The Future of Canada-U.S. Relations

PETER HAYNES: Welcome to the February episode of Geopolitics with the Honorable Frank McKenna. My name is Peter Haynes at TD Securities. This is episode 62 of this podcast series, where, each month, we get to hear the perspectives from Frank on global geopolitical issues.
Once in a while, we will invite some of our colleagues onto the podcast. And this month, we've been joined by our colleague at TD's Washington Research Group, Chris Krueger. Chris is part of the number one-ranked research team covering government affairs, and his specialty is in geopolitics. And Frank and Chris, along with our colleague, the Honorable Rona Ambrose, have been spending a lot of time together trying to decipher some of the goings on, both in Washington, and here in Canada, and in Ottawa. So, Chris, thanks again for joining us today. So much for getting some downtime after the inauguration.
CHRIS KRUEGER: Yeah, it's been something.
PETER HAYNES: Yeah, well, we'll get into where this ranks, I think, a little bit later, in terms of our lifetime, at least as Canadians here. So I'll start with you, Frank, on that front. That really was quite a weekend to remember, as we're taping here on Tuesday after the weekend of the World Cup of Hockey, our national winter sport here in Canada, which is an event that has proven not to be an all-star game.
It's interesting to hear both the NBA and Major League Baseball say, hey, we ought to do something similar to this. The World Cup of Hockey has literally turned into a war. Do you get the sense, Frank, that even though the Canadian and US players wouldn't say it during the game on Saturday night, that Saturday night's game was more than just a game?
FRANK MCKENNA: Yeah, I think so. The emotions were very high. Well, you saw the fights in the first couple of seconds. I'd say, first of all, I think it's been a great spectator sport. It's amazing the ratings and the interest in this. And it's great hockey, really good hockey. So it's very enjoyable to watch the best against the best. And I would say that our hockey players are fighting the tariff war, vicariously, on the ice.
The only unfortunate thing-- and I will say this-- I don't like fans booing another country's national anthem. On the other hand, I understand how jacked-up everybody is, how angry people are, right across the country, and they want a way to vent their frustrations. So I don't blame them for that. I just wish that we could either sit silently or find some other way to express our outrage at what's taking place.
CHRIS KRUEGER: I would agree. It's not right, but it's also understandable, unfortunately.
PETER HAYNES: Yeah. Frank, you've spent the better part of your entire adult life involved in politics. Where do you rank the current existential crisis for Canada in terms of your time in public service?
FRANK MCKENNA: Well, Peter, I've been through a lot-- through the original free-trade agreement negotiations in the late 1980s. That was intense, and the NAFTA negotiations were intense. Meech Lake was extraordinarily intense.
But I would say the most intense one that I was through was the referendum in Quebec, campaigning in that referendum, being in Quebec, being there for the giant rally. That was probably the most tension-filled event that I've been in. This is right up there. It's right up there, I would say, with that situation, and certainly ahead of the other negotiations. The temperature on this one is just red hot.
PETER HAYNES: So, Frank, as we dig in on the current events that are, as you say, red hot, I want to start with the recent visit to Washington by the premiers of Canada's 13 provinces and territories, a trip that was meant to sway the hearts and minds of politicians and senior staffers in the Trump ark about the Canada-US trade relationship.
After this trip, Newfoundland's premier, Andrew Furey told CPAC that it was, quote, "chilling" to hear one of President Trump's top advisors say that he is serious about making Canada the 51st state, and said he left Washington very aware that Trump was launching an attack not just on Canada's economy but on its sovereignty.
He said it is time to reevaluate the Team Canada strategy to ensure a firm response that draws a line in the sand. What do you think Furey meant by this statement?
FRANK MCKENNA: Well, I've spoken with him and other premiers, and they all were shocked and chilled by the reception they got in Washington. And I want to make it clear at the outset-- I think there's a big distinction between Trump and his entourage and the views of the United States, writ large, right down to ordinary citizens and all the way up to elected officials in the House and Senate.
But I think what Furey is really getting at is that we've got to really steel our resolve because we're in for a real battle here. And the end result of that has been-- we've seen the premiers be united and resolute more than I've ever seen them on issues in recent memory.
We've seen a former prime minister, Stephen Harper, come out saying, we need to be able to endure any level of pain in order to win this battle, which should be a call to action. And then Conrad Black, who was pardoned by Trump in the first term and has been quite close to Trump and associates, came out strongly, saying, we've got to teach the US a lesson, and we've got to fight this thing and fight it hard.
So that's the mood of the country. And Peter, I'm going to take a couple of minutes here and run through the arguments as to why we're going to win this skirmish and why it will be in the distant rearview mirror at some point down the road. So if you just bear with me for a minute, there are three reasons why we're going to end up winning this battle as Canadians-- one, we're united. But I'll just go through the facts. And first of all, the facts are on our side.
Overall, our trade is the largest of any countries in the world, and our trade deficit is the lowest of any country in the world, only 5% of the US total imbalance. We're the biggest customer of the United States. We supply 62% of all exports of oil into the United States. 25% of their refinery capacity requires Canadian oil. We ship 45% of our natural gas into the US.
Potash-- 77% to 80% of the potash consumed in the United States comes from Canada. Uranium-- 30 million people enjoy heating and lights as a result of nuclear reactors fueled by Canadian uranium. Electricity-- 33 terawatts go down. Refined products-- the state of Maine alone-- 95% of the state requires Canadian heating oil.
50% of nickel is from Canada. Tourism is four times bigger than any other country in the world. Steel and aluminum-- aluminum is-- about 70% of all of America's exports come from Canada. And steel-- we're the biggest exporter as well.
On services, they enjoy a $25-billion surplus with us, which they don't record. And we're on the receiving ends of an army of guns and drugs coming across the border from south to north that we need to put the United States on notice on. So all of those things weigh in our favor.
But there were other factors, as well, that were in our favor. And one of them is what I would call pure raw emotion. Americans, in my view, do not hate us and do not want this fight.
In fact, a poll that was taken by Angus Reid indicates that only 25% of Americans support the 25% tariff on Canada. And that number gets cut in half when you mention the fact that it could result in higher gas prices or higher material prices in the United States. So the support level, I would say is weak.
And then you've got all of the other relationships that we should never forget about-- people in neighboring communities, people in labor unions, people, governor to-- governor to premier, et cetera. I think the hearts and minds part of this campaign is extraordinarily important, as well.
I think of a note that I read yesterday when the mayor of Haynes, Alaska, sent a note to his counterpart in the Yukon saying, "Can we still be friends?" And I think at the end of the day, that will be a very important element, as well.
My son is down in Tampa to see some preseason baseball. And he warned me before he left. He said, I'm going to have to keep a careful eye on my wife because she gets furious every time she looks at a certain individual on television talking about Canada.
And I sent him a note yesterday and saying, how is it going? Have you been able to keep your wife out of trouble? And he said, look, we've met 20 Americans in a very short period of time, and every single one of them apologized for any offense that we might take to the rhetoric of their political leaders. So I think that's the overall mood that we're dealing with.
And the final point I'll make, Peter-- and then I'll shut down-- is what I call the law of groups. And I had a lot of experience in politics, wondering why small groups could always outorganize bigger groups. And the reason they do is because they have more energy, more intensity, and they care more.
And in this case, Canada cares a lot more about this issue than the United States. It's not the dog in the fight. It's the fight in the dog, as we used to say on the farm. And right now, there's a lot of fight in this dog in Canada.
And you'll see in the United States, I believe that they will cool their heels very quickly about a tariff war with us when they see the reaction of the US dollar, the stock market, or the bond market, and realize that Canada is totally galvanized, totally united, and totally determined to fight this and fight it hard.
So we are already seeing some signs of that. Senator Collins in Maine is out saying, look, you can't stop the flow of fuel oil into Maine. Senator Grassley is out in Iowa saying, you can't stop the potash from going into Iowa, CEO of Ford saying that there'll be massive layoffs and losses if you go ahead with these tariffs, oil executives talking about the price of gasoline, Wall Street Journal saying it's the dumbest tariff war ever.
I think we've got an awful lot going for us, Peter, if we get down to-- in the trenches in a real tariff war, which is why I want people who are listening to this today to say that we may go through a bit of uncertainty, but we will ultimately prevail.
PETER HAYNES: And I love your confidence, Frank, on behalf of all of us Canadians. We do have a US counterpart with us, Chris Krueger. Chris, I want to talk about, what are the next steps as we think about this Canada-US relationship and the talks around the tariffs?
CHRIS KRUEGER: Yeah, no. Great to be with you all. So March 4 and March 12 are going to tell us an awful lot. March 4 is the 30-day deadline for those initial blanket tariffs proposed by President Trump under the IEEPA statute. IEEPA is the International Economic Emergency Powers Act.
This is the law from the late '70s that Trump used to impose those 10% tariffs on China for illicit-drug flows earlier this month. So March 4 is the 30-day reprieve on the 25% blanket tariff, as well as the 10% tariff for energy.
Then on March 12, we have the steel and aluminum tariff of 25% These are stacking, in that if both of these tariffs hit, the steel and aluminum tariff would actually be 50% So it's not 2% and then a push. These are incremental.
So on the initial 25% blanket tariff, this was like the China tariff over non-trade issues, specifically migration and illicit-drug flows.
I do have a lot of sympathy and agreement in Frank's earlier comments. Both Canada and Mexico, from a public-policy standpoint, have made numerous advances on both issues, Canada having deployed a number of not just dollars but also incremental policy positions on migration flows and others.
With the steel and aluminum tariffs, this is under Section 232. This is under the Commerce Department. This is for national-security issues.
We've seen this movie before, although it was a different version. We saw this in 2018. Canada and Mexico both, essentially, have been working on de-facto quotas since those initial tariffs. We'll see how this unfolds. I think longer term, you still have the USMCA renegotiation, as well. So March 4, March 12 are the next flashpoints.
I am hopeful that this ends with an end result that has a better trade and border relationship for all three countries, but I think it is going to be a longer narrative, with March 4 and March 12 being the next big clues.
PETER HAYNES: Chris-- so March represents the two-year anniversary of the merger between Cowen-- the Washington Research Group being part of Cowen and TD Securities. I want to take you back to your time before you were working for a Canadian bank. What do you think you'd be thinking right now if you didn't have the understanding-- clear understanding, because you're working with Canadians a lot, about how important this issue is here? Do you think you would appreciate the gravity for Canadians, absent the fact that you get to hear our passion regularly and all the meetings you're having here?
CHRIS KRUEGER: Well, I thought Frank nailed it, as he is-- wanted to do. But I grew up in Vermont, and I vividly remember those Quebec secession votes. So, I mean, look, having grown up 50 miles from the Canadian border-- lots of friends on either side.
But I would say, if you can zoom out a bit, this isn't happening in a vacuum. I mean, this is part of the shock and awe or the flood-the-zone component that has been the-- not even the first month of the second Trump administration.
So I am very aware and very sympathetic to the Canadian perspective on this. But also, I think if you can look south of the border, there are so many other things going on, not just within the administration but just writ large, that it's not happening in a vacuum. And we're hopeful that USMCA will be made stronger. But I think it is going to be a long road.
PETER HAYNES: Yeah. So, Chris, you mentioned the 30-day window that Canada and Mexico were granted on tariffs. We're close to the 30-day mark in Trump 2.0. I'm curious, what has surprised you most about the first 30 days? And chaos, obviously is the obvious thing, but let's dig in a little bit on what you are most surprised by.
CHRIS KRUEGER: Well, so our six-person group in Washington, the Washington Research Group-- we put out an ahead-of-the-curve note in mid-January attempting to forecast, as best we could, the first hundred days of the Trump administration. And we entitled that note, "All Gas, No Brake." And candidly, I think we probably undershot it.
So I would say there-- I mean, typically, I like to speak in threes, as Frank did earlier. But I would say, really, five things have stood out in no particular order-- number one, not just the velocity but the torque of these policy announcements. It's not just one a day. It's, like, six or seven a day, any of which, I presume, there will be PhD dissertations written about.
The second one has been, at least from my seat, the seeming lack of opposition, whether it's from elected Democrats or others. There just-- there seems to be this-- that Trump is just running the table. Looking at the muscle memory from 2017-- the opposition, the resist-- the so-called resistance, et cetera-- that's been a surprise.
I would say, number three, the speed in which the Cabinet outside of Matt Gaetz, has been confirmed and very nontraditional cabinet picks, where Republicans have essentially locked arms with a couple noted opponents.
The fourth-- I would say DOGE. No real precedence. I mean, one of the things at Washington Research Group, that we've done, not just at TD-- our time at Cowen and at other firms-- is there's a wealth of precedents and history that you can look back to and, at least, a mosaic theory, explaining or putting into context what's happening within public policy. And DOGE is really a unicorn. So where that ends up, I think, is anyone's guess.
And then finally, I would say the China tariffs. I think if you went back in time to early November and said, on this date in February, the administration is going to put a 10% tariff on all $400 billion in imported goods from China, with no exceptions, unlike 2018, 2019, impacting everything, including all consumer goods, and the stock market is going to be up at the end of the day, I don't think anybody would have taken the other side of that trade.
That's because we didn't end the largest free-trade zone in the world on that same day. You didn't have those 25% Canada and Mexico tariffs on the same day. But just instituting those 10% tariffs on China via IEEPA-- first time that statute has ever been triggered for this-- that's historic.
And that could well be an outlier. That could well be the beginning of, essentially, rewriting the global-trade process. But we'll see. But those are just, top of the mind, some of the things that have been nothing less than historic and nothing less than extraordinary.
PETER HAYNES: And I'm going to pick up on the fourth and fifth ones here-- IEEPA and DOGE. One of the controversial aspects of the early days of the Trump administration is his apparent willingness to seek absolutely no boundaries to the powers of the executive branch, including, as you mentioned, using IEEPA for the steel and aluminum tariffs and, of course, threatening the more broad-based sanctions against Canada and Mexico and, I'm sure, other countries soon.
So far, the lower courts have pushed back on executive actions that have gone too far, including the 14th Amendment birthright issue and some of the DOGE actions against agencies, such as USAID.
The reaction from the Trump administration and Elon Musk, specifically, is that any judge that stands in the way of the executive branch should be fired. And, I believe, on Sunday, Trump was quoted as saying, "He who saves his country does not violate any law." I think that's following some Napoleonic sort of memes, and now he's tagged his social media with that statement. Are you surprised by the aggressive approach shown by the administration, and what are your expectations when these issues arrive at the Supreme Court?
CHRIS KRUEGER: That's a great question for John Roberts, and Brett Kavanaugh, and other members of the Court. Look, I mean, I think it's going to be a case-by-case basis. We do have precedence here, right? I mean, Andrew Jackson-- and Jackson is one of the portraits that is in the Oval Office. I think-- interesting as a historical figure-- I think Trump is a historical figure, whether you disagree with him or agree with him. I don't think there's really any question of that.
From our standpoint, the broader public-policy issue to watch will be the question of impoundment. This is an issue that Trump and his supporters want to litigate. So impoundment gets to the heart of that federal spending-freeze memo.
You now have Russell Vought confirmed to run the Office of Management and Budget-- incredibly influential position. What Vought, I believe, and his allies would say is that impoundment, specifically the 1974 law, is unconstitutional.
What impoundment is is the ability of a president to not allocate-- to not spend Congressionally appropriated discretionary funds. Every president, from Thomas Jefferson to Richard Nixon, impounded funds. It was the perceived abuses of impoundment that led to the '74 law.
This will ultimately end up, in our view, before the Supreme Court. That would be-- if the Supreme Court overturned the '84 law, that would really shift power massively from the legislative branch to the executive branch. So that's the one to watch. Don't really have a strong view on how those nine justices will vote on that other than, probably, the three liberals verse the three hard conservatives, and then you kind of have the three in the middle.
You did have, under President Clinton, the line-item veto. That was struck down by the courts. So, I guess, perhaps, if you're looking at case law, the Impoundment law maybe stands. But I think if you zoom out, the biggest, probably, question in all of this, from a public-policy standpoint, is that impoundment question.
PETER HAYNES: Frank, you're a very close student of the Supreme Court. I know we've talked, on this podcast in the past, about some of your interactions with members of the Supreme-- the Supreme Court justices in the US. What is your read on the actions of the administration and the lengths they seem to go to want to push the boundaries between the power of the executive branch versus the courts and versus Congress?
FRANK MCKENNA: You'll never have a greater alignment between president and Supreme Court than you have right now. They've demonstrated that they're prepared to go to very significant lengths to support Trump in all of his judicial proceedings and, I think, in the attitude they take towards the exercise of power by a president.
I suspect there will be some lines drawn in the sand. I think the chief justice, and probably Madam Justice Barrett, will, from time to time, become a bit nonpartisan. But, I think, largely, the president will be successful in prosecuting his case before the Supreme Court.
PETER HAYNES: That's concerning, but we'll have to watch. Stay tuned on that-- that channel for sure. Frank, I'm going to switch gears here, follow up and talk about the Super Bowl. And I want to mention the fact that the government of Ontario ran an advertisement across the United States promoting the province in Canada that was described as, quote, "the most politely aggressive Super Bowl ad." Why aren't other levels of the Canadian government flooding the MAGA zone with advertisements, appearances on right-wing news agencies like Fox, and social-media postings?
FRANK MCKENNA: Your point is an excellent one. I think one of the reasons a lot of governments aren't doing that is there's a certain amount of shadowboxing going on now. We don't know what we're fighting. Are we fighting a battle on tariffs? Are we fighting a battle on defense spending? Are we fighting a battle on fentanyl? Are we fighting a battle on water? So it makes it a little more difficult.
And the other thing, of course, is that the goalposts change constantly. Now, we hear there could be tariffs on the auto sector. Steel and aluminum got introduced last week, and so on and so on.
Having said that, when I speak with provincial premiers, and territorial leaders, and cabinet ministers, and public servants, I stress, very strongly, the importance of a hearts-and-mind campaign. I think what Ontario has done has been laudable, and I think it's been significant, and I think it's been influential.
And I spoke to a premier just last week and said, look, you need to do the same thing. You need to express this in such a way that Americans will clearly understand what's at stake here.
And so I'd say there's two parts to the message, Peter. One is the facts. And Chris, this would probably surprise you to know, but I think just about every Canadian, now-- all 40-million-plus of us-- know the facts about the trade relationship with the US. I could walk into a local hockey game, and people would walk up to me and start talking about reciprocity, and oil, and price of oil, and the trade numbers.
So Canadians are really seized with the fact, which just makes them angrier, quite frankly. But we need Americans to know the facts, as well. Trump believes this $200 $250-billion figure out there, which is just an absolute canard of the worst proportions. It's just a lie. It's wrong. But he lets it lingering out there, and nobody really repudiates it.
So we need to get the facts out there, I think, before Americans. And we need to get the facts-- as we say sometimes, you need to fish where the fish are biting. And in this case, it means going right to President Trump's constituency, to Fox News, and to Newsmax, and to Joe Rogan, and all of the other constituencies-- Sinclair Broadcasting and so on-- and make the argument, in front of those constituencies, about the real facts regarding the Canadian-US relationship.
I think we need to do that, and we, secondly, need to tug on the emotional heartstrings. We're best friends. So what did we do wrong?
We need to ask that question because I think instinctively, Americans and Canadians like each other, respect each other. We're cousins. We're neighbors. We're allies. We're trading partners. We're all of those things. And we always thought that it was good for us and good for them. So if we did something wrong, then what is it?
I think it's important that America understand that, even as powerful and mighty as they are-- and they are-- we've got huge respect for them. Everybody needs friends, and we acknowledge that in Canada, we need friends. We need a friend, especially, with our neighbor. We only have one neighbor, and we want that neighbor to be a friend.
So I think Americans will ultimately come to the conclusion they need friends, as well, and they've never had a better friend over a hundred years than their neighbor to the north, Canada. So I believe all of that will help shaping the debate as we go forward.
PETER HAYNES: And I'm guessing, Frank, we need to solve our uncertainty in Ottawa before we can really build that strategy. So, hopefully, that happens sooner than later. You mentioned goalpost changing. And in the theme of football, I'm not sure if you've heard that suggestion, but they're literally considering raising the goalposts on an NFL football field each quarter to make it harder to kick a field goal later in the game, and, thereby, encouraging teams to go for it on fourth down and try and score touchdowns. So I thought you'd get a kick out of that one.
But anyways, we're staying with the Super Bowl here, Chris. In what has been a tradition up until, I think, the past couple of Biden years, the network that carries the Super Bowl runs an interview with the sitting president. So that happened this year. Of course, it was Bret Baier from Fox, who interviewed President Trump.
I think what most people took away from this interview was Trump's seeming unwillingness to endorse his VP, JD Vance, as the next leader of the Republican Party. His comment was, quote, "it's too early. There are lots of good candidates." Do you take that to mean, Chris, that there's lots of good candidates with the last name, Trump, either 47 himself or Donald Jr.?
CHRIS KRUEGER: I don't. I mean, look, I don't think it was terribly surprising. I mean, if you read the full quote, I mean, he went out of his way to praise and to compliment his Vice President Vance. Vance is only 40 years old. Trump frequently talks about deals, and leverage, et cetera.
The second Trump appoints a successor, he's a lame duck. So I don't think Trump is ever going to go out of his way to really put his finger on the scales because then he would lose his leverage.
We've talked about, a lot that, in our view, President Trump is perfectly comfortable being a paradox. And what we mean by that is that he will push policies and personnel that are seemingly in massively contradictory policies. That only serves to increase his leverage. We've called it the chaos premium. It puts him at the center of all decisions.
So I don't expect him to change in any short time. Ultimately, we come back to what we've called the Highlander principle, that there can be only one. And Trump is President, and he will act as such.
PETER HAYNES: So threatening the Highlander principle is Elon Musk, who's been outspoken, of late, on political issues in Germany, the UK, and Canada, just to name a few. And there have been rumblings that he even has Twitter algorithms and bots that are set up to impact the outcome of elections, including Canada.
Last week, it was a pretty high-profile speech that he did with Trump sitting behind the resolute desk while Musk had his four-year-old son with him. What do you make of his growing influence inside the White House, and do you have any sense of where Musk might be on this issue of tariffs?
CHRIS KRUEGER: I really don't. As I said earlier, I mean, it's really without precedents. And DOGE seems to shift almost daily. Maybe just to flag one thing, though, with a lot of Canadian listeners, to use a hockey metaphor-- maybe skating to where the puck might be-- there are two sides to a balance sheet, right? You've got debts, and then you've got assets.
I do think, at some point, whether it's DOGE, whether it's Treasury-- and the Treasury Secretary, Scott Bessent, has talked about this a lot-- is what Bessent has referred to as monetizing the balance sheet, so taking government efficiency, taking the disruptors, taking the contrarians, to maybe trying to rethink how we think about the massive assets on the US balance sheet, this idea that the US is asset-rich but cash-poor. So whether it's the creation of a sovereign wealth fund, whether it's rethinking some of these other proposals, I think, is probably a podcast discussion for us maybe in the spring.
PETER HAYNES: It's interesting you bring that topic up because, I believe, it was the famous economist Bob Shiller, who, at one point, suggested that countries should sell equity in themselves. And of all the presidents or people in the world that might consider doing something like that, you would think that it would be someone like Donald Trump, who might take the United States public, like Bob Shiller had suggested several years ago. It's an interesting thought. And yeah, maybe we'll take this one on in a future podcast.
So, Frank, I want to come back to Canada and talk a little bit about some of the important players in our national politics at the current moment. We do this role-playing every once in a while in this podcast series, and I want to get there again. So I'm going to put you in the corner of each of the following individuals, and I want you to tell us what advice you would give each of them for addressing the threats from the president and each's own future in politics. And I'm going to start first with Prime Minister Trudeau.
FRANK MCKENNA: I think that Trudeau-- his [INAUDIBLE] in the rearview mirror. I thought he should have left sooner. That left the party poorly prepared. But having said that, everybody tells me, including his most bitter critics, that he's performed well in the last several weeks and that his speech to the nation was probably his finest moment.
So I would say this to the prime minister-- look, you're running out the string. I would have liked you gone earlier, vacate the field, and let a new leader in place. But you did stand tall when we needed you. That's it for Trudeau. Next?
PETER HAYNES: Mark Carney.
FRANK MCKENNA: He's had to prove that he actually can do politics. Everybody knows that he can do everything else. And I think he's done that well.
I listened to a podcast yesterday. He was excellent. And I think he just needs to keep doing what he's doing. To quote another expression, "his brand is crisis. His brand is crisis." And right now, we're in a very significant crisis. So Canadians are looking on him very favorably because he's got so much experience at managing difficult situations.
PETER HAYNES: Chrystia Freeland.
FRANK MCKENNA: I've said this before, so I'll say it again. I think that she'll end up not being successful because of her association with Trudeau. But that doesn't mean she hasn't run an impressive campaign and is not an impressive individual. And she's being very assertive in fighting against Trump and some of his aggressive comments. And I think that she will end up having a really important role in our country going forward.
PETER HAYNES: OK. And in that vein, in the event Mark Carney was to win the Liberal leadership, become prime minister, one of the problems that he faces is separating himself from previous Liberal leadership, and also the fact that, generally speaking, the Liberal Party has all turned on policies that they implemented, such as carbon taxes, capital gains, inclusion rates, and other issues that seem to be dear to the Trudeau leadership. So with that in mind, would you expect Chrystia Freeland to be a key part of Mark Carney's cabinet or more likely on the sidelines in that regard?
FRANK MCKENNA: Well, I think she'll be both. I think she'll be an important player, but I don't think she'll occupy the position she's had before as finance minister and deputy prime minister, if I had to guess.
PETER HAYNES: OK, next up-- Pierre Poilievre.
FRANK MCKENNA: Pierre Poilievre has read the room a little bit late, but he's read the room, that Canadians have a single preoccupation now, and that's dealing with the United States and impending tariff threats. And he's made a pivot, and I think he's done the pivot successfully. I watched his speech several days ago, and I thought it was quite masterful, not only the speech but the packaging around the speech and his commitment to moving our resources away from the United States and doing it quickly. I thought he did a good job of making the pivot.
PETER HAYNES: Frank-- and I think you're referring to his speech on Flag Day where he did actually come out and make some suggestions about his platform, specifically around energy. I want to talk about that because both Poilievre, as well as some of the premiers, have suggested, that, to reduce Canada's reliance on the US as a buyer of our energy products, that we consider restarting Energy East, which I believe still remains a problem in the province of Quebec. What is your advice for Canada in terms of making the US less important in our exporting of energy products?
FRANK MCKENNA: Look, I'm going to jump right on that. But before then, I'm going to mention two or three other names that I think have performed well and need mentioning. Dominic LeBlanc-- he's been superb not only as a negotiator but in his new role as minister of finance. Extraordinarily exacting.
Mélanie Joly, who's been giving speeches in New York and Washington. She was over in Paris two days ago. She's in Munich now and headed off to South Africa and still co-chairing the US-Canada stuff. She really asserted Canada's view very, very strongly today in telling US senators that talking about Canada being a 51st state was no joke. And then Anita Anand, who's been leading the inter-provincial trade barriers and, I think, doing a terrific job at that. So I mentioned that.
But to get to your point, right now, I think we need to strike when the iron's hot. I spent a lot of my public credibility in pushing the Energy East pipeline and connecting shippers, and producers, and receivers. And I thought we were close to getting it across the line. We didn't quite get there. The polling shows now three quarters of Canadians support that project.
But I have to tell you candidly, it's more difficult now. TransCanada had vacant space on its pipelines, which has now been filled with natural gas, which means that you would have to build a pipeline all the way from Alberta to New Brunswick, rather than simply building it from the Ontario-Quebec border to New Brunswick.
So it's a bigger lift, and it would take a mammoth amount of support from the private sector and the public. So doable? Probably, but it would be a big lift.
A much easier lift would be the Trans Mountain pipeline. It, of course, was recently doubled. About 60% of the oil in that pipeline is still going to the United States. With some carrots or sticks, it would be quite simple to design. You could get all of that oil moving to foreign markets, which would take a bit of pressure off our so-called "balance-of-payment deficit."
You could also, very quickly, in my view, fill up the spot capacity on that line, which would be another 150,000 barrels. And by debottlenecking and pressurization, you could probably add another 250,000 barrels. And if you were serious about doing that, you could try to take a bit of a meat cleaver to the regulatory process to do that quickly. That would be the quickest win.
The other major win that can happen-- and I've been talking to Premier Eby about this in BC, so I know it's quite realistic, and that's speeding up LNG on the West Coast. There are at least four or five projects in various stages of licensing and approvals, and I know he's pledging to speed that up. That would require that we increase the capacity of the coastal gas pipeline, and I believe that can be done, as well, with the existing pipeline, with more pressurization, et cetera.
So I think some of those are the more low-hanging areas of fruit. A project that I've worked on with my colleague, John Prato, at TD for some period of time was what we call Saginaw LNG, moving gas from Alberta to the Saint Lawrence River. That would have First Nations involvement and support from Quebec, and Ontario, and Alberta.
And all of the parties in the East, Quebec specifically, have indicated they have an open mind on that project now. That would move a lot of gas out of the basin, as well, allow us to get oil prices, and reduce the energy exports we make to the United States of America. So all of these things are possible. And I think if the government puts its shoulder to the wheel, some of them are even likely.
You have to remember that this is a time of crisis in our country, like nothing that we've ever faced before. When the US government faced a crisis in the Second World War and realized that they had a problem defending Alaska, they built the Alaskan highway, 13 miles a day. That's a really good role model for us in just how decisively we need to tackle the current challenges that we have.
PETER HAYNES: It's interesting you say that, Frank. When they speak to Democratic supporters who decided to vote for President Trump and ask them what they think of the first 30 days, they seem very-- at least from the polling, they seem very supportive and happy with everything President Trump's done because it's happening so fast, and they're seeing change actually happen. They may think he's rude, but they see things happening. And where there's a will, there's a way. And I would agree that it shows that it can be done when you're in a period of crisis, like you mentioned,
Chris, on that-- you mentioned, earlier, the sovereign-wealth fund. I want dig in a little bit on that because that suggestion has come up a couple of times. We've heard about a sovereign-wealth fund in the province of Alberta, here, for resource assets that Premier Smith is considering. We know about the sovereign-wealth funds in other jurisdictions around the world. They're normally tied to some sort of resource revenue.
Cynics would argue, from the US perspective, that President Trump would want to build a sovereign-wealth fund so he can buy the Dow's next dip. I'm curious here, though, what is this going to look like? He seems very serious-- it's an executive order, I believe, to create the sovereign-wealth fund. How does he envision this fund will be structured? How would it be funded? And what would it be used for?
CHRIS KRUEGER: All great questions. I'm not sure there are definitive answers for any of them. Just, maybe, taking a step back, so President Trump issued an executive order earlier in February for both the Treasury and commerce departments to establish a sovereign-wealth fund. And the expectation is is that that fund would be stood up in 12 months or so. Overwhelming consensus that Congress would have to authorize.
Keep in mind, we hit the debt ceiling last month. So funding a sovereign-wealth fund while we're in extraordinary measures is basically impossible. So the first question here is just figuring out how we're either going to suspend or raise the debt ceiling.
Most of the bigger sovereign-wealth funds across the country are financed right from oil and gas reserves. So you want some type of steady revenue mechanism. And again, this is not a radical idea. It's actually been Democrats who have long argued for the United States to establish a sovereign-wealth fund to invest in new technologies and infrastructure.
We've heard any number of revenue mechanisms, whether it's tariffs, whether it's some type of new bonding, whether it's oil and gas leases, whether it's the Fannie/Freddie recap/release, et cetera.
A lot of questions. I think, probably, our big four core questions would be, number 1, what is the expected size; number 2, the sourcing of the funds that I just mentioned; number 3, who manages it; and then number 4, what are the investment parameters here?
I mean, when Trump issued the executive order, he mentioned, TikTok, that this could possibly be an investment in something like that. I think there's an expectation that it would be infrastructure-type investments, like Hoover Dam-type programs of national significance. But, once again, I think another great topic for a future podcast.
PETER HAYNES: Yeah, once we get a little bit more meat on the bone. I want to switch over here, Chris, and follow up with a discussion on some of the recent global-geopolitical matters that the US has gotten involved in. I want to start by asking you about the reaction in Washington to President Trump's first move on ending the Ukraine War, which happened in the last few days and including today, where there was a meeting in Saudi Arabia that did not include Kyiv, and also to JD Vance's speech that was done on German soil, condemning Europeans' immigration policies, lack of support for right-wing political parties, and his suggestion that the enemy in Europe was from within.
Of course, we know since then, there's been an emergency meeting of the various European leaders being held, I think, in France, and a lot of rhetoric coming out of that. So I'm curious, what's Washington saying about those two matters?
CHRIS KRUEGER: Well, look, I mean, I think ending the war in Ukraine has been a huge priority for Trump, probably a top-five campaign issue. The administration, I think, would file this under the promises-made/promises-kept category. We'll see what that resolution looks like, et cetera.
But I think this is something that-- if you look at policies in Washington-- red light, green light, yellow light-- this is definitely in green light in that we want a green light for-- a red light in terms of the hostilities in Ukraine and Russia.
I think more broadly speaking, President Trump is unique in that not only is he president. He's also the leader of a movement. I'm not equating him with the two. But Barack Obama was also president and the head of the-- what was it? The Hope and Change coalition, right?
And Ronald Reagan was the Reagan Revolution. So not only are they presidents. They're also figureheads of political movements, whether you think those are also cultural movements and/or changes in the culture, et cetera. But I think what you're seeing is MAGA going global.
You had both the leaders of Italy and Argentina at Trump's inauguration. This is not unlike Ronald Reagan, with Margaret Thatcher or, candidly, Brian Mulroney. As Frank knows better than I, It was Mulroney who convinced his friend Ronald Reagan to open up the Canada-US free-trade agreement to Mexico. So I think there is-- we're still in early days, but this idea of a populist, MAGA, global phenomenon.
PETER HAYNES: And so on the JD Vance side, are you surprised that-- I know that a lot of people have called it a rookie error for some of the things that were said during that speech. Has that gained much traction in Washington?
CHRIS KRUEGER: The primary lens in which Trump and the administration look at trade flows is the bilatera goods deficit. And I think Europe is going to be in a pretty tough spot when, not only do we get clarity on these reciprocal tariffs but the April 1, America First trade report, when that comes out on April 1.
PETER HAYNES: Who's writing that?
CHRIS KRUEGER: The varying cabinet departments and agencies. It's primarily the Commerce Department, the Treasury Department, and the United States Trade rep.
PETER HAYNES: Frank, obviously Trump had to make a first move and make a phone call. He couldn't call both leaders at the same time. Do you see an off ramp coming out of this-- the first move that Trump has made to try to solve the war? Or do you think this is going to get caught up in he said, she said, were not part of this?
FRANK MCKENNA: Look, if we could resolve the war, it would be a good thing, not just for the two combatants but also the rest of the world because it has many knock-on effects that affect the quality of life of other people around the world, nothing, obviously, on the scale of what's happening to people in Ukraine. My view-- it's always good to try to see if you can resolve it.
I think, ultimately, no matter how Trump and Putin portray it, there can't be a settlement without Zelenskyy and Ukraine being at the table and with Europe being involved, either as a guarantor of the peace or as a continued armorer of Ukraine.
So I think that, perhaps, after the initial conversations take place, other conversations will take place, as well. It's not unusual that how you end up is different from how you start out. It's going to be very difficult for Ukraine to carry on this war without the United States of America having its back.
But the Ukrainians have proven to be valiant and heroic in the way in which they've defended their homeland. They're fighting for their home. And they will not give up this battle without some level of agreement that allows them to retain some territorial integrity. So I think the rest of the story is yet to be written.
And I would not want to be Trump in the history books if he gives Ukraine, essentially, up to the Russians, and they turn around and use that, as Hitler did, as just another appeasement that allows the march to continue into other countries. That would be a disaster for all of us, and, certainly, would be a disaster for Trump and his ability to try to get a Nobel Prize for his efforts.
PETER HAYNES: Yeah, that's for sure, Frank, I'm going to carry on the crisis, but this time, I'm going to come back to Canada and talk about the overused saying of, "never let a good crisis go to waste." I know it's something that you've been talking a lot about with various leaders in this country. There's been a lot of talk about the tariff crisis being used as a catalyst to reduce what are known as inter-provincial trade barriers. And I know this was a topic that, I think, that Pierre Poilievre has on his agenda, which he outlined on the weekend, as well.
I know there appears-- you've mentioned this before, that there's some work being done behind the scenes on this file. Yet, I actually don't think Canadians really understand, when people say there's inter-provincial trade barriers, what that really means. I know the IMF has said that if Canada could get rid of-- miraculously get rid of all of their inter-provincial trade barriers, our GDP would rise by 4%. Can you help us understand this issue with, perhaps, some examples of maybe some of the lower-hanging fruit for our governments to fix?
FRANK MCKENNA: Yeah. And Peter, allow me to say that there are many things that Trump has been doing which will be positive for Canada, even DOGE itself. It represents a fundamental shake-up of government, but governments should always be looking at re-engineering the things that they do and trying to find ways to do things that cost less and are more efficient.
I think the United States will enjoy lower taxes in the very near future as a result of these efforts. Canada is probably going to have to face having a more competitive tax regime, as well. So there are a number of things spilling over.
But one of the things spilling over is interprovincial trade. And it's something which, as you know, I've argued about here ad nauseam. It's the low-hanging fruit in terms of making Canada more efficient-- as you say, 4% GDP growth. It really acts as something like a 7% tariff between provinces.
The problem is-- and it takes a crisis to fix it. Behind every one of these non-tariff barriers, there's an interest. And those interests are going to fight ferociously to retain their barrier.
So here are a few of the examples. We have 600 professional credentialing bodies in Canada, and there's often not mutual recognition. So the credential in one province isn't recognized in another. For example, when we had terrible wildfires in Yellowknife and in the Northwest Territories in 2023, the doctors who accompanied a number of the people being medivaced out to British Columbia looked after the patients in the plane. But once they got to British Columbia, they could no longer look after those patients because they weren't credentialed in BC.
Those are the kinds of dumb things that we need to fix, both in terms of improving the quality of our health care and mobility across the country but in terms of cost, as well. That's one example.
Alcohol-- we have really rigid prohibitions about moving alcohol across the country. A BC wine can only be bought in Ontario through the LCBO, and you'll have to pay a 72% markup in order to get it. Packaging and labeling is another example.
Commercial vehicles have multiple inspections across the country. You may need to reduce air in tires. You may need to change signage at the border. Those are all examples of it. Car seats-- a different safety standard in every province for car seats.
And here's the one that I always laugh about. There's a sign on the border between New Brunswick and Nova Scotia saying, effectively, New Brunswick bees are not allowed in Nova Scotia. Now, the bees, as smart as they are, don't necessarily have the capability of reading the signs. But you cannot commercially take bees from one province to the other.
Now, the large blueberry growers in Atlantic Canada bring bees all the way from BC, right across the country. But when they get to the provincial borders between New Brunswick and Nova Scotia, the bees have to stop and turn around.
So those are the kind of dumb things that provincial leaders need to stand up and be counted on. And I think they are. I talked to the minister this weekend about progress. She said the momentum is still there. She's holding a meeting this coming week with premiers and ministers. And before the end of the month, there's going to be a live meeting of all of the people involved in this file.
So I think this will be a really beneficial development for Canada. And it's been brought about because we have a burning platform, and that's the way you get most things done. A crisis like this should not be wasted.
PETER HAYNES: Well, Frank, I have to imagine this is the most time premiers in this country have ever spent together. certainly in the last couple of months, they've been traveling en masse. Just as we finish up here, Frank, I want to talk, as we end up, about critical minerals because President Trump has already signaled that his art of the deal in the Ukraine-Russia war will include access to Ukrainian critical minerals.
President Trump's also mused about access to critical minerals in Canada. Quebec Premier Legault has suggested that, instead of all these back-and-forths on tariffs, maybe we should just move ahead and fast track renegotiations on CUSMA. So if this was to happen, how would you manage access to Canada's rare minerals in the reopened CUSMA negotiations?
And I want you to talk about water because, with 20% of the world's Freshwater in Canada, I wonder whether or not this is something that the Americans will want to get their hands on here as part of this negotiation.
FRANK MCKENNA: Yeah, so look. This is a great question. And Premier Legault's been saying a lot of things which are counterintuitive, and I applaud him for it. Here's the problem on renegotiating CUSMA, and it's a problem we're going to have to face at one point sooner or later. And I say this advisedly, but I do say it.
How can we trust the United States of America? We had NAFTA, and President Trump, effectively, tore it up. We renegotiated CUSMA at his insistence, and he declared that it was the best trade deal ever after tearing up the worst trade deal ever. Now he wants to tear it up again.
And I think we would be ready, and Mexico, to roll up our sleeves and negotiate. But how can we do business with somebody who's breaking the law? Everything that Trump has been talking about in these last two or three months is a breach of law, whether it's CUSMA, or whether it's the WTO, et cetera.
And how do we get a deal where we're comfortable saying, well, we'll send you more oil, we'll send you more natural gas or whatever it might be? But how can we trust the United States of America? It's a terrible thing to say. We're talking about the greatest country on the planet, in terms of the economy, and military, and its moral leadership, even. But this is going to be a problem for decision makers when we get into negotiations.
So my view would be, President Trump, if you want critical minerals, you've got them. You've got oil. You've got gas. You've got potash, all the things you need as all part of the free-trade agreement between Canada and the United States of America, we've got at least one-- I think three critical-mineral mines in Canada, where one of the investors is the Department of Defense of the United States of America. That's the kind of relationship that we have and have always had.
And I don't know why he would be obsessed about the pretty minor amount of critical minerals in the Ukraine when he's got one of the richest sources of critical minerals in the world on his Northern border.
PETER HAYNES: Well, we'll have to be watching that. We've set ourselves up for a ton of different follow-up conversations, both with Chris and Frank here, as there are so many things to talk about. And my brother's in the cybersecurity industry and I always say, he's got a job for life. And I think both of you gentlemen in the geopolitical space have jobs for life based on the amount of activity that's going on currently.
But thank you both for such incredible insights into these issues that we're facing here in North America and around the world. And, Frank, let's just finish up with a quick conversation on a topic that you and I are a little angry about right now, and that's the Toronto Blue Jays. We failed to sign Vladi Guerrero, Jr. before his self-imposed deadline. He's now going to free agency, alongside his sidekick, Bo Bichette. They're going to both play out the string to free agency and maybe loss to the Blue Jays with nothing in return. Frank, what do you give Blue Jays management as we arrive at spring training here in terms of a grade?
FRANK MCKENNA: I think it's a big zero. This is going to be a horrible year, watching two of the greatest athletes that have played in Toronto playing out the string, headed towards free agency. I think that management have proven they're just not serious. They've had years to conduct these negotiations-- years, literally, knowing that this day would come, and they haven't been able to ice the deal.
We're not a Minor League city. We're competitive with LA and New York in terms of having the capability of supporting a Major League team, financial capability. And yet, we just continuously get knocked off the puck every time there's a competitive situation.
So I really blame management, I have to say. I just don't think we've got a serious baseball team that's being put together in Toronto, and I'm broken-hearted today. You know how strongly I feel about the Blue Jays, and I love Vladi and all of the excitement he brings.
And by the way, it's not just a pox on the Blue Jays. It's a pox on Major League Baseball. We've witnessed, over the last few weeks, salaries of $400 million, $500, $600 $700 million for individual players. Well, what about the poor kid who wants a seat out in the bleachers or to buy a hot dog at the game and just can't afford it? Or what about watching his favorite players take off and go all over the planet, looking for the highest price? I just think it's wrong, and I think it's unfortunate, but that's what we're in.
PETER HAYNES: I know there's a famous agent out there that likes to get on the radio and sign guys for $700 million and set records all the time, but my thinking is agents should be like umpires and referees. We shouldn't know their names. We want to know the names of the people that are on the playing field.
FRANK MCKENNA: That agent's out today saying that baseball's not spending enough money.
PETER HAYNES: Yeah, of course.
FRANK MCKENNA: It just saddens me because I love the game so much. And I love the game because the look on the faces of young boys and girls who were at the game cheering on their favorite player and able to go in the cheap seats and get a hot dog and a bag of popcorn. And now, all we're going to be doing is waving good-bye in Toronto.
PETER HAYNES: Chris, sorry you had to suffer through that conversation. I know being from Vermont, you probably cheered on the Montreal Expos,
CHRIS KRUEGER: Red Sox Nation.
PETER HAYNES: Oh, there you go. Yes. So Red Sox Nation. So you got a little boost here this week with the signing of Alex Bregman. So we'll have lots to talk about going forward. Chris, thank you very much for joining the pod, Frank, as always, for your insights. And until we meet again next month, Thank you very much.
CHRIS KRUEGER: Take care.
FRANK MCKENNA: Thank you.
PETER HAYNES: Thank you for listening to Geopolitics. This TD Securities podcast is for informational purposes. The views described in today's podcast are of the individuals and may or may not represent the views of TD Bank or its subsidiaries, and these views should not be relied upon as investment, tax, or other advice.

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