Carney Changes His Tune

Good conversation with President @realDonaldTrump on the future of Canada-U.S. trade. This builds on our recent constructive discussions on the outlines of a mutually beneficial trade deal that would create jobs for our workers, boost affordability for families, and fully respect Canada’s languages, culture, and sovereignty. Our teams will now be working in the coming weeks to deliver that outcome.

— Mark Carney (@MarkJCarney) November 1, 2026

There's been little mention anywhere of Mark Carney's abrupt about-face on negotiating with the US over trade. As of Friday, as I noted in yesterday's post, he told Politico that "if his government could not successfully negotiate a suitable trade pact with the Trump administration, he was prepared to wait for a new American president to close the deal". As of yestrerday, it was "never mind".

Actually, there had been signs that something was in the works. As of October 26:

A trade agreement between the United States and Canada would be reached "pretty soon," President Donald Trump told a campaign rally on Sunday [October 25], nine days ahead of crucial US midterm elections.

Tensions between the North American neighbors have been high since trade talks broke down in August, with Trump imposing a slew of new tariffs in response.

"We'll have that settled pretty soon. They're willing to give us anything at this moment," the president said of an agreement during the rally in Port Huron, a Michigan town on the US-Canada border hit hard by his tariff war.

Carney himself had been making similar noises over the week:

Prime Minister Mark Carney told reporters Monday [October 26] that there has been some intensification in trade talks with the United States, but the prospect of a deal will depend on the Americans warming to Canada’s perspective.

“To the extent any progress has been made, it’s because the U.S. is coming closer to our position,” said Carney, during a press conference in Ottawa.

. . . Last Wednesday [October 21], Carney spoke with Trump at length about geopolitical and trade issues.

“Canada is ready to sign an agreement that is in the interests of Canadians, all Canadians, with very clear bottom lines, red lines, which meant that we were not willing to sign what was offered in in August,” said Carney. “To the extent to which the U.S. is moving towards accepting those aspects, then there’s a greater prospect of a deal.”

However, as of October 23, Trump was saying the US "holds all the cards" in negotiations. He gave a few details of what's being negotiated in an impromptu press conference yesterday:

At 4:30

We have the concept of a very good deal with Canada. You know, we've been losing money for many years with Canada, many, many years, 75 years, so we are now very, very close to having a deal. I spoke with the prime minister the other day. I spoke with him again yesterday, and we have the concept of a deal that's going to be great for our farmers, great for our country, and it'll be fine for Canada, too.

Q: Is the Keystone Pipeline part of the deal?

They're gonnma build, which I think is great. . . They're gonna pay for it. They're gonna pay for all of it. We're gonna give them the route, and it's largely been determined, but they're gonna build the Keystone Pipeline. . . . One thing we didn't talk about is our farmers were paying tremendous tariffs to send things to Canada. All those tariffs will be gone. There will be no tariff. . . . They were paying as much as 400% for milk products and other things. So part of the agreement is that our farmers will have to pay no tariffs.

Sundance at Conservative Treehouse thinks Carney's change of mind followed the EU-Canada summit:

[M]uch to the chagrin of Prime Minister Mark Carney and EU head Ursula Fond-of-Lyin, last Friday the major economies within the EU, specifically Germany, rejected any possibility of an “Associate Member” status for Canada. Simultaneously, Canadian media realized a trade deal with Europe would subject Canada to carbon taxes that are larger and more economically intrusive than Trump’s tariffs.

However, Carney and Trump talked on the phone October 21 and seem to have been aware of what was being negotiated, but for whatever reason, it was being kept very quiet. They seem to have agreed over the weekend to disclose the talks. The Montreal summit probably had nothing to do with this, and Carney's hard-line remarks to Politico were a pose. (But how much of anything Carney does isn't a pose?) While we still know very little about what's being discussed, Trump did mention the tariffs on US dairy products, which are apparently a complex issue:

“[Canada] has a large dairy producing constituency that it wants to protect, so they put a cap on imports that can be accessed at a competitive rate. That's what we call a ‘TRQ’ (tariff rate quota),” says Becky Rasdall Vargas, senior vice president of trade and workforce policy at the International Dairy Foods Association. Under the TRQ, Canada accepts a certain amount of dairy products duty-free, without tariffs.

“Above and beyond that cap, you are charged a tariff in the realm of 250-270%. That's the simplest way to think about it. Our complaint is we're not able to get anywhere near that cap, even though we have buyers who tell us they would like to bring in our product,” she says, noting the specific tariff rate depends on the product.

. . . Just on principle, a 250%-plus tariff seems outrageous, [s]he says. And when considered “in isolation, people are shocked.” Retaliation seems reasonable. “But it’s not a realistic picture. First of all, [dairy] is one of the outliers for out-of-quota tariffs. Secondly, just because there's a quota” doesn’t mean it’s filled. Neither the cap amount or percentage are the issue at hand, and there isn’t a lack of Canadian demand."

“We have, both from the U.S. government and from our members, some market intelligence that suggests there are Canadian consumers who would really like to have U.S. yogurts in their markets,” Rasdall Vargas says. “The quotas are in place to cap the amount of product going into the country so that we don't flood the market.”

Rather, Rasdall Vargas blames the dispute on “a systemic set of failures” by Canadian administrators that intentionally prevent American dairy exports from reaching the import cap. These protectionist measures are intended to support Canadian dairy farmers. One rule, for example, requires that Canadian dairy processors be the primary recipients of American dairy products.

. . . “Almost immediately, we felt like Canada's administrative rules were not consistent with their obligations in the agreement,” says Rasdall Vargas. “Very quickly after that, the U.S. government engaged in consultations, which are discussions with the government of Canada, as precursor to a dispute.”

The discussions were at a standstill by early 2021, prompting the U.S. to launch a formal dispute aligned with the USMCA arbitration mechanism. The U.S. won, and Canada “immediately changed its rules in a manner that kind of made the problem worse,” Rasdall Vargas explains. “So, the U.S. government took another dispute.”

Again, to no avail. With tensions ratcheting up, the stakes are rising for dairy farmers on both sides of the border.

But the dairy caps and tariffs are only a small part of what's apparently being negotiated, and we basically know nothing else. What we do know is that Carney seems to making a big effort to control the optics of the situation. He's apparently under a lot of pressure to avoid looking like he's giving in, but he has little choice but to do so.