are to sustain attacks from the United States, whether militarily or economically.

23:10So we already saw this on the military front. Russia and China have continued to resupply the Iranians. They have continued to supply intelligence to the Iranians for strikes. It's going to be the same picture economically. The Trump administration wants to try to cut off Iran from the world. But to do that, they're going to have to answer this crucial question. How do you cut them off from the line of credit they've got in Moscow and in Beijing? And if they don't have an answer to that, this campaign is not going to work. And believe me, Russia and China have every interest in continuing to fund the Iranians, helping them evade sanctions, helping them rearm.

23:51Why? Because they see that it is bleeding the United States dry, right? You go back to what you said earlier, John, the enemy of my enemy is my friend. Well, look, among these groups of American enemies, they see an opportunity to collaborate to take down the United States, or at least to damage the United States strategically on the world stage for years to come. Just look at the fact that the United States has suffered extraordinary blowback in its regional interest, its ability to operate because of the destruction of bases, missiles running out. And you see that they feel like they've succeeded.

24:29And they're going to continue to do that while they see the opportunity. So, you know, the administration may be promising a very big operation, a D-Day level economic operation, but it's unclear that that will be successful if they can't deal with the Russia-China problem. We'll be back in just a moment.