Mark Carney wisely didn’t promise Canadians a miracle before travelling to Washington this week for a first official meeting with U.S. President Donald Trump. The PM also didn’t say much at all about his intentions, leaving the public and the media to speculate about what might be achieved in such a short visit. 

Now that it’s over, I don’t think anyone can honestly say we are any clearer on the state or future of Canada-U.S. relations. We know only that words were exchanged over lunch, high-level (cabinet member) talks to remove U.S. tariffs on steel, aluminum and automobiles will continue, and Carney will see Trump again at the G7 meeting in Alberta next month. 

To be fair, some things are a bit clearer after Tuesday.

It seems that Trump likes Carney, for whatever that’s worth. He congratulated the Prime Minister for his debating skills and the election win. Trump contrasted Carney favourably to former PM Trudeau (“I didn’t like his predecessor”) and spent a few moments disparaging a “terrible person” who “worked for him,” who most assume to be Chrystia Freeland. 

There is also the relief, in both countries, that the meeting did not go sideways—and, in Canada, involved no obvious grovelling on the prime minister’s part. But this may be small consolation for manufacturing workers and farmers in Canada feeling the fallout from overlapping trade spats with the U.S. and China. 

Which leads me to what the Carney-Trump confab left problematically unclear. 

Does Trump like the new NAFTA?

During the pre-lunch media scrum, the first question put to Trump concerned North American trade and the renegotiated NAFTA, which Americans refer to as USMCA and Canadians refer to as CUSMA: “Is the USMCA dead?” Several follow-up questions from journalists attempted (unsuccessfully) to clarify the president’s contradictory points and figure out the trade deal’s future. 

In chronological order, this is what Trump had to say:

  • USMCA “was actually very effective, and it’s still very effective”
  • People “haven’t followed it” (yeah, we know)
  • It was “a transitional step a little bit”
  • It “terminates very shortly”
  • It “gets renegotiated very shortly”
  • It “was a very positive step from NAFTA”
  • It “was a transitional deal” (you said that already)
  • We’re going to be “starting to possibly renegotiate that if it’s even necessary”
  • “I don’t know that it’s necessary anymore”
  • “It’s fine”
  • “It’s there”
  • “It’s good… a good deal for everybody”
  • “USMCA is great for all countries”
  • We will be negotiating “over the next year or so to adjust it or terminate it”

Finally, Trump said: “We’re going to work on some subtle changes. Maybe. I don’t even know if we’re going to be dealing with USMCA. We’re dealing more with concepts right now. Look, right now, we’re doing trade. We have trade.”

We also have hundreds of auto workers being laid off as North American producers shift production lines to accommodate Trump’s desire to stop importing cars and trucks from Canada and Mexico. These workers still have no idea when—or even if—Canada-U.S. trade relations will ever normalize and at what new baseline.

While most of Trump’s threatened tariffs against Canada have been paused or applied to a minimal amount of non-USMCA-compliant trade, 25 per cent levies on U.S. imports of assembled vehicles, and steel and aluminum products remain in place.The president’s views on the new NAFTA were not clear, but his goal in this respect was:

We want to make our own cars. We don’t really want cars from Canada. And we put tariffs on cars from Canada. And at a certain point, it won’t make economic sense for Canada to build those cars. And we don’t want steel from Canada because we’re making our own steel and we’re having massive steel plants being built right now as we speak. We really don’t want Canadian steel and we don’t want Canadian aluminum and various other things, because we want to be able to do it ourselves.

Say more about “backward integration”

Given the uncertainty about the future of the North American trade deal—and relative clarity on Trump’s intention to destroy what’s left of Canada’s industrial base—Carney will be under pressure to expedite some of his industrial policy plans outlined in campaign messaging and the Liberal platform.

The “build” agenda from that platform focuses largely on incentivizing private sector investment in new productive capacity (in renewable energy, manufacturing or AI, for example) through grants, loans, tax credits, and by removing “red tape.” It’s what Carney knows, what he proposed internationally to try to catalyze the world’s obscene levels of private wealth into climate infrastructure spending in the Global South.

This classically neoliberal strategy has utterly failed to move the needle on lowering greenhouse gas emissions, slowing fossil fuel development or rolling out renewable energy in a sustainable and publicly supported way. It will be totally inadequate to the task of enhancing Canada’s “economic autonomy.” 

We need to act faster and more assertively, with a greater role for the public sector in guiding economic development and transformation—including through a public stake in production where appropriate. We need less catalyzing and more of what Carney has called “backward integration.”

Backward integration is a business term for the corporate strategy of acquiring (through mergers or acquisitions) the means to produce key inputs a company would once have purchased from upstream suppliers. For example, Tesla purchased Ontario battery-maker Hibar Systems in 2019 and has mused about purchasing mining companies supplying the raw materials for its batteries and vehicles. 

Carney appears to have used the term loosely during the election campaign to describe a situation where more of the inputs for Canada’s manufacturing supply chains also originate in Canada: Canadian minerals for steel and aluminum production, Canadian steel and aluminum (and artificial intelligence) for Canadian automotive production, and so on. 

But there’s only so much money you can throw at companies to encourage them to adjust their supply chains in this way. If it is not profitable, companies simply won’t do it.

The key concept in backward integration is acquisition. You choose to own what you need to fulfil your business strategy. It can work for government as well as the private sector, as Mexico is showing through its public stake in a new electric vehicle manufacturer. The public-private venture hopes to release a Mexico-made EV next year that will cost consumers no more than US$5,000. 

In another intriguing example, the CEO of Trafigura, a Swiss trading house, recently proposed that Western governments should nationalize mineral and metal processing such as smelting to effectively respond to Chinese overproduction. 

We learned yesterday that Trump doesn’t know what he thinks of the USMCA, or when negotiations may start with Canada and Mexico to remove tariffs, or whether he wants another trilateral deal or to negotiate separately with Carney and Mexican President Claudia Sheinbaum. 

We know nothing other than Canadian jobs are still immediately threatened by Trump’s industrial tariffs and uncertainty about possible future tariffs on Canadian exports of pharmaceuticals, semiconductor components, trucks, and copper products. Backward integration may have been just a catchy phrase for Carney in the middle of the heated election campaign, but we should hold him to the spirit and letter of the concept.