Mark Carney on dealing with Donald Trump

Prime Minister Carney, welcome to The. Insider. Well, welcome to Ottawa, Annie. >> Thank you. It's great to be here. You've. been what, Prime Minister for 6 months? >> Yes. What a 6 months. It's been quite a 6 months. It's now. what, 6 months since liberation day, too. So, let's start with tariffs. I. mean, Canada is a country, one of the. countries most affected by Donald. Trump's tariffs. How much damage have. they done? And is it going to get worse? Well, they They They have had an impact. without question on the Canadian. economy. You saw it in the second. quarter, negative quarter in the second.

quarter. We announced economy started to. grow a bit again. So, there was the initial adjustment. The bigger impact right now is the. uncertainty. Where is the relationship. going to go, Canada and the United. States, in terms of our tariff regime? US, rest of the world. It's still in. flux, and that's causing businesses in. Canada and Europe, UK, around the world, to hold back on some of the investment. We're working to get greater certainty. with the US. What's he like to deal. with? Well, you've you've interviewed him. I.

know that. >> may have met him much more than I have. I have. Look, he's uh. He is very He's A, he's very sharp. He's. very curious about people's opinions on. a wide range of issues, which And so, he will solicit my views, other people's views on on on topics of. the day, particularly international. He's He's just You know, he's decisive, and he has an ability to to change the. dynamic. very quickly on, you know, whether it's.

with respect to Ukraine, peace in the. Middle East, global trade, and beyond. So, you can understand. It's absolutely. clear why he's leader of the United. States. I mean, you put together all. those qualities. >> Yeah. But, the US is effectively. monetizing its military hegemony and its. economic clout. I mean, it's it's. essentially, and I can say this, and you. probably can't, but it's essentially a. sort of mafioso economic policy. Well, certainly I was You had me at monetizing. hegemony. I I you lost me as as as you.

went on. I think he has a view. He's not alone in his view. I don't. share the view, but he has a view that. you measure economic. success in trade, just like you measure. success in business, of whether or not. you have positive cash flow. And so, for. him, running a trade surplus is a sign of. success. And if you're running a. deficit, you. by definition are are are either being.

ripped off or you're not as successful. as you need to be. We take a different view. You know, comparative advantage. We don't have. time, but since this is The Economist, I. can say comparative advantage. I can. also say, and this is you know, higher level. explainer at the back, if you have the reserve currency, the quid pro quo of having the reserve. currency is you run a current account. deficit cuz you got to supply. >> Have you tried Have you tried that logic. on the president? I have not. I We've. There's not enough hours in the day to. go there. To use President Trump's.

favorite analogy, you know, they have. the cards, right? I mean, you know, they. they have not not only do they have the. economy, they also have the security. side. I mean, you can't even defend the. Arctic, right, by yourself. >> Well, we can defend more of the We're. defending more of the Arctic now, 365. days, land, air, sea, over the horizon radar in the Arctic. We're building out our sovereignty in. the Arctic. >> That's great. I mean, you can see the. difference. You can't actually Don't you. need missiles to shoot things down? >> certain areas There are certain areas. where we will want to be integrated and.

and continue to fully cooperate with the. United States. I would suggest some. others have a different view, but. hypersonic missile defense is one of. those areas where we're going to want to. do. We have those discussions with them. But, the the analogy, to go back to your. analogy, who has all the cards, there are other games. There's not just. one game. That's the point. There are. other games. And And yes, we're going to. spend more time, to extend the analogy, in the game with the United States, but. we're going to play other games with. other with other players. >> There could be a rules-based trading.

system excluding the US. Yes. Yeah. I mean, the US There is There. is one. It's called the WTO, actually. I. think we're going to end up with a. degree of variable geometry in trade as. well as elsewhere, where you you have. tighter integration. Coalition of the willing. >> Yeah, coalition of the willing, tighter. integration with countries that you. share a broader range of values. Basically, concentric circles of. integration, which does make sense. It's. not. to be clear, it's not as efficient as.

the trading system that had been in. place, but that system. is over, and the question is, what do we. construct beyond that? >> But, but when you look at actually. what's happened in the last few months, all of these big countries have been. falling over themselves to cut deals. with the US. So, it suggests that they're not Well, okay. Not all of them. Not you, but but. the Europeans, the Japanese, everyone is. essentially saying, "Fine. Let's just. kind of get the best deal for us with. this, you know, large tariff-laden US.". Yeah, I think Well, there's been a.

process of countries recognizing the. scale of the change in US policy, making. decisions about how to And I'm using the. president's word, President Trump's. word, how to buy access. to the club. I mean, he uses the example. or the reference to Costco or reference. to a golf club, etc. You know, you're. buying a membership through paying a. tariff, making investment decisions, making other decisions. So, countries. and trading blocks like the EU are. making those determinations. That is. given the current level of exposure and.

in degrees of integration with the US. In their judgment, that makes sense. Is that the way they want the system to. be 10, 20, 30 years from now? Probably not. And the question is, what are what are. countries and trading blocks doing to. help build that system? >> now, countries just have to do the best. they can, but then they can create a. better one. Which which leads Well, and. it's also, if I may. So, part of the. reason why countries end up in.

quote, having to do one or negotiating. from the position they're in, is their. degree of dependence on the United. States. So, the logical thing, and. Canadians got here back in January, February, is, well, we should take care. of ourselves, do the stuff at home, and. we should build up relationships abroad. So, the two things do go together. Relationship with whatever agreement met. with the United States, but really focusing on building up that. outside option. >> But, you You said a few months ago that.

this is not a transition, it's a. rupture. >> Yeah. And I was really struck by that, because that suggests to me that you. think that the United States is on a. permanently different path. Do you think. that basically the US is going to be a. high-tariff country even after the Trump. administration? >> I think I Yes, short answer. [Music].