Canada will not reach a free trade agreement without US tariffs and must accept being “second” to America when it comes to the auto sector, according to US President Donald Trump's trade spokesman.
Appearing virtually, Commerce Secretary Howard Lutnick bluntly told the audience at the Canada-U.S. conference in Toronto on Wednesday that the United States is determined to dominate the auto industry.
This was reported by five sources present in the hall at the discussion, which took place under the auspices of “Chatham House Rule“which prohibits reporters and media coverage,” Lutnick said Canada needs to look at the “big picture” and realize that it may be in a great place, but trade between the two countries will never return to what it was during three decades of free trade agreements.
“If you look at where Canada has been and where it will be, you will be disappointed,” Lutnick said.
Canada is next to the United States, and Canada needs to recognize and understand that “America is first and Canada can be second,” Lutnick said, according to sources.
But Ottawa must take advantage of Canada's geographic proximity to the United States, he said.
“Cars will be assembled in America, and Canada can't do anything about it. The question is, what is Canada going to do instead?” one source quoted Lutnick as saying.
“You have an opportunity to attract technology, mining and other investments into Canada,” Lutnick continued, according to the source, adding: “If Canada plays its hand and its neighborhood with the U.S. right, it can win.”
Four other sources agreed with how the first source summed up Lutnick's private conversation, with one saying Lutnick had some knowledge of the auto sector, saying Trump believed the “finished assembly” should be in the US.
Lutnick's comments prompted Conservative leader Pierre Poiliève to mock Prime Minister Mark Carney in the House of Commons, saying he was the “weak leader” Trump wanted in office, and accused Carney of being inferior to Trump in the auto sector, saying the prime minister was “weak.”recovering from elbow removal surgery.”
Carney responded that Canada already got a better deal than others when it comes to U.S. tariffs and said he achieved results at his meeting in Washington.
»Yesterday I had a common view regarding the future cooperation of the steel sector, the aluminum sector and the energy sector, so our teams are negotiating the terms of these transactions.”
Lutnick made clear Trump's ongoing frustration that American products have been pulled from the shelves of government liquor stores in many provinces, including Ontario. He said there are “negatives” that Canada needs to correct and specifically mentioned bans on the sale of American liquor.
Premier Doug Ford, who was in the room for Lutnick's comments, later responded with a threat of his own, saying the U.S. is “damn sure it's not going to hurt our auto sector” or Ontario's steel sector without resistance, and rejected calls to meet Trump's demand by returning American booze back to LCBO shelves.
“I will pass a law – if it wants to destroy our auto sector, destroy our steel sector and protect the aluminum sector – not one ounce of critical minerals will come south of the border. Not one ounce of energy will come from Ontario. Because you know what I'm going to do?” Ford said on stage. “I'm going to use this cheap energy that we sell to our American friends to be competitive and sell products around the world. That's what we're going to do. I wouldn't want to do that, but it's an option that's being considered.”
Ford repeated his call from a day earlier for the Carney government to take a tougher stance in response to Trump's actions. Shortly after Lutnick's speech, he told the audience, “If we can't make a deal, we'll have to fight back and hit him twice as hard.”
Speaking to reporters afterward, Ford said he had never heard Lutnick speak as outspokenly as he did in his private comments Wednesday.
“He was very clear… so you need to be alert and ready right away,” the prime minister said.
“I would say it's a serious threat when the Commerce Secretary came out and said it. He would only say it if the president gave him the green light.”
As for whether a new comprehensive continental trade agreement will be reached, Lutnick suggested the president favors bilateral trade agreements, but went on to say that the current trilateral free trade pact, known as the Canada-United States-Mexico Agreement (CUSMA) and the United States-Mexico-Canada Agreement (USMCA), is a good deal for Canada, according to Star sources.
Lutnick said it could be saved if Canada came to the negotiating table and struck other deals before the renegotiation.
He said it would be “smart” for Canada to create “positive building blocks” so the larger trade team can “enter the larger (CUSMA) negotiations with momentum.”
The conference, organized by Eurasia Group and BMO, brought together a wide range of political, corporate and industry leaders with a direct interest in how the trade war between Canada and the United States is evolving.
Some said they expect Canada and the U.S. could reach, as the Carney government has proposed, separate, smaller deals to resolve industry tariffs on foreign-made steel and aluminum, within days or weeks.
However, Jean Simard, head of the Aluminum Association of Canada, downplayed expectations of an imminent deal.
“I don’t believe it because these things are complicated,” he said.
He said Lutnick and Trump's comments suggested that “essentially they want Canada to be almost a colony of the United States. You mine the resources, you send them out there, and they're the ones that process the critical minerals, make all these things that obviously can't work.”
However, Simard said the U.S. administration now better understands Canada's value as a supplier of things like aluminum and energy – be it fossil fuels or renewables like hydroelectricity.
Part of Carney's argument in Washington to Trump about the aluminum tariffs was to highlight that Canada sends 2.7 million tons of aluminum to the U.S., which requires 40 million megawatt-hours of energy a year to produce, Simard said.
“That's the equivalent of four to six Hoover Dams,” Simard said, “the equivalent of what you need to power 466 data centers to power artificial intelligence. So where do you want to distribute your energy that you want to produce? Do you really want to replace the aluminum coming from the north?”
Lana Payne, head of Unifor, said in a statement to the Star that Lutnick's comments “illustrate the Trump administration's arrogance toward Canada and Canadian workers.”
“Canada can't be second to the U.S. in car production because we don't race,” Payne said. “We build cars together and have done so for half a century.”
Flavio Volpe, president of the Auto Parts Manufacturers Association, said Canada must stand its ground to protect its auto industry if Trump and Lutnick say they only see cars made in the United States. Canada shouldn't give in “because they ask for it,” he said.
“I want to make sure that Canada continues to negotiate in the best interests of all Canadian interests. If we have leverage, yes, we shouldn't be making individual deals. We should be using that leverage to get as much of a collective deal for Canada as possible.”
Reince Priebus, Trump's former chief of staff during his first term, later told the audience that he is a president who “listens to the chorus” of voices and surrounds himself with people who are on opposite sides of issues. The only way for Canada to influence important discussions, including on tariffs, is to engage with all of these people, including if that means hiring lobbyists, he said.
“If the president is listening to the choir, you better be one of the voices in the crowd. And often the people who play by the rules in Washington, D.C., lose. So if you play by the rules, you will lose.”
Priebus added that the biggest difference between Trump 1.0 and Trump 2.0 is that “we flew and built the plane while we were flying it,” but Trump and his team had four years between presidential terms to prepare to implement their policies and write all the executive orders, so when the president makes a decision, things move quickly and the only debate that happens happens after the fact.
Alberta Premier Danielle Smith said at the conference that she was glad Carney had established a better working relationship with Trump and said oil and gas producers were “enthusiastic about building in the United States,” but she also insisted that Carney build a new oil pipeline to Canada's west coast to diversify energy markets or risk fueling Alberta's nascent separatist movement.
With a file from Josh Rubin and Raisa Patel.
