Is Chaos a Distraction?

FRANK MCKENNA: I'm surprised that Puritans in the Republican Party who are deathly opposed to taxes, don't call it out for what it is. It's a massive tax grab.
PETER HAYNES: Welcome to episode 74 of Geopolitics, a monthly TD Securities podcast, where I speak to the Honorable Frank McKenna about global geopolitical issues. My name is Peter Haynes, and for those of you that don't know Frank's resume, he served as premier of the province of New Brunswick for 10 years to the day from 1987 to 1997, and he went on to be Canada's ambassador to Washington under Paul Martin's federal government.
For the past 20 years, Frank's been an executive with TD Bank, and we're blessed to have him on our payroll. Frank, I hope you're keeping up well with the global developments these days and the dizzying pace of geopolitical issues. I know we were together just a couple of weeks ago to talk about Venezuela. It feels like an eternity since then. Are you feeling as overwhelmed as I am?
FRANK MCKENNA: Somebody said that January feels like 10 years, and that's the way I feel. I feel like I've just gone through 10 years of my life and the month's not over yet.
PETER HAYNES: I know. It really is difficult to keep up. And I'm going to work a bit backwards here over the last couple of weeks, Frank, starting with the issue that is front and center more so than anything else, I think, and that's Greenland. That's where I'm going to start.
Despite some pushback from both sides of the aisle in Congress and very little support for use of force to take Greenland, the president has not stopped musing about the need for US security purposes to own Greenland and Arctic country that is 836,000 square miles in size. This weekend, Trump announced escalating tariffs on several European countries that will be imposed starting next month, unless there is public support for his aspirations to own Greenland. Yesterday, he wrote a letter to the president of Norway complaining about not winning the Peace Prize and musing that this slight means he no longer needs to think about taking Greenland peacefully. What happens next in Greenland, and how do you expect the Europeans to respond?
FRANK MCKENNA: Greenland is his, effectively. The United States has had 17 military bases there since the Second World War. They have a treaty in 1951 that gives them almost complete impunity to deploy military forces in Greenland as they wish. They have chosen, the United States has chosen, to narrow their military presence in Greenland down to one base, Thule, originally named Thule base, with only about 200 people in the garrison.
A small point of information. It's headed up by a colonel, which shows you how little importance the United States has attached to it. So it's not about getting Greenland. Greenland is de facto US territory for any of the purposes that the president talks about.
What is he doing? Well, he's angry at the Europeans for having the impunity to support Denmark and actually sending a few troops there. So he's saying that he'll put 10% tariffs on. And if they don't capitulate and bend the knee, he'll add 25% more tariffs on in June. So there we have it.
The Europeans, you have to remember, the EU is 27 nations and it's very hard to develop consensus there. But they seem to be genuinely outraged here and are looking at punching back. Whether they do or not, I don't know. They tend to like to negotiate more than to punch, but they're pulling out their bazooka, which is retaliatory action against the United States for the massive services imbalance.
And so they would do a direct attack on US services going into Europe. That would be $100 billion package. So the market's getting really, really nervous that people are going to make a mistake here and launch a trade war that will shake the very foundations of the global trading system.
PETER HAYNES: So Macron seems to be the one that they're having trouble reining in in Europe right now. I'm also interested in how quiet Congress has gotten in the last few days. There was that mission over to Denmark, the bipartisan mission last week, but in the last couple of days, I'm not hearing anything out of Washington. Are you as surprised by that?
FRANK MCKENNA: Well, there's isolated comments here and there. You'll get a retiring senator, like Tillis, basically saying that this is out of control, and then a few others. I would say that there's a lot of consternation in the Senate and the House about this. There's no appetite to do a military invasion of Greenland.
And so you'll get people turning, twisting themselves in knots to come up with an explanation and say, well, he's not really serious. He's just negotiating to buy Greenland, and he's not really going to do this, and he's just playing with your mind and all this kind of stuff. So I think people are going out of their way to try to not get on the wrong side of the president on this, but I think Congress will resist this. I think this is a bridge too far for Congress, and mainly because it opens up the entire NATO.
If he takes on the European countries, he effectively destroys NATO. And we all know that Section 5 of NATO, every time somebody's attacked, the gang will all resist together. It's only been invoked once, and that was by the United States of America. So people know how important Section 5 is and they know how important NATO is.
I have a huge amount of respect for the checks and balances in the US system. And I feel fundamentally they will pull back from the brink on this one. In the meantime, it does divert the news away from other things, such as the decline in manufacturing in the United States and the stagnant economy and other things. So it probably suits the president's purpose for this to be top of mind.
PETER HAYNES: Well, you talk about manufacturing and you talk about messaging, and we talk about tariffs, which, again, are in play here. It seems every time we turn around, what was it, Macron's getting a 200% tariff on French wine because he wasn't supportive of the-- we'll talk about it a little later-- the Gaza peace plan. But on the tariff side, there was some interesting news that came out this week.
And surely it was timed in light of the fact that everybody's going to gather at Davos. A report from the Kiel Institute that was published on Monday concluded that 96% of the cost of US tariffs was borne by US companies and consumers. Using data from 25 million transactions valued at over $4 trillion, the Kiel Institute concludes that the $200 billion increase in tariff revenues that have been earned in the US since Liberation Day last April was almost entirely the result of higher prices paid by the end consumer or eaten by the US company or manufacturer.
So instead of increasing prices, foreign exporters to the US chose to accept lower sales where elasticity existed. This is exactly the result economists anticipated. We've spoken about it several times on this podcast. And the timing, as I mentioned, is likely to coincide with all of the leaders being in Davos. Frank, how can businesses suffering from higher taxes in the United States change the narrative that tariffs are, in fact, a consumption tax and not a revenue generator for the US government?
FRANK MCKENNA: This report is very instructive. People should look at it. The Kiel Institute is a highly respected German think tank, but its conclusions mirror that of the Budget Lab at Yale, of the Harvard Business School study, the Peterson Institute. All of them have concluded the same thing, and that is that the foreign exporters are only absorbing a very small percent of these tariffs. US consumers and importers are consuming 96% of the tariffs.
So it's a consumption tax. I'm surprised that people like Grover Norquist and all of the other Puritans in the Republican Party who are deathly opposed to taxes don't call it out for what it is. It's a massive tax grab. And this $200 billion that's been raised, this additional revenues paid by Americans, that's the unfortunate situation that we're in. And of course, we expect that a Supreme Court decision even on Tuesday this week, and it didn't come out on tariffs, which tells me that the Supreme Court is really wrestling hard with these IEEPA tariffs, which constitute 40% of the tariff package.
I suspect the Trumpites in the Supreme Court are fighting a very, very aggressive rearguard action to avoid the president being overruled on this one. So we'll just have to wait and see. But it was expected that decision would come before Christmas.
So where will these tariffs go? Well, look, all you have to do is to look at the auto manufacturer to get a little sense of it. The auto manufacturers are very, somewhat desperately, trying to hold on to their market share. So in addition to taking write-downs on e-vehicles, they're absorbing tariffs on autos and on steel, aluminum, et cetera.
GM has reported a $7.1 billion loss this quarter. Ford, this year, $19.5 billion in losses. You're seeing Toyota of three billion write-down. Stellantis, six billion. BMW, Mercedes-Benz, and Audi are all pulling out of America.
So you're seeing it flowing through the balance sheets, for example, as retailers desperately try to hold on to customers. And so I think that's what's going on. But you're also seeing it in people rather desperately trying to reduce costs. Manufacturing in the United States of America lost jobs for eight straight months, which is exactly the opposite of what this administration has forecast. Automakers have cut 28,000 jobs in the past year. That was not what was intended, but that is unfortunately what's happening.
And in the case of autos, Canada is the largest market for autos from the United States by a wide margin. But we're now buying more autos from Mexico than we are from the United States of America. The reason, if you're looking for one, why you see this dissonance, you see Trump touring an auto plant and the auto CEOs talking to him about what a great person he is, and thank you, thank you. And then you're seeing all the auto executives coming out and imploring the United States to stay in CUSMA because they need it for their survival. Or you're seeing the governor of Michigan coming out supporting CUSMA.
So people are afraid of the president. And they bow their knee to him, and they genuflect when he asks them to genuflect. But truthfully, America, at the industrial level, wants free trade within the region and are pushing as aggressively as they dare.
PETER HAYNES: Frank, I want to just stay with the tariffs for a second. We found out earlier today there won't be a ruling this month. It'll actually be at the earliest in early February. Last weekend, I think it was, that Treasury Secretary Bessent was suggesting that the Supreme Court would not rule against Trump because it would be too messy to unwind the tariffs.
According to Chris Krueger, our colleague from the Washington Research Group, any decision that the Supreme Court is making is locked down tighter than Fort Knox. Do you think that Bessent is actually trying to speak to the Supreme Court judges or jawbone the result? And in your understanding, is the administration likely behind the scenes trying to sway the outcome of the Justices on this file?
FRANK MCKENNA: Yeah, so that's a really interesting question, because if you recall, when Premier Ford ran his ad in the United States, he was accused, up to the president's level, of trying to influence the Supreme Court of the United States. And now you've got somebody like Bessent, who should know better, effectively trying to use moral suasion to try and get the decision that they want from the Supreme Court.
The Supreme Court heard their evidence. They heard the arguments. What the government is now trying to do is introduce extraneous evidence through the media about the impact of having to disgorge all of these tariffs. Highly inappropriate. I'm surprised the Supreme Court doesn't simply suggest that people refrain from commenting on a matter that is before the courts, but at any rate, yes, I think that there's an effort there to try and cloud the atmosphere and make the Supreme Court of the United States, inappropriately, I might add, aware of some of the implications of ruling against the IEEPA tariffs.
PETER HAYNES: Just before we switch out of tariffs and Davos, earlier today, Prime Minister Carney spoke--
FRANK MCKENNA: Just before you do that, Peter, I just want to remind people that the IEEPA tariffs, which will probably, by maybe a narrow margin, be ruled ultra vires, represent about 40% of the tariffs that are collected by the United States. They're sitting there with three or four other weapons-- Section 122, Section 301, the big bazooka, Section 232, which threatens if a trade threatens national security, they're going to invoke all of these and throw all of those out there.
Peter Navarro and others desperately want to preserve their legacy as tariff hawks. So they'll throw everything at the wall to substitute the tariffs that may be ruled unconstitutional with new tariffs. So people should not expect a reprieve from tariffs as a result of the Supreme Court.
PETER HAYNES: But I understand that those sections are harder to invoke. Generally speaking, they take more time.
FRANK MCKENNA: Correct.
PETER HAYNES: They might be a little trickier and have to run through Congress.
FRANK MCKENNA: Correct.
PETER HAYNES: So at any rate, we would get a reprieve here and maybe some cooler heads prevailing. Just speaking of cool heads, our prime minister of Canada, Prime Minister Mark Carney, was a featured speaker today at Davos, where a lot of the world leaders have joined. His speech had some very, very interesting quotes in it. A couple that I'll just make note of and then get your thoughts on the speech, Frank, which was really focused on the end of the rule of law.
As the first quarter, I noticed that I thought was interesting. "We are actively taking on the world as it is, not waiting for the world to be as we wish it." And then the other one I know a lot of people have picked up on is, "if you're not at the table, then you're on the menu." Clearly, Prime Minister Carney was sending a message, even though he did not mention the United States, that he was trying to make it clear that the previous world order, that rules-based order, is over. What were your thoughts on Carney's speech?
FRANK MCKENNA: Well, I would highly recommend that everybody listening to us read the speech. It's very, very sobering. There's no effort to sugarcoat it. He's saying the old world that we knew and respected and created so much prosperity is gone and that we're in a world now where hegemons, and it's kind of a new word that has entered our lexicon, basically are exercising power arbitrarily in their own best interest.
And that we have to accept that fact, accept that reality, and realize that as middle powers, that we don't have the power to go it alone and form new friend groups and new trading groups, all guided by our self-interest. So it's a very, very sobering message, I thought. And everybody should read it because I think it'll be the foundation of Canadian government policy, whoever's in office, for the coming years.
PETER HAYNES: So, Frank, as I read some of President Trump's language that he's using to justify the takeover of Greenland, it sounded eerily similar to language that was used by Russian President Putin to justify military action in Ukraine. Now, I admit it scares me to think about this, but do you think that Trump's imperialist ambitions mean that Canada is next?
I know the president says he doesn't need anything from Canada. The next thing you know, he does. And his AI-generated post last night, showing an American flag over Canada, did nothing to quell Canadian concerns.
FRANK MCKENNA: Well, look, what I think, I guess is always grounded on my respect for America and my friendship with Americans. So I have not gone there. But 31% of Canadians in the last poll think that the United States has military ambitions on Canada. There's a story today, which should alarm everybody, and that is that the Canadian armed forces are actively wargaming what an invasion from the United States would look like.
So these are scary moments. And remember what the president is saying about Greenland, it is remarkably similar to what President Putin said about Ukraine. We have a lot of ethnic Russians in the Ukraine. They want us to go in, et cetera, et cetera. Every military operation in another country is surrounded by propaganda about why it's being done in order to convince your own citizens and citizens of the world. People will always come up with a rationale.
I've said before, and so I won't repeat it, there is zero reason for the United States to invade Greenland. Again, I repeat what I've said before as well, why buy the cow when you can get the milk for free? The United States can get everything that it wants from Greenland. It does not have to take on its allies, does not have to invade Greenland. It simply has to take advantage of current relationships. So what I fear, again, is that we're seeing an unraveling at an increasingly rapid rate of the world order.
And hopefully cooler heads will prevail, with respect to Greenland, in particular, and the United States will realize that Denmark is one of its strongest allies, bled for the United States, as has Europe and as has Canada. And that we all need to back off and allow the blood to stop boiling, because this is getting serious and it's getting to the point where mistakes can be made. And we don't want that. So we need sober-minded leaders. We need people to be cool and calm and start talking more and yelling less.
PETER HAYNES: Well, no matter what, if a mistake is made now, it'll always be the other person's fault. That, I think, is where it gets a bit scary. I'm going to move regions here, Frank, to Iran. Civil unrest began towards the end of 2025 when merchants went on strike to protest weakness in the local currency, the rial, and related inflation, which was reported to be as high as 80% for some products.
As protests expanded across the country, the government took extreme steps to quell the uprising, including turning off the power, eliminating access to the internet and phones, and using physical force, which resulted in the sad killing of thousands of locals. President Trump threatened US military involvement if Iranian officials continued with executions of its citizens. Since this threat, it does appear that the situation in Iran has calmed down a bit. What do you make of the uprising, and do you think it's under control?
FRANK MCKENNA: Unfortunately, I think it is probably under control. We should have a change of government. It's a real theocracy. And of course, it's the Ayatollah that rules Iran.
The elected president is actually a reasonably pragmatic person, but the Ayatollah is, of course, ideological. And the reason I think it's under control is that the Revolutionary Guard are effectively running Iran, and they're very powerful. And at this stage, we don't see any rupture within that organization. So I think that's the unfortunate situation.
It's also a bit unfortunate that President Trump has really encouraged the protests in Iran. And what he said to the people of Iran that were protesting, we're locked and loaded. We're ready to go. And unfortunately, thousands of people have lost their lives believing that America was going to end up helping them.
America has pulled back from that. Israel really pushed back hard, saying it would destabilize the Middle East. And Saudi Arabia pushed back hard, and perhaps people within Trump's circle. So the United States does not seem likely to be going into Iran. And a lot of lives have been lost there. But at this stage, I would say, sadly, I don't see the conditions for an overthrow of that government.
PETER HAYNES: OK, well, I'll move on to another government that was overthrown, or at least the president was overthrown, and that's Venezuela. I know we talked about that a couple of weeks ago. President Trump suggests that he's acting-president of Venezuela from the White House. But really, since that event where Maduro was captured, there really hasn't been a day two plan by the administration, at least that's what it appears on the surface. Are you surprised by this?
FRANK MCKENNA: Yes and no. First of all, we know a couple of things. We know that this is not about drugs and narco trafficking. If that were the case, the president would not have pardoned Juan Orlando Hernandez, the ex-Honduran president, who was convicted of drug trafficking and sentenced to 45 years in jail for offenses that were worse, really, than the one being alleged against Maduro. So we know it's not about the drug trafficking.
We do know what it's about. It's about the oil. It's all about the oil. I've talked to people in Venezuela, and I've certainly talked, listened to a lot of commentators, what they're saying is that there's a very uneasy calm in Venezuela. People are really ambivalent. On the one hand, they wanted Maduro gone. They repeatedly voted against him, although the votes didn't count, they wanted him gone.
But secondly, they don't want to be a colonized by a foreign government. They want their freedom and democracy as well. So they're ambivalent at the moment. I think they're giving it a chance to see what develops. It's very unclear what kind of situation we're going to have.
What we know is that the United States is not looking for a democratically elected government there. They are not supporting Machado to take over there. They're really working with the current leadership, the rather cruel current leadership of Venezuela, in order to run the country at the present time and extract the oil. And cargoes of oil are coming out. They're all embargoed.
Anything that would go to China or anything that would go to Cuba or any other country in the world, all of those are embargoed. The cargoes of oil that are coming out are going to the United States, and the monies are going into an offshore account. So I would say that there's not chaos in Venezuela, but on the other hand, there's not jubilation and celebrations in the street over the current situation.
PETER HAYNES: So given the sensitivity, how quickly do you expect the courts to hear Maduro's case? And let's go through the what if, Frank. What if he's acquitted? I know you've mentioned this before. What if he is acquitted? Do you expect he would return to Venezuela to lead the country? Or would he live in exile in somewhere like Russia or somewhere else?
FRANK MCKENNA: There always is a chance that he could be acquitted, although it's hard to see that happening being tried in the United States. As I indicated to you, Hernandez was convicted in the United States, so I imagine Maduro would be. But if he were acquitted under Trump, there'd be some reason for him to end up in jail, I would think.
There are an awful lot of people who are being sent to jails around the world who have not been convicted of any offenses. So, no, I don't think he'll be back to Venezuela. I think that would be unacceptable to the United States, under all circumstances. Perhaps exiled somewhere else in the world, but I think we're talking about a hypothetical that's not going to happen. He will be convicted and he'll be in jail for a long time, or until his supporters raise enough money to be able to get a pardon from the president.
PETER HAYNES: OK, over to the Middle East. Details are coming out about President Trump's so-called Board of Peace idea for the rebuilding of Gaza. Cost of entry seems to be $1 billion price tag per country. And final say forever is with President Trump in terms of how this initiative plays out.
Will Prime Minister Carney keep his acceptance that Canada will be part of this Board of Peace now that the terms are public? President Macron has said no for France. And why do you think that Trump would have invited President Putin to be part of this initiative?
FRANK MCKENNA: I think the original premise was one, I know of a CEO, a business leader, who was invited to join that board several months ago, and it was really originally designed around the redevelopment of Gaza in such a way that it would create an economic basis for people to survive in those communities and rebuild the area. That was the original premise. It, so many other things, has now taken on a life of its own, and it's become a substitute United Nations, where Trump is the president for life and where he's got a veto power and nobody else has veto power, where a board is being created that would not only work on Gaza issues, but on issues around the world where the price of playing is $1 billion, and where you'll be rubbing shoulders with one of the worst villains in terms of coveting other countries, and that's Putin.
So Macron had the temerity to raise questions about it. And now Trump has told him that not only does he have to pay $1 billion in order to be on the board, but if he doesn't do it, there'll be 200% tariffs on French wine and on champagne. So what we're seeing here, you either pay up or you pay a price for not participating. Carney is handling it, I think, as artfully as he can, saying he's interested.
He originally indicated that he would be prepared to join the board when it looked like there were extraordinary world leaders involved. All of a sudden, the whole premise has changed. It's now a substitute United Nations that would have Putin at the table. Trump having a veto with a billion dollar table stakes. So it's changing as we go. I don't think the world will sign on to this. I think the world's still committed to the United Nations, the larger world.
The only enthusiastic participant so far is ally Orbán in Hungary, who is in a rather desperate election there and certainly wants to cozy up to Trump. I don't see other people jumping for joy at the prospect of joining this organization. So like everything, we'll need to wait for the additional details to come out. But I think right now, it's not going to work to have a substitute for the UN with a billion dollar membership fee headed by Trump for life, with a veto only to Trump, with Russia sharing center stage with everybody else.
PETER HAYNES: All right. Well, yeah, you're right. Let's wait for the details to come out and see how the dust settles. And obviously, other geopolitical issues will play into where everybody stands on this in the end. Before we return to domestic political issues, Frank, I'm going to reach into our mailbag. You probably didn't know we had one, but I'm going to ask a question that I received from a listener from Pennsylvania, and I'm going to describe this individual as well educated and well thought out, and who puts himself in the category of a MAGA supporter.
His question for you is as follows. Quote, "the Monroe Doctrine outlining a strategy for dominance in the Western hemisphere has been invoked by American presidents since its inception in 1823. In spite of the fact that most Canadians might oppose the methods of the current president, do you think there is value in Trump's attempts to minimize the influence of China and Russia in the Western hemisphere, with particular emphasis on American influence in Venezuela and Cuba," end quote.
FRANK MCKENNA: Yeah. Look, the individual is not wrong. The Monroe Doctrine over the years has been used to justify interventions in Latin America. What's happening here is, I'd say, quantitatively and qualitatively excessive, even by Monroe Doctrine standards.
And by the way, the Monroe Doctrine, for those who care, was introduced in 1823 by President Monroe at that time, and it was really designed to ward off Spain. Spain had been a colonial power in Latin America and wanted to recolonize some of those communities. So it was an effort to ward off Spain. And ironically, the Monroe Doctrine was partially enforced by the British Navy working with the government of the United States.
I can understand the logic behind that, but what Trump is saying, at least, is not consistent with the Monroe Doctrine. He said that Venezuela is hosting foreign adversaries. That is not true. He said that they're acquiring offensive weapons, and that's not true.
Why he's there, and we should just be honest about it, is about the oil. And it's a great source of wealth, and he wants the oil. And Americans can decide whether or not that should be justification for invading another country. But that's the reason he was there.
Now, in the case of Kennedy, he invoked the Monroe Doctrine, in an event that happened in some of our lifetimes, and that was the Cuban Missile Crisis. And there Russia was putting offensive weapons within miles of the shores of the United States. So you can understand why that would be a source of concern to America and why they would end up moving in. That's very understandable.
That is much more consistent with the original design of the Monroe Doctrine. Not simply to act like Pac-Man and seize countries because they happen to have a resource that you want. We also have to bear in mind two other things, that sometimes people have no choice but to trade-- "to trade," I use those terms advisedly, with countries that the United States might not, like China or Iran.
In the case of Brazil, Trump imposed 50% tariffs on them because they had the temerity to prosecute his buddy, Bolsonaro. And as a result of that, he threw tariffs on them. And of course, they had to try to trade with other countries of the world for survival. So they should not be punished for doing that.
In the case of Mexico, they have been trading aggressively with China as part of improving their quality of life over the years. Canada, just this past week, entered into a deal with China to protect our canola farmers and our seafood producers. And we should be allowed to do that because we're paying a price for tariffs from the United States of America. So the Monroe Doctrine could be extended to those situations, but it shouldn't be.
Then you go to Greenland, which would never have been in the contemplation of President Monroe or any other president of the United States. And as I indicated before, it is not occupied by China. It's not occupied by Russia.
The United States has a base there. They have the right to do whatever they want militarily. And to use the Monroe Doctrine to extend it all the way to Greenland would stretch that doctrine to the breaking point. So bottom line is, I see the logic of the Monroe Doctrine being used in very limited situations to protect the United States, but in its current format, it's being really stretched to the breaking point.
PETER HAYNES: So, Frank, you mentioned the CCP announcement by Prime Minister Carney when you visited China, did a tariff-related reduction, or a trade agreement, I should say, with that country. Initially, President Trump seemed to be nonfussed by the trip and the deal, but the feeling is he will circle back with more pointed criticism down the road once his supporters in his orbit get him riled up. Is it your expectation that will happen? And how do you expect Prime Minister Carney to manage the next steps on a pivot from the United States or from Trump from what he initially said?
FRANK MCKENNA: Well, first of all, I think the muted reaction was because that outcome had been socialized with the Americans before the deal was done. But secondly, I want people who are listening to understand why Canada is looking for other trade partners, even for modest agreements like this one. We have a massive tariff applied against us on our canola and seafood producers by China.
It's applied against us and has been over the years for two reasons. First of all, we had the temerity to enforce the United States request to pick up the daughter of the CEO of Huawei in Vancouver. As a result of that, we had our two Michaels in prison for two years, and we had tariffs on Canadian products at something like 100%. This was at the request of the government of the United States of America, but the government of the United States of America didn't lift a finger to try to help us with those, get relief from those tariffs.
And then the government of Biden requested our help in keeping out Chinese vehicles from coming into North America. And Prime Minister Trudeau put 100% tariffs on those vehicles coming in, at the request of the United States of America. We ended up getting massive tariffs on our canola and on our seafood industries involving billions of dollars and thousands of jobs.
So I thought the prime minister and his people did a masterful deal, very modest in its scope, where they ended up agreeing to a limited number of EVs, 50,000 approximately, only 3% of our total auto sector, in exchange for getting relief on canola and seafood tariffs. To me, it's an entirely reasonable thing to do to try to end up having a very, very modest agreement with China that would allow that to take place.
At the same time, President Trump is saying he doesn't want a Canadian car in the United States of America. It doesn't seem unreasonable that we would allow a very small number of highly efficient and low-cost BYDs into Canada. So we'll see. Greer, the USTR, has said that Canada would pay a price for this. We'll see what that price is.
But I want people who are listening to understand that we have to have some tools to protect ourselves. And the United States of America, if they don't want to do business with us and think that we're incapable of giving them anything of value, they at least need to give us the latitude to trade with other countries around the world. So I'm hoping cooler heads will prevail on this. I know Scott Moe was out very strongly in support of it. Other premiers have had different views, some for, some against.
I thought it was a superb act of statesmanship, quite frankly. I just hope we do more of these things. And as Prime Minister Carney opined in his speech today at Davos, that we form coalitions of the willing with various compositions around the world. Canada, this is not the world we want, but it's the world that we're in. We're going to have to pursue our pragmatic self-interest at times, and that's just the reality of the world that we're in, Peter.
PETER HAYNES: And one of those who might have been frustrated by that transaction was Premier Ford in Ontario, just because of the impact on the car industry. And it just proves how difficult a country it is to run here. You're trying to solve a problem in one region and you're causing a problem in another region. It's by no means easy.
OK, so we're going to circle back to North America here, Frank. So a couple of musings on Truth Social by Trump in the past couple of weeks. I'm going to start with his threat to the defense industry to limit buybacks and dividends for, I think, up to three years, if they do not invest in plant and equipment in the US.
Now, I personally admit that sometimes I feel that companies do skew, favor too much towards shareholders over stakeholders. And I know you, as a chair of a company, understand that debate. But nevertheless, where did this come from and do you think it has merit?
FRANK MCKENNA: Yeah, when you look at all the things that have happened just in the last week or two, buybacks and dividends for defense contractors, the single-family homes limiting institutional ownership, cap on credit cards and everything, all of those addressed the same issue, affordability. The president says that it's fake news, but in fact, it's scaring Republicans, and particularly with midterms less than a year away. So to his credit, he's trying to deal with the affordability issues rhetorically. So number one, it does that.
Number two, it basically diverts attention away from the other things that the president doesn't want to talk about. And thirdly, quite frankly, it's another example of state enterprise. We've seen the United States, I think it would be hard for any listener to disagree with that, go from the bastion of free enterprise in the world to the exemplar of state enterprise, whether it's a golden share, whether it's basically getting a percentage of trade when you can't trade with China, but you can if you give a percentage back to me, all of those things.
This is a whole new world. This is a capitalism in a way that we've never, ever witnessed it before from the United States of America. And it really is a state enterprise, I guess, is what you would call it, where the state has got its fingers in every sector of the economy.
PETER HAYNES: Add to that, obviously, control over the media and other elements that the government has imposed over the past year. I guess today is the one year anniversary of the inauguration of Trump 2.0. And we'll see how the next nine months before midterms, or 10 months before midterms, progress.
Let's move on to border control. There's no doubt that the Trump administration has, in fact, been successful in reducing the entry of illegal aliens at the southern border and also the removal of people living in the United States illegally. But the tactics of ICE have become a flashpoint for the current administration.
And it really does feel like the activities that occurred in Minnesota recently, and the tragic death of a US citizen on film for everyone to see, has placed the spotlight on this activity. Are you expecting ICE to tone down its actions as we approach midterms? And do you think there's actually another leg to the Minnesota uprising, or are things calming down there?
FRANK MCKENNA: I think the answer is that I think ICE will tone down. They had another death in detention in Texas today. I think if you look at the polling, even those who are strongly supportive of the president's agenda find that this is repugnant to them, what ICE is doing, the aggressivity of the way in which they're enforcing the law. I think Americans, there's widespread support for dealing with the border issues, the Mexican border. A lot of illegal that have come across that border over the years. And I think there's strong support for that.
And I think Trump deserves credit for dealing with a real issue. But the extravagance of the effort being pushed by, of course, Stephen Miller and the White House, who every waking day is devoted to this issue of illegal immigration. And I suspect he's pushing on enforcement of ICE. So I think there's a lot of pressure to deport more people.
On the other hand, I'd say the American public, including the Republican base, are pushing back on the tactics. So yes, I expect ICE will tone down. And I think that Minnesota will calm down. You couldn't get a state that is more reasonable and rational and peace-loving than Minnesota. And I don't think there's an appetite there to engage in almost open warfare with the government of the United States. So, yes, on all counts, I think there'll be a cooling period here.
PETER HAYNES: Well, let's hope so, Frank. Again, we've only been talking-- it's only been two weeks since we last spoke. And of all the news developments with Trump's signature on it, I find that the one that seemed to generate the most blowback domestically was word from Fed Chair Jerome Powell that he's under investigation from the Department of Justice over his congressional testimony on renovations to the Fed's office building. Are you surprised, Frank, by the reaction in Congress from both sides criticizing this investigation, especially given the fact that Trump is actually going to appoint the next Fed Chair and this person is only one of the 12 voting members, alongside many other Trump appointees?
FRANK MCKENNA: I think the checks and balances are holding in this case. Trump is going to have to pull back from this battle. The support that Jerome Powell has is substantial.
What's interesting is that Powell is scheduled to go and actually sit in the Supreme Court when one of his colleagues, Cook, Lisa Cook, I believe it is, who's on the board, her case is being considered. And Scott Bessent has cautioned him against doing that. He shouldn't be trying to influence the Supreme Court. At the same time, Scott Bessent has talked about how terrible it would be if IEEPA were overruled because of the impact on the US Treasury. So we're getting some real hypocrisy in real time here on this.
But to get to your point, I think the United States, at its best, has very strong checks and balances and a sense of decency. And I think public opinion is strongly supporting Powell. And I think the president is going to have to back off.
PETER HAYNES: OK, so I'm going to finish up here with something that happened in Canada last week, and that was the surprise resignation of Quebec's premier, Francois Legault, who announced that he was going to leave eight months before an election. He lost the support of the province. That was clear in the polls.
I know we talked last month about the Liberals who are looking to elect a new leader for their party, and Legault's party will also need a new leader. Do you think that this news is a surprise, number one? And number two, does it impact how the election campaigning will go over the next eight months?
FRANK MCKENNA: It's not a surprise to me. When somebody is lower in the polls than the interest rate, you know that it's time for them to go. And the more he said he would stay and fight, the more you know that it's likely that he'll go. So no, I'm not surprised.
Does it shake things up? I think it does. He was extraordinarily unpopular. So his party will have a new leader and will have a chance to resurrect itself. The Liberals now have a new leader, it looks like it will be a new leader, Dhillon, who's a well-respected person, and they'll have a chance to resurrect themselves. So it will shake up the contest.
The Parti Québécois looked like they were headed for a very easy victory. And now, I think that there'll be three credible choices that people will have. And I hope in a way that Quebec nationalism will be on the agenda. All polls indicate that Quebecers do not want a referendum. They do not want to leave Canada.
In fact, even those who want to leave Canada want to keep their Canadian citizenship. It's sort of like a divorce with conjugal rights. But I'm hoping that Quebecers will pull back from the brink. Quebecers have to understand that if they decide to be a separate nation, they are right in the crosshairs of the President of the United States.
And I can't imagine any Quebecer thinks their language and culture is going to be better protected by the President of the United States than they currently are within Canada. So I think this Quebec election will be now very, very interesting. You'll have three real choices. Separation or nationalism may be on the agenda. We'll see. And Quebecers may decide to pull back from even electing a government that wants to introduce a referendum into the chaos that's taking place right now.
PETER HAYNES: But, Frank, if the two parties, if there's two strong leaders in the other two parties, does that not split the vote against the Parti Quebecois?
FRANK MCKENNA: In Quebec, it's just hard to know. It's like playing pool. You never know where the balls are going to go when they break. So theoretically that's possible, but you don't know. The end result maybe would be a minority government, which would tend to rein in the premier. At this stage, we don't know. I'd say politics in Quebec will be very interesting to watch. A lot of volatility.
PETER HAYNES: All right. Well, that's going to be a good one for us to keep an eye on as we go through this monthly podcast. All right, Frank, enough of the sour notes here. Well, I was going to say enough of the sour notes, and then I mentioned that I'm a Bills fan. So I am kind of reeling after the weekend.
I cheer for three teams, Frank. Really, I cheer for the Leafs, I cheer for the Jays, and I cheer for the Bills. And it's pure misery in my life. So let's talk about the Blue Jays, as we always do. We're three weeks away from pitchers and catchers reporting to spring training. Most of the big free agent fish have been reeled in.
Jays for players, as they have been the last few years, on just about every big free agent available. They reeled a couple in and then they lost out on the last couple of big signings. Kyle Tucker, who went to the evil empire in Los Angeles, and former Blue Jays, Bo Bichette, who ended up on a short-term deal with the New York Mets. Are you satisfied overall with the Blue Jays' offseason?
FRANK MCKENNA: I have to tell you that I share your frustration around the Bills. I thought that game-altering play at the end should have been reviewed. And it's just not a fair way for a great team like Buffalo to exit. So anyway, it is what it is.
With respect to the Blue Jays, I've really become more sanguine about this. I have always been critical of the management of the Blue Jays, but last year, they really redeemed themselves in my eyes. From the coaching right through to the executives, I've really come around quite a bit. And so I'm going to give them the benefit of the doubt.
The price for Tucker really was high. And it tells us, Peter, that there's something wrong with baseball when a team that's already stacked can spend $240 million for another star player. At some point, baseball's going to have to get its head around this whole issue of parity, because LA can just keep paying the luxury tax on top of their payroll and will always end up having the best players, or the Yankees, or the Mets, or in fact, to some extent, the Blue Jays. So just get that out of the way.
I think I really wanted us to keep Bichette. I liked him right from the time I first saw him in training camp. And I just think he's a superb player. So I hate to see us losing that, but I'm still encouraged. We made some really good additions, both in pitching and on the field.
We've got some very talented young people in the farm system that can come up and perhaps play in the middle infield. And we shouldn't forget the fact that we've got Santander. We're paying them a lot of money. Last year, he didn't produce anything, but he's capable of 40 home runs and being a substantive contributor. So I think we have to live in hope that Santander produces, which would be almost equivalent of getting one of these great free agents that was available.
And don't forget as well, we've got Barger, who ended up having a great year. He could play third base. He's got a cannon for an arm. If he blossoms the way I think he will, he'll be a 40 home run hitter. So it may be some of the people that are on the roster now have to step up a little bit more, and I think they're capable of it after seeing the way they played baseball last year.
I just hope and pray that the Blue Jays entertain us, entertain our country for another year, play the kind of baseball they played last year, playing contact baseball, being aggressive on the bases, and taking advantage of every opportunity to score a run. I hope they do that. Whatever the result it'll be, if they play that kind of entertaining baseball, I'll be glued to the television.
PETER HAYNES: As Canadians, we needed the Four Nations and then we needed the Blue Jays last year. We're going to need our Olympic team to win the gold medal.
FRANK MCKENNA: Yeah.
PETER HAYNES: Sorry to all our American friends out there, but we really do want to kick butt at the Olympics. My theory on the Blue Jays this year, going after all the free agents, was that they feel as though, management feels as though, there are a lot of outlier years last year. Whether you mentioned Barger, or Ernie Clement, or others like that, I would think that somebody there is going to regress.
And management knows that not all those guys are long-term big leaguers, and that's why they were trying to sign Tucker, some of these other guys. But I'm hoping I'm wrong. I'm hoping all these guys continue to be as good as they were. Lucas as well, and even Davis Schneider. So it's going to be fun, and it's not too far away.
And as you watch the Dodgers pay the equivalent of 120 million a year for Tucker, because they have to pay dollar for dollar in luxury tax on that contract, how can there not be a salary cap? Frank, let's enjoy baseball in '26 because I actually think we're not going to lose a season in '27. I think everybody knows a salary cap has to happen.
23 owners have to approve the CBA. There's going to be more than seven that'll say there's no way we can continue to let this happen. There's going to be a salary cap. I think they can get it done without having to go on strike. Everyone knows it has to happen. How they implement it, obviously, is the challenge, but what everyone forgets that with a salary cap, there's going to be a floor.
So these 10 teams that are only paying $60 million or $80 million in their salaries will have to move those up to a higher number. So a lot of people will get more paid in the middle. So it'll be interesting to watch that in-- and we'll definitely be talking about that as the year progresses.
FRANK MCKENNA: Well, it'll be great fun to be able to talk about this and not talk about the world of chaos that we seem to be living in.
PETER HAYNES: Yeah, we always end on a positive note here, and that's talking sports. All right, Frank, next month I'm sure we'll be talking about the Olympics. It's going to be fun to watch. And thanks again for your time. And we'll catch up with you again in the month of February.
FRANK MCKENNA: OK, all right. Thank you.
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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.