Iran Takes Center of World Geopolitical Stage

FRANK MCKENNA: We now have the lowest tariff barriers of any country in the world, and the problem is the ones that we have are particularly burdensome.
PETER HAYNES: Welcome to episode 66 of Geopolitics with the Honorable Frank McKenna. My name is Peter Haynes. I'm the host of this podcast series. And I'm joined today by Frank. And I'm hoping you're well. It feels like it's been forever since we last sat down for the pod, but here we are. It's June 24, and we're taping early in the morning. And I say that because my sources tell me that you and your wife, Julie, are traveling to beautiful Miramichi, New Brunswick this morning for a special event. Can you tell our listeners what you're up to today?
FRANK MCKENNA: Well, the Miramichi is a very special place for us. That's where I practice law, and that's where I was elected. And the Miramichi supported me all the time that I was premier.
So I owe a special debt of gratitude to the Miramichi and always will. We have many great friends there. So we'll be announcing today that we're donating $1 million to create an aquatic center on the Miramichi and make it clear that we'll continue to support the Miramichi for as long as we're able to do that.
PETER HAYNES: That's a very kind gesture, and obviously returning the favor to the community that you work for for several years now. My question is, while you're out there, will you get a chance to put on the hip waders and go out and do some fly fishing?
FRANK MCKENNA: I'm going to be doing that not this trip, but in a few weeks. It looks as if something might come together to get me out fishing. I hope so. By the way, I find it amusing, but one of my earlier contacts in Washington was around the Miramichi, and that was Dick Cheney, the Vice President.
And we were at the Correspondents' Dinner, and he didn't have anybody to talk to, and neither did I, so we talked to each other. And he was a little angry at us because we hadn't entered the war in Iraq. He said, anyway, I can't hold it against you for too long, he said, because I'm a passionate Canadian. In the summertime, I go some place called the Miramichi every summer to fish. He said, you probably never heard of it. I said, that's where I live. So we bonded over that, and turned out it was a good beginning.
PETER HAYNES: I think you've told me in the past few of the famous people that you know or maybe have fished with on the Miramichi. I think Jack Nicklaus is one of the names. Who are some of the other famous people?
FRANK MCKENNA: Yeah. Jack Nicklaus fished on the Restigouche. The Restigouche is a very famous-- maybe the world's most famous fishery, and the Restigouche Club is the most exclusive club in the world. And Jack Nicklaus was a member of that. And I did fish with him one day. And he also hit golf balls-- he was an active golfer then, and he would hit golf balls across the river, and the guides would pick up the balls. And I asked the guides one day how they ever found his golf balls, and they said, well, we don't have to look very far. They all land in the very same area.
[LAUGHTER]
PETER HAYNES: Yeah. We can only wish, eh? As amateurs in that sport, once in a while they land where they're supposed to. Well, that's a great event, and best of luck to you and Julie today on that great event. So let's turn to geopolitics, and there's one hotspot that everybody's focused on right now in the world, and that's Iran. I want to ask what you think of President Trump's attack on Iran's nuclear facilities. And is regime change the end game for the United States?
FRANK MCKENNA: Two or three things on this one. First of all, I'm not surprised that the United States attacked. It was, in my view, opportunistic. I think they've always wanted to try to take out the nuclear capabilities there, but they've had a number of worries which needed to be assuaged.
In particular, they were very much afraid of having any long, drawn-out conflict where they would end up being trapped, and I'll give you an example of that. They attacked with B-2 bombers. These B-2 bombers cost $2 billion a copy. There's only 21 of them in existence.
So the last thing they wanted was to have one of these planes shot down and become a trophy for the Iranians. And also, they would despise the idea that a pilot or their crew might end up being caught. And you remember the very famous U-2 incident with Francis Gary Powers where he was held as a hostage in Russia for a number of years and became a source of great embarrassment to the Americans.
So I think the opportunity presented itself where the Israelis had totally degraded air defenses in Iran and effectively created air control in Iran, something Russia has not been able to achieve in the Ukraine. So with all of the ground-aware capabilities of Iran suppressed, the United States had a clear shot to bring their very expensive bombers in and do precision bombing. So I would say it was very opportunistic.
In terms of the result of that, I can't say that I'm surprised with Iran's reaction. It really only had about two or three choices. One was to do nothing, and that would be a colossally difficult thing politically in Iran. They would lose a lot of face if they did nothing. The second they could do was literally go to DEFCON 3, which means attacking military targets outside of Iran, in Iraq or Kuwait or some other place.
Or attacking shipping in the Strait of Hormuz. And remember, Strait of Hormuz has 20% of the world's oil production flowing through it every day, something like 20 million barrels a day. So that would have been a very, very serious escalation. Some estimates are that oil would spike to $110 to $130 a barrel. But Iran would feel that the most, obviously, because they rely on oil revenue as well.
So they didn't do that. And they did what we in diplomatic circles call called retaliatory de-escalation. They attacked a US base in Qatar. They called ahead and told them that they had incoming missiles, which were all shot down, so they can say that they retaliated in a commensurate fashion. As many missiles were fired from Iran as bombs dropped by the United States. And they didn't do any serious damage, and that allowed both sides to de-escalate. So all of that, I would say, was quite a carefully orchestrated minuet.
PETER HAYNES: So since the bombings, Trump has tweeted-- or put on Truth Social that the war is over, that there is a truce, that it will last forever. He thanked both sides. He thanked the Iranians for warning them ahead of the attack on Qatar, on the Qatari base. And immediately, the Israelis-- or I believe it was the Israelis who were arguing-- or both sides are probably arguing now that that truce has been violated.
Do you believe that President Trump has, in fact, worked the phones to the point of creating some sort of a settlement here, or at least a pause in the war? And do you think that down the road, that Iran will really gain its revenge in different ways through sleeper cells and other things potentially the United States? Does that worry you at all?
FRANK MCKENNA: Yeah, the latter would worry me very much. But in terms of the former, look, Trump is polishing his resume for a Nobel Peace Prize, but I suspect that he's overstating the case here. I think that what we have is a short-term ceasefire. It may stick. It may not. There have been a number of ceasefire fires with Hamas as well, and none of them have stuck.
So I give him full credit for wanting peace, and I think that some of the building blocks are there, but I suspect this is not the end. I suspect we'll be going through many more iterations of conflict before this one is resolved. But progress so far. I would say progress to date.
PETER HAYNES: So dare I ask the most difficult question possible in your mind-- is peace possible in the Middle East?
FRANK MCKENNA: Probably not. We have to remember the history of the region. Thousands of years-- in fact, we should take a minute just to talk about Iran itself. The Persians are an ancient civilization, by some accounts, over 100,000 years old. One of the only countries in the Middle East that has kept its territorial integrity. And it's a very proud country. It's got some 92 million people, and they're extraordinarily well-educated. They're very secular, quite pro-Western, with a pro-Western president, Pezeshkian, of some considerable respect.
But they've got religious leadership in the Republican Guard ruling the country, and they're not able to totally escape their, I guess, more fanatical elements, which is a shame because regime change would probably be a good thing to happen, but it's almost certainly not going to happen as a result of external force. If it happens, it'll happen from within. And in a repressive regime like that, it's very difficult to see that happening.
I think we also need to bear in mind that Iran feels very isolated now. China and Russia have been putative allies but haven't lifted a finger in this dispute. The proxies, which Iran have commanded, Hezbollah, the Houthis, Hamas, have been largely degraded. And they're a minority religious population in the Middle East. The Middle East is probably 80% or 90% Sunni, and Iran, with its 92 million people, is Shia. And it represents a minority situation in the Middle East. So they've always felt somewhat isolated in the Middle East.
Now, the hope is that with this reduction in tension, potentially, with Israel, that Saudi Arabia and the Emirati move closer to Iran and that some type of rapprochement occurs across the Arab world, including Jordan, Egypt, Turkey, et cetera. That's been difficult to navigate because of all of these almost tribal communities. It could be the Alawites in Syria. It could be Druze. It could be Shia. It could be the Kurd population, which is large, the Sunnis, and so on. It's been very difficult for the Middle East to overcome its tribal tendencies, but we live in hope.
PETER HAYNES: OK, so let's talk about the fact that Trump has vowed to end all the forever wars that are going on in the world, and so far, he has not been very successful in reaching that goal. Reaction to Trump's military strikes back in the United States have been mixed and not necessarily along political lines.
While most Republicans are rallying around the president, some of the more influential or high-profile members of the MAGA wing are not too happy that the US is involved in a Middle East conflict and, therefore, putting US lives at risk. Meanwhile, Democrats were mostly critical of Trump's actions, pointing to violations of the War Measures Act given that Congress did not provide preauthorization for entering this war.
How do you expect the calculus for Trump to play out? Will that be totally dependent on Iran's long-term response and the potential for loss of military or civilian lives?
FRANK MCKENNA: Yeah, there's no doubt the latter is true. If the United States gets drawn into a war, if, for example, they had to commit ground troops and so on, that would really be a difficult pill to swallow politically. It doesn't look as if that will happen. It looks as if this is one-and-done, in which case, I think Trump surfs through this without too much challenge.
There always has been an isolationist wing in the Republican Party and with good reason. We've seen misadventures in Vietnam, misadventures in Iraq, and even the withdrawal from Afghanistan. By the way, Afghanistan is the only situation in which Article V of the NATO charter was invoked on behalf of the United States. So Americans are very leery about getting involved in foreign wars.
And Democrats, I think, are predictably being critical that the War Measures Act wasn't respected, but the War Measures Act over the years has been much more respected in the breach than the observance. It's only been respected, I think, 11 times and hundreds of military excursions have taken place, including by the Democrats. Obama's attack on Gaddafi, for example, would have not been done with respect to the War Measures Act. So these are legal arguments that play out, but at the end of the day, if this is one-and-done, it will not be a political issue in the United States.
PETER HAYNES: Were you surprised by any of the rest of the world reaction to Trump's move on Iran? You talked about the fact that Iran's partners, or what they think of in their axis of influence, China and Russia, have stayed focused on other things. Are you surprised by that or any of the other world reaction?
FRANK MCKENNA: No. I'm not surprised. The rest of the world has done the predictable tut-tutting, but none of them were fans of the Iranian regime, and all had hoped to see something take place. And remember, the whole world was affected by the Houthi attacks in the Red Sea and of course, they're proxies of Iran.
So the only thing the rest of the world will mention, and with reason, is that this problem was, in large measure, solved back in 2014, when the Europeans and the rest of the world, and the United States, et cetera, negotiated a deal with Iran that would not result in them enriching uranium to the point of being able to make a bomb. And that agreement was respected by Iran and by the rest of the world up until 2019 when Trump unilaterally tore it up, the same as he did Kuzma and the Paris Accords and so on.
Iran, rightfully, was saying, and I think international observers would agree, that they had been respecting that agreement. Now, Trump and Israel had never liked the terms of that agreement, in fairness, but it was an agreement. It had kept Iran from proceeding. So the rest of the world will remind the United States that all they've really done in 2025 is go back to the 2014 situation where Iran was not able to proceed with further enrichment. Other than that, I think the rest of the world will largely be quite silent about what's taking place.
PETER HAYNES: Just before we move on, Frank, can you explain why Iran with a nuclear weapon poses more of a threat than, say, North Korea? And how did North Korea get away with building a nuclear bomb before the rest of the world could-- or at least the United States could put a stop to it?
FRANK MCKENNA: Yeah, so that's an interesting question. I think it was a case where North Korea raced to get a bomb before the rest of the world caught on or were prepared to undertake action against North Korea. And that's one of the reasons, or cosabella, I think, around why Israel and the United States, for that matter, and a lot of the rest of the world, did not want Iran to get a nuclear bomb, because it's one more country that would be nuclearized and a great danger to the world.
I guess the two of them have a certain comparability in terms of danger to the rest of the world. In the case of North Korea, they've got a dictator, but many analysts would say it's more for the defense of North Korea. It's more a defensive weapon. They're using that to defend themselves. And after seeing what happened to Gaddafi, more countries in the world are trying to get a hold of some way to defend themselves, like having a nuclear bomb.
In the case of Iran, I think there's a real concern that because the country's led at the very top by religious fanatics, it could be more of an offensive weapon. And they could undertake actions which would imperil other countries in the Middle East and, in fact, the rest of the world.
PETER HAYNES: When we think about the attacks on Iran's nuclear facilities, they come at a time of increased tension in the Middle East. And this was caused really by President Netanyahu of Israel, who turned up the temperature a couple of weeks ago with his surprise first strike on a group of Iranian military leaders who were meeting in Tehran, which set up this current conflict to where it's at today.
With the continued war in Gaza occupying military tension at home, why would Netanyahu decide now to escalate Israel's conflict with Iran and create a multi-flank operation? Is it part of a personal survival plan given his pending legal problems that will become front and center once he leaves office? Or is it more of a tactical opportunity to strike while Iran's proxies and allies are occupied or depleted?
FRANK MCKENNA: Well, I think it's very much part of a personal survival plan, both politically and legally. He's only kept in power by two right-wing hawks in his government, and they're very, very committed to this war effort. And he may very well lose them if he were to pull back, and this government, in that case, would fall.
And then secondly, he's got legal peril because he's in danger of being convicted and put in jail over some offenses if he's not in office. So yeah, so he's got a strong motivation that way.
I suspect there is an element of tactical opportunity as well. After undertaking this war of attrition with Hamas, which seriously degraded Hamas's capabilities, Hezbollah entered the fray as well, and they were severely degraded in their capabilities as well. And I think, almost gradually, Israel started to realize that the forces against it were no match for its technology prowess. And by continuing, they were able to decapitate Iran's leadership with a number of surgical strikes and also its military capabilities.
So I think it was almost a case of not starting out with that end objective in mind, going back a year or two, but with each step taken, getting closer to being able to carry out their ultimate objective, which was to defang Iran.
PETER HAYNES: Frank, I hate these Monday nights when there's no Blue Jay games, but last night was one of them. And my son and I decided to go back and start watching those Bourne movies, Jason Bourne movies. And there's a scene in one of the movies where he's got his rifle pointed-- or his target pointed at one of the CIA folks. And he's talking to her, and she says something about the person standing right beside her, and they around and realize that the gun is pointed right at them.
Do you think the Israelis actually had the gun pointed at Khomeini and that they could have taken the shot if Trump had given them the approval? Was it that close to regime change, do you think?
FRANK MCKENNA: Well, there are two explanations. One is categorically no. The second is categorically yes. And we don't know which one is true. But it could have been a no, in which case, they actually don't know where Khomeini is, but by saying that they do, they'll force Khomeini to move and perhaps reveal his presence.
So problem is, assassinating fanatical leaders usually leads to another fanatical leader. Over a period of time, Peter, how many commanders of Hamas have we seen assassinated or Iranian commanders? There seems to be an endless supply of people to take their place, and the feeling is that if Khamenei were to be taken out in Iran, we would very quickly see a replacement leader from the Revolutionary Guards.
By the way, on my screen, it just flashed across, apropos to our earlier discussion, Trump is lashing out at Iran and Israel for both breaching the ceasefire that he had negotiated a few minutes ago. So that didn't last very long. That doesn't mean it's over. It just means that it's tenuous.
PETER HAYNES: Yeah. OK, well, Trump's actions against Iran followed his surprise early departure from the G7 Summit, which was held in Kananaskis, Alberta a week or so ago. Do you think the timing was coincidental, or was Trump grandstanding again to make the point of his disinterest in multilateralism?
FRANK MCKENNA: I think more of the latter. I think that he suffers from the same ailment I have a touch of, and that's attention deficit disorder. I think the idea of spending two days listening to everybody else except himself was just too much to bear.
Look, witness his interaction with Carney in the Oval Office, where he chewed up all the oxygen in the room, or with Zelenskyy, or with every other world leader, the leader of South Africa. He really demands a lot of air time, a lot of oxygen, and the idea of having a meeting with a bunch of other world leaders all doing a lot of talking, I think, was probably more than he could bear.
But it's more than that. Ideologically, he's a unilateralist. He does not agree and believe in a multilateral world. If necessary, he would agree with bilateral relationships, where the United States could control the relationship with its greater power. But he really does not respond to a world that was created by his predecessors, where the WTO was created, or the Trans-Pacific Partnerships, or the Paris Accords, or WHO, or any of these multilateral institutions.
I would say that he's just not comfortable in those surroundings and not comfortable being in a surrounding where he has to give air time to other people.
PETER HAYNES: Well, speaking of bilateral arrangements, before President Trump departed from Kananaskis, he did sit down with Prime Minister Carney, and the two leaders held what I will call a sometimes awkward joint press conference, and then later announced that they'll work towards a trade agreement within 30 days.
Meanwhile, Trump's Liberation Day 90-day tariff extensions come due on July 1. How did Canadians circle the square here on the timing differences between the Canada Day deadline and the 30-day extension or agreement between the two leaders? And what's your expectation for what will become a Canada-US trade agreement?
FRANK MCKENNA: Look, just based on conversations I've had in the last few days with people involved in this, I'm not particularly optimistic that we're going to get a zero tariff, or what I call Fortress North America. What we're trying to negotiate is a trade and security package that would have those elements in it. But at this stage, I wouldn't put the pin in and say that we're going to achieve that.
On the other hand, I suspect that when the deadline comes that we're talking about, Kuzma-compliant goods will continue to be tariff-free up until 2026 when we have the review of Kuzma. And that includes, by the way, about 93% of goods from Canada. One of the negotiating parties told me recently that Canada has really escalated its game in terms of making having goods Kuzma-compliant.
So we now have the lowest tariff barriers of any country in the world, and I guess we should be happy with that. The problem is, the ones that we have are particularly burdensome. I'm talking about steel, aluminum, autos, for example, Those sectoral tariffs, they're very difficult. And so we're attacking those in all of the negotiations.
But all of that to say that we're probably the best of a bad lot, and I suspect that will continue to be the case after these 30 days wrap up. Will we get a deal? I find people now increasingly cynical about the opportunity to get a deal, but that doesn't mean that they're not rolling up their sleeves and working hard at it. They are. There's no doubt about that.
PETER HAYNES: Well, you've made the point before that it's one thing to say you have a trade deal and it's another thing to actually negotiate all the finer points of the trade agreement. And clearly, we're still at the high level in these negotiations. How involved would Prime Minister Carney be, do you think? Is he leaving it to his leaders to negotiate with the Americans, or is he involved?
FRANK MCKENNA: Oh, he's very much involved. I'm told that he's texting or talking by phone to the president almost daily.
PETER HAYNES: I guess that's a good thing, eh? We always say as long as they're talking, that something can happen. Or is it not?
FRANK MCKENNA: Yes, that's right. It demonstrates as well that it's a respectful relationship, and we've never heard anything disrespectful between Trump and Carney, and that's a good thing.
PETER HAYNES: Speaking of disrespectful, the Sikh community was a little concerned or upset with Prime Minister Carney's decision to invite Indian Prime Minister Modi as a guest at the G7 Summit. After a sideline meeting between the two leaders, the Canadian government issued a release indicating a reaffirmation of the importance of Canada-India ties, quote, "based on mutual respect, the rule of law, and a commitment to the principle of sovereignty and territorial integrity."
Meanwhile, talks between Indian officials and the RCMP have restarted over the murder of Canadian Hardeep Nijjar, a murder that occurred on Canadian soil that Canadian officials have linked to the Indian government. Do you think Carney moved too quickly to re-establish close ties with India, or do you agree with former Prime Minister Stephen Harper who suggested that it was time to move on?
FRANK MCKENNA: I categorically agree with former Prime Minister Stephen Harper and current Prime Minister Mark Carney on this one. I think it is time to move on. And look, I'll just openly declare my bias because there will be lots of people who disagree. I think that the diasporas that come to Canada should leave their politics at home, full stop.
We should not be fighting foreign wars on our soil. I don't think that we should encourage separatism in other countries of the world. Some of the Sikh community in Canada were openly doing that in the case of Khalistan. And that's not a unanimous view in the Sikh community, by the way, but there were some that were doing that. So, I just categorically don't agree with that.
I'm of the view that we should keep our relationships with other countries at a very businesslike level. Dean Acheson, who's a former Secretary of State in the United States, once criticized Canada, saying, "We were the stern voice of the daughter of God," and by that, he meant that we were hectoring and lecturing and moralistic and judgmental. And I've observed it in my time in the diplomatic corps and my political life that that is a fall-back position for Canada, often tut-tutting with other countries about their particular practices.
Whether it's with their First Nations or whether it's gender communities or human rights or all kinds of areas, we've tended to be excessively patronizing and moralistic, and I just disagree with that. I don't think that's our role, and I think it gets in the way of having important other relationships which can help create the credibility by which we may be able to influence some of these other issues.
PETER HAYNES: So, Frank, as we wrap up Carney's first-time role as president of the G7 Summit, I want to know what grade you give the Canadian leader on his overall performance as host. And what are your expectations for this week's NATO Summit at the Hague and Carney's participation at this event, and for that matter, Trump's participation at the event?
FRANK MCKENNA: I would give Carney a high rating on Kananaskis because the bar was set high and he got over it. I can't tell you it's a 10 out of 10 because there was a limit to what we could achieve, but he controlled the elephant in the room. He was able to come out with a number of communiques. And I'm told that the chemistry amongst the leaders after Trump left was excellent. So I think in terms of what he could control, he controlled it well, no drama, and that's a good result.
What's going on now, I think, demonstrates a pivot from Canada that people should note as being historic in its nature. Firstly, we signed a security pact with Europe writ large, and that will mean that we will be much more aligned with European objectives around defense. We're going to be able to draw down on European credit lines, and we probably will end up sourcing equipment compatible with Europe more likely, and all of this will give us more leverage with the United States.
Quite frankly, 80% of our expenditures now in defense are made with the United States, and I think that we have to accept the fact that after two Trump elections, that that is not necessarily a reliable relationship that we can count on, so we need to have balance in our relationships. And we've signed on with Europe to do that. America will always be our best friend defense partner, but we need alternatives.
And in terms of the percentage of money that we apply to NATO, that will be decided sometime in the next day or two. We've committed to 2%, which we'll achieve this year. After a lot of huffing and puffing about how we couldn't get there till 2032, it looks like we are going to achieve it this year. And we'll be part of a NATO discussion now where we'll have more credibility having achieved-- or about to achieve that minimum native requirement.
The big question will be whether NATO will then push the limits to 3.5% or 5%. Even the United States won't reach those limits. And other countries are now starting to fight back. You'll notice that Spain is resisting the idea of going as high as 5%.
I suspect there will be a compromise, as is usual in these situations. One, that maybe we set a higher target but over a longer period of time. Secondly, we may change the bucket. I'll give you an example of that. Canada is moving our icebreakers, I believe, from the Coast Guard to the military and putting guns on them, and that will allow that to be charged off as a contribution to the native limit.
I suspect all countries will agree that investments in AI and cyber can be part of the bucket as well. And when you look at the kind of asymmetric warfare taking place in Ukraine, you see the credibility of that. The only reason Ukraine is in this battle at all after this amount of time is because of their keyboard soldiers. So I suspect that we'll see some redefinition of what constitutes a NATO-eligible expenditure.
PETER HAYNES: Are you expecting Trump to grandstand over there again? I know he's just boarding Air Force One, I think, this morning to head over to the Hague.
FRANK MCKENNA: [LAUGHS]
PETER HAYNES: Is that just a loaded question? Is that an obvious? Is that rhetorical? [LAUGHS]
FRANK MCKENNA: Yeah. I mean, he tends to command a lot of attention, let's put it that way, which is the most diplomatic way to put it.
PETER HAYNES: Clearly, geopolitics globally have taken center stage in recent weeks, which has overshadowed some of the domestic issues President Trump is facing at home, namely his ability to push through Congress his Big, Beautiful Budget Bill. One topic that has generated interest outside the United States and here in Canada is Section 899 of the proposed budget, which takes aim at countries that the US deems to impose unfair taxes on US businesses by adding taxes on various foreign investors from these discriminatory countries that invest in the US, and that includes pension funds.
Canada is on the hit list because of its digital services tax and the fact that it supports a global minimum tax regime. Recent Senate redrafts of the bill, including softening of language in 899, have taken place, but it does not eliminate completely the potential for increased taxes on foreign investments in the US by Canadians and other so-called global offenders. What is your expectation for 899, and do you see Canadian government officials taking steps to keep Canada off the offenders list?
FRANK MCKENNA: Yes. Section 899 is a sleeper issue that has ominous consequences for Canada and the rest of the world. It's a so-called revenge tax. It will attack countries that have a digital services tax or an undertaxed profits tax. Essentially, any kind of a global minimum tax would be attacked under this provision.
And what it means is that you'll see a 5%-per-year withholding tax on dividends, for example, which is escalating each year, so the pressure will get ramped up each year. It overrides tax treaties, which I think is ominous in itself. It has real consequences for the rest of the world and for the United States.
Basically, it's extending tariffs to capital flows. And it's just another example of the US basically monetizing its hegemony over the rest of the world. The trouble with that is that every action has a reaction, and there will be a reaction here if this goes ahead unabated. And the changes in the Senate are not enough, I think, to prevent there being a reaction.
You have to remember that in spite of the United States being a powerful country, there's still tens of trillions of dollars from around the world that flow into the United States to help finance its appetites. And if this tax were to go ahead, it would raise the cost of capital in the United States almost certainly.
It would also undermine stock valuations, and it would test the US dollar. So all of those are not good consequences for the United States. And for the rest of the world, it would make the United States a less attractive place to invest, quite frankly. And it would hasten a tendency right now, which we're seeing because of the tariff war, of the rest of the world turning elsewhere from the United States in terms of partnerships.
So I don't think it's a healthy long-term trend for the United States. It may give them a sugar high in the short-term, but in the long-term, I don't think it's healthy. How will Canada respond? It'll be part of the multilateral negotiations that are taking place at a world global level but also a bilateral negotiation between Canada and the United States.
If I had to guess, I would say that we would flush the digital services tax if that were the linchpin that would break the logjam and other negotiations. But it is a negotiating chip, and I don't think we'll do anything on it until we know that it will give relief from this revenge tax or help to facilitate an overall tariff and security package.
PETER HAYNES: Sorry, do you think that this would be part of that negotiation for the tariff and security package, or will it be handled differently?
FRANK MCKENNA: I think that it will be part of a bigger negotiation, much more a negotiation that will be around the impact of Section 899. Whether that gets pulled into the big package that's being negotiated now or not, I don't know, but it's definitely being talked about by the negotiating teams.
PETER HAYNES: That one, I can tell you, Frank, caught the institutional community off-guard. A lot of questions, a lot of calls--
FRANK MCKENNA: Yes.
PETER HAYNES: --webinars and the like taking place over the last few weeks with tax specialists.
FRANK MCKENNA: Well, Peter, it also applies to sovereign wealth funds. These are massive walls of money going into the United States, so I suspect everybody has got some accountants and tax lawyers on staff trying to figure out the implications of it.
PETER HAYNES: Yeah. Once again, the lawyers are getting rich here, but nonetheless-- tax lawyers in this particular case. But nonetheless, it is an important topic. So Frank, just before we finish up, I want to address something that is on Bloomberg this morning relating to-- it's actually on the top stories-- relating to Premier Smith in Alberta, who is suggesting that in the next couple of weeks, she expects private sector to announce potentially a pipeline to Northern BC, which would be paired with a massive carbon capture project in Alberta and that it would be driven by private sector ownership.
And this would be taking advantage of Bill C-5, which, I think, was put through the Parliament recently, which suggests that you can fast track projects that are in the national interest. And Danielle Smith believes this particular project, may be first in line. What are your thoughts with respect to hypothetically how this could play out? Is it realistic, or is this still in the early stages of discussion?
FRANK MCKENNA: I would say there are a number of elements of this that are positive and doable. There's no doubt the government of Canada wants the carbon capture and sequestration project known as Pathways, and they're putting a lot of money in the window on that. And they're prepared to make trade-offs if that can be achieved, and those trade-offs would include emission caps, and I think Alberta would be happy with that.
The problem is really whether or not Premier Smith is setting a bar too high. I don't know the answer to that, and nobody does. The problem is, some of this is under the federal control. First of all, we have to have a private sector carrier, a pipeline company that's prepared to take the financial risk and raise the money, and that's a big ticket.
Secondly, are there shippers that are prepared to pay the toll on that pipeline, assuming it's going to be a fairly significant cost? Thirdly, I'm told that there are as many as 100 rights and title holders in the First Nations community along the path of that pipeline. Are they going to end up signing on? And how many will sign on? Some will sign on for an equity stake, but will they all, and will they be able to obstruct the pipeline?
And then you get into the question of British Columbia, which has said that it's not supportive of a pipeline to Northern BC. And then you get into the question of the ban on tanker traffic on that part of BC. So those are all big issues. In a way, this is probably the highest bar that Premier Smith could put up, and it may be impossible to achieve. I don't know. Market conditions may influence it. Financial circumstances may influence it. Legal rights may influence it.
It's not entirely within the federal control. So even though Bill C-5 gives them enormous powers, there are complicating factors in this particular package that make it challenging. If she were to say, look, we will agree with Pathways and put our share of resources behind Pathways in exchange for getting rid of the cap on emissions, and if you can find another million barrels a day by using existing pipelines, debottlenecking, et cetera, et cetera, that's a very doable deal, I think, and could be done quite quickly.
But she's certainly set the bar extremely high, and we'll find out whether the parties can get over it. I just worry when people create a litmus test that may not be achievable. And in this case, at this stage, we just don't know how realistic this is.
PETER HAYNES: Well, it certainly feels like the temperature between Ottawa and Alberta is lower than it was when Prime Minister Carney first took office, with lots of threats coming from the western leader and some of the provinces out west. Would you agree with that statement?
FRANK MCKENNA: Oh, absolutely. There's just a sea change. It's refreshing to see, quite frankly.
PETER HAYNES: Good. I'm really glad to hear that because it was really concerning to hear separation talk at a time when we're trying to bring the country together, facing the threats from the United States, which, again, as you said earlier, President Trump has certainly not treated Prime Minister Carney anywhere near the way he treated Prime Minister Trudeau with respect to governor talk. There's been none of that. It feels like there's a professional bilateral relationship between those two leaders. Is there anything there that we should worry about?
FRANK MCKENNA: No, I think everything you've said is true. I just like the way the dialogue is unfolding now. I feel like we have adults in the room on the major files, and I think respect is being shown across the country. The president is realizing that there are two sides to every story, and I also think the United States is realizing that Canada is not without weapons if we get into a trade war.
I think we're extraordinarily well-armed. We're really the farm that feeds the grocery store here, supplying endless amounts of raw materials for the United States, and I think that reasonable people are starting to realize that, that we're real equals and partners. We're not supplicants in this relationship, and that the United States would be far better off having a Fortress North America rather than Fortress American going it alone.
PETER HAYNES: Yeah, certainly a lot of vacancy signs at hotels in the border states, and more and more of those border leaders, the governors are speaking out about concerns that Canada has abandoned the United States for obvious reasons.
All right, Frank, let's move on to the Blue Jays here. Last Tuesday, I went to the Blue Jays game against Arizona. That was the first time I'd been to the Rogers Center this year. And this was the game, you may recall, where Bo Bichette and Addison Barger went back to back to walk off the snakes.
I was on cloud nine when I walked out, but since then, we've lost three of four, including a series to the worst team in the AL, a team only the Pope cheers for, and that's the Chicago White Sox. The AL East and the Wild Card positions are up for grabs. I believe there's nine teams within 6 and 1/2 games, and one of those is Baltimore. Are you confident we can make the Playoffs?
FRANK MCKENNA: I am. I really like the look of our lineup now. When you see people batting over .300 like Bichette and Clement, you see Borchard hitting a lot of extra base hits, and you see Guerrero starting to get into the extra base hit game and Bichette so well, and Springer and Kirk, and you look through the lineup. I think it's a pretty potent lineup. And that's not including Varsho and Santander at this moment.
So on that side of it, I like the way they're playing, and you see the creativity of a guy like Straw or Clase and so on. So, yeah, I like the way that's going. The only thing I worry about now, increasingly, is the pitching, and Gausman, I think, is a class pitcher, but he's had some tough outings, and Hoffman has not proven to be 100% reliable. So we need another one or two starting arms, at least Scherzer, hopefully, and maybe another starting arm. And if we don't have that, I think we're going to be in trouble. But I like the look of our team, and I think that we will get to the playoffs.
PETER HAYNES: Scherzer is a wild card, I agree with you. Very important. I offered to trade Hoffman back to the Phillies to one of my friends in Philadelphia yesterday for a bucket of balls, used. He did not accept that trade. He wants to give us Romano back because he's been useless for Philadelphia. So we both haven't done so well on that one.
I agree with you. I'm very worried about the backend of our bullpen. We can't keep blowing games like Sunday, where we need to beat Chicago, and Hoffman's been in the crosshairs a lot of games we've let go lately.
So next month when I talk to you, Frank, will be just before the trade deadline. So I want you to start thinking about any deals you want to see the Blue Jays make between that point in time and the trade deadline. It should be interesting. We'll see whether or not-- that Rafael Devers trade was probably good for the AL East to get him out of the division, but what a mess in Boston. I know if you're a Boston fan, you're wondering, how can we let a Top 10 hitter go for, really, a very light package coming back? But wow, that was a case study in mismanagement of a situation, and there's blame to go on both sides there.
So, all right, next month, we'll be talking trade deadline, and hopefully we'll be talking about a world that has the temperatures down a little bit from where it is right now. So I look forward to that conversation. Once again, congratulations to you and Julie on the announcement you're making later today in Miramichi and enjoy your time. Thank you.
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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