Canada's Carney Faces Trade Tensions With US, China

After some six months as Canada's Prime Minister, former banker Mark Carney faces a tepid economy and mounting obstacles as he attempts to forge a new path for the country amid tariff disputes with its two largest trading partners.

Carney has not sealed a new economic relationship with the United States, as promised during an election campaign defined by President Donald Trump's tariff policies and trade measures, and is locked in a trade war with Canada's No. 2 trading partner, China.

While his minority government has passed one key piece of promised legislation, his policies have angered some of his Liberal party's progressive wing, including migrant advocates and environmentalists.

Carney, elected in April arguing he was best-placed to negotiate with Trump and steer Canada's economy through crisis, was widely seen as a test case for how other global leaders might respond to the U.S. president's trade demands.

But his administration has made concessions to the U.S., such as removing many retaliatory tariffs, and dropped much of the strongly nationalistic language that had previously characterized Canada’s trade disputes with the U.S.

The moves suggest Carney has few options to exert pressure on the U.S., the destination for nearly three-quarters of Canadian exports.

Tariffs have hit Canada's steel, aluminum and auto sectors and while Canada has avoided a recession, some analysts warn economic malaise might broaden in coming months.

Polls suggest nearly six in 10 Canadians approve of Carney and recognize the unique challenges of his job, though some show his approval rating has slipped in recent months.

"Carney cannot realistically control the pace of any discussions with Donald Trump,” said Nik Nanos, chief data scientist at Nanos Research, which shows 50.7% of Canadians favor Carney's leadership versus 28.6% for the opposition Conservatives led by Pierre Poilievre.

Carney said last week that talks with Trump would mostly move to a future review of the trade agreement between the U.S., Canada and Mexico.

His office did not respond to further request for comment. Carney is also negotiating with China, which slapped import duties on Canadian canola in August, in response to Canada imposing tariffs on Chinese electric vehicles last year.

Canada's trade minister Maninder Sidhu is expected to travel to China in November in an effort to lower trade tensions.

"Canada is living in the land of bad options," said Michael Kovrig, a geopolitical advisor and former Canadian diplomat, adding that capitulating to China to counter the damage being done by the U.S. would be dangerous.

Canadian officials last year concluded that China interfered in at least two federal elections.

The Nanos poll showed a rising unemployment rate and the economy have replaced U.S. relations as Canadians' primary concern. Carney has said Canada "needed the rupture" with the U.S. and that it can thrive despite the rift.

"We have what the world wants,” Carney said last week, referencing Canada's natural resources and its expertise in artificial intelligence. A former UN Special Envoy on climate and finance, Carney supports increasing Canada's energy production, hoping to export oil and liquefied natural gas to new markets.

Earlier this month, several thousand protesters gathered in various cities to protest Carney's policies on issues from Indigenous rights to climate to migrants.

"We've got a Prime Minister who I know knows very well about climate change and the threat, but he’s still supporting pipelines and LNG,” said environmentalist David Suzuki.

Jeremy Paltiel, a political science professor at Carleton University, said there were few palatable options for Carney amid continued uncertainty.

“Canada does not have a lot of leverage with Trump or China and so we have to use state investment to substitute for foreign investment,” he said. “We’ve got to figure out how to keep up investment and prepare for whatever might be coming next.”