Trade Update and Canada's Budget – Rona and Frank Debate

RONA AMBROSE: If the president ran an ad in Canada like that, we would be furious. Furious. I think premiers need to get behind the prime minister and let him lead these negotiations.
PETER HAYNES: Welcome to a special episode of Geopolitics with the Honorable Frank McKenna. My name is Peter Haynes, and I'm the host of this podcast series where we discuss important geopolitical issues that impact investors, traders, and for that matter, interested citizens from around the world.
This special episode-- number 70, for those of you counting-- drops in between our regular monthly cadence and involves a conversation between Frank and his colleague, the Honorable Rona Ambrose, who were paired up for the lunch keynote at the recent 26th Annual Portfolio Management and Market Structure Conference. I hope you enjoy this bonus episode as much as I did moderating the discussion.
I'm very pleased to be joined on stage today-- two over from me on the left is my colleague, the Honorable Rona Ambrose, former leader of the Conservative Party, who works in Calgary, representing TD on senior boards, doing all kinds of advocacy work, working with our large institutional investors on political issues.
And in the middle here, my colleague, the Honorable Frank McKenna, who, by the way, Frank, former ambassador, former Premier of New Brunswick, have been with TD for over 20 years. Frank and I have been doing a podcast together-- Rona has been a guest-- for, I don't know, almost 70 episodes now. Frank, I just found the one listener. He just told us over here, he's actually a dedicated listener every month.
FRANK MCKENNA: There's a listener?
PETER HAYNES: Yeah, there is one.
FRANK MCKENNA: Yay!
PETER HAYNES: We found it. Exactly. So thank you, everyone, for joining us. And Frank, I'm going to get right at it because we got a lot of material to cover here today. And it's always fun to debate these issues in a civil manner, and that's what we're going to do. So we'll start.
RONA AMBROSE: Who said anything about civil?
PETER HAYNES: OK. Well, if you want to drop the gloves, we're ready to go. We can be Canadian too. So we did ask that question during Jeopardy, a question about what Mike Myers-- the two words that Mike Myers had inspired for Mark Carney's campaign. And the candidates didn't get it right. They didn't get the "elbows up." I know you guys would have gotten that.
So, Frank, I am going to start with you. And we're going to talk about an elbows-up issue, and that's trade. So when President Trump was referring to the Doug Ford ad with Ronald Reagan on tariffs, the now famous ad that ran during the World Series, he first said that he would have done the same thing as Premier Ford.
But then the president did an about-face and decided to cut off negotiations with Canada, as everyone in the room is aware. What do you think is the real motivation behind halting the trade negotiations with Canada? And when will we get these discussions back on track?
FRANK MCKENNA: Well, I'll answer that as best I can. But Peter, first of all, thank you for inviting Rona and I to do this, and thank you for your leadership every year, putting this on and bringing all of these people together. It's marvelous. It truly is a labor of love.
So the simple answer-- and I invite Rona to help me on this if necessary-- I don't know what the real motivation of the president is. You can be almost sure that it's not what he says because it doesn't make any sense. What he's saying is that it was an attempt to try to influence the Supreme Court.
And yet, up until this week, he was alluding to the fact he might show up at the Supreme Court and sit in the front row and listen to the arguments. And Scott Bessent, I think, actually did or said that he was going to sit there in the front row. And they've done everything in their power to try to influence the Supreme Court. So there was no effort by Doug Ford to influence the Supreme Court. And that's not the reason why the president didn't like what was said.
Another explanation-- I've talked to more people in the last two weeks who claim that they have it right from the president what's going on. You must get a few of those too.
RONA AMBROSE: Yeah.
FRANK MCKENNA: They know exactly what's going on. So somebody told me, the real reason is that Doug Ford or his team strategically targeted key Republican constituencies and key ridings that all would be influential in the midterm elections-- which would be strategically the right thing to do-- and that the team around Trump felt like this was interfering in US electoral politics. That's one justification.
Another justification, I was told, is that we really weren't making much progress at the negotiating table, and Trump wanted to shake up the negotiations, essentially, by trying to put everybody off their game. So there are a number of different explanations. And with him, you just don't know.
It could have been a total distraction. The day that this happened, there might have been bad news somewhere else. So you do this "there's nothing to see here, look here" kind of thing. So I think the simple answer is that we don't know.
I think it's more likely, if I had to guess, that it wasn't Trump himself. I think the people around him, Peter Navarro and Miller and those guys, I think they've had a hard time accepting that Canada is not being sufficiently pliant bending the knee. And so this was chin music. High inside fastball. Just letting us know that we better smarten up. So I wish I could give you a specific answer, but I just don't know.
PETER HAYNES: Well, I think we do know that the negotiations will at some point get started again. We just don't know when. When that happens, what is your best guess of what a deal will look like in the end? And will there also be a national security aspect? I know we've got Five Eyes and the like already in NORAD. Will there be an additional security aspect to a final deal?
FRANK MCKENNA: Well, I would say, everything is on the table. But the kind of deal-- this is pretty inside baseball, but the kind of deal that's being looked at is nothing to write home about. I mean, we have CUSMA now, as much as it's worth.
And then we have the carve-outs, the sectoral tariffs, Section 232 tariffs, like aluminum. But we're selling our aluminum into the United States. It's just they're paying the tariff. They can't avoid it. We have 70% of their market.
Steel is a real problem for us. And the kind of solution being proposed there is a quota. So you can sell as much steel as you sold last year and the year before, which would be probably OK, but on top of that would be a tariff. So I think the US's starting position is a quota plus 25% tariff.
And Canada is saying, no, no, no, that's way too high. We could agree to a 10% tariff. I think they got within that range on the steel issue. They didn't even get to autos-- that never really got discussed-- nor softwood lumber, which are huge pain points for Canada.
On the other hand, the United States has spent days niggling around supply management. And I think they've finally agreed that, within the quota that we've given, if we would simply loosen the rules, we could accommodate greater American access.
In terms of security, there's two different kinds of security-- military and energy security-- it's not news to anybody that we actually put on the table the idea of Keystone XL and actually the government of Canada financing it, which would be a million barrels of oil, up to a million barrels of oil a day.
I personally find that a very worrisome thing if we were to do it. We're doubling down on the United States. They've taken $70 billion out of the Canadian economy in wealth transfer because of the deep discount that they're putting on Canadian oil. I don't know why we would double down on that, but that seems to be on the table.
And we're also putting on the table the Golden Dome and that we would participate in that. And I don't know if we've gotten to that level of granularity, but even the F-35s, I guess, could be discussed. So I'd say all of those things are in the mix. But the best intelligence I have is they really only got to steel and aluminum in those opening talks. Have you heard differently, Rona?
RONA AMBROSE: No, I think you've hit all of the points.
PETER HAYNES: So, Rona, that Premier Ford-- Frank was talking about aluminum, steel. These are issues that are really impacting Ontario. So Premier Ford has said many times that a bad deal would be worse than no trade deal at all. And he's been unapologetic about the advertisement that played during the World Series or playing, frankly, hardball with the US specifically.
Meanwhile, other premiers, such as Alberta's Daniel Smith, have argued for a more conciliatory tone, with Trump playing to his ego and his personality. Where you stand is often where you sit in terms of positioning. And as I mentioned, Premier Ford's in the province suffering the most. How do you think Prime Minister Carney is doing managing the internal conflicts within Canada regionally against his relationship with the president? And are you fitting into the camp that CUSMA will be ripped up completely?
RONA AMBROSE: No, I don't think CUSMA will be ripped up because it is clearly of benefit to all of the three countries that are signatories. I do believe-- I'm actually optimistic-- that we will get a deal done. It's in all of the three countries' best interests.
Frank and I were involved in the first round of negotiations a few years ago, in Trump 1.0. And now, Trump 2.0, he's emboldened. He knows what he left on the table. He knows exactly what he wants in this round. Our negotiators know what he wants. It's autos. It's dairy.
And we have things that he wants-- critical minerals, energy. And when you look at the interoperability of our energy sector with the US or auto sector with the US, our armed forces with the US, people use the terminology, you can't unscramble this egg. You really can't. And so this too will pass.
And yes, it's a tough negotiation. And yes, we're going to have to put things on the table that are politically difficult, like the dairy sector, like autos. I mean, I think-- but I'll get back to your question. So I'm optimistic. We will get there. It's going to hurt a bit.
But on the point about the Golden Dome and critical minerals, there are things that they want from us. And the Golden Dome offers us a huge opportunity for our industrial base around the security companies, security and defense companies, in Canada to participate. I was just at something with someone from the Space Force and other areas of the security establishment in the US, and they talked about what a great opportunity it would be.
And the quid pro quo there is, if Canada participates in the Golden Dome, we would get access to procurement around what will be a massive trillion-dollar expenditure around security and defense. So there's a benefit to us there.
We know Trump appreciates energy. I will just say one thing about Keystone. I agree, doubling down on a discount on our energy to the US is not the right thing. But politically, it's helpful to Prime Minister Carney because getting a pipeline off the West Coast is now becoming very politically difficult. As of yesterday, the premier of British Columbia stood on a podium with several chiefs, Indigenous chiefs, and signed a declaration that means absolutely nothing, but it's politically symbolic, saying we will never support a pipeline off the West Coast.
Of course, we know the Supreme Court has already ruled on this. Constitutionally, we can build a pipeline to the West Coast, and the prime minister can support that. But it's obviously already very politically difficult for him. So to get a pipeline built, obviously, Keystone, well, it's already approved on this side of the border, all the regulatory issues have been dealt with. Obviously much easier for Prime Minister Carney to support Keystone if he doesn't think he can get a pipeline built.
Frank made the point about, look, we have CUSMA. It's working. Those companies that are CUSMA compliant and are exporting are still tariff-free. If we saw what some people contemplate as an additional 5% across the board tariff, companies that are within the CUSMA bucket feel that they could absorb that. It's just the uncertainty that never seems to end.
And so we do have to get to the end of these negotiations. I would say, interestingly, Mexico's strategy has been very different than Canada's. So they have not suffered, I think, the same brunt in the negotiations as Canada has. And they've also, interestingly, been very supportive of their many sectors-- any sectors that are exporting to become CUSMA compliant.
So they're saying to companies, let's get you under the umbrella of CUSMA. Because they believe, and I believe too, that it will survive, and we will continue to have at least, if not tariff-free, a much lower tariff than other countries experience. We haven't done that so much.
And there's still a lot of companies that export in Canada that aren't under the CUSMA umbrella. They're not certified to be CUSMA compliant. So that's another way the government can support, I think, a number of export-reliant companies to get under that umbrella.
Back to Doug Ford, not the best timing for his ad. But I'll say this. I mean, it obviously hurt the prime minister-- we could see that, because we handed a little bit of leverage-- whatever the intention, leverage to the president to be able to say, this ad ticked me off.
But look, Doug Ford is bleeding auto jobs. I mean, he is going to be the person that's the worst hit in these negotiations. So he has an electoral mandate, he's worried about his province, and he felt like this ad was sticking up for his own people. We live in a--
FRANK MCKENNA: It was accurate.
RONA AMBROSE: It was-- yeah. It was accurate. Actually, my former staffer did the ad. And he's a really smart guy. I mean, I didn't know it was happening. I'm just saying, he's very smart, and it was a good ad. But I'll just say this. The prime minister is the key person on the trade negotiations. So I would just-- I would encourage all premiers to just get on his team and let him lead these negotiations.
They're tough negotiations. And we've got premiers kind of speaking out of turn and running ads in the United States. If the president ran an ad in Canada like that, that split the Liberal Party somehow by saying, look, Prime Minister Carney is running all these deficits-- look at Jean Chrétien, he balanced the budget, this is not the party of-- that sort of equivalent, we would be furious. Furious. I think premiers need to get behind the prime minister and let him lead these negotiations.
PETER HAYNES: Speaking of the premiers, Frank, there have been calls of late for a first minister, first premiers meeting. We were seeing that happen a lot when the trade negotiations started-- or sorry, when the trade war started, all the premiers getting together with the prime minister. And now they're feeling like they're not in the loop. Do you feel that there's a justification to their criticism, that they haven't had an ear in the negotiations lately?
FRANK MCKENNA: Well, there's an old saying, where there's smoke, there's fire. But President Kennedy once said, sometimes where there's smoke, there's a smoke maker. And, in this case, I think it's partially true. But the premiers, I think, are pretty knowledgeable about what's going on.
The problem is, right now, there's not a lot going on. I agree that they were more in the loop maybe a few months ago. But Prime Minister Carney, because he's trying to execute this what I almost call "turning of the Queen Mary," he's done 11 trips to 16 countries in the last couple of months trying to restore trade corridors with Malaysia, with Singapore, with China, with India, and with Europe.
Met with President Xi of China, which was a really important meeting, and it's already leading to some good things. Been working with Modi, I think, in a very constructive way. So he's trying to pivot. And so that work has to involve him. You can't send a deputy minister to go see President Xi. You have to be the person. Although it was interesting, I thought, that our global affairs minister, Anita Anand, actually had a one-on-one with Modi.
RONA AMBROSE: Yeah.
FRANK MCKENNA: Isn't that unusual?
RONA AMBROSE: That's a huge change in the India-Canada relationship.
FRANK MCKENNA: I asked her how that happened, because we just happened to be chatting last night, and she said that it goes back to familial relationships.
RONA AMBROSE: Oh, great.
FRANK MCKENNA: Yeah. So you can't ask for a better situation than when a minister gets a one-on-one with somebody like Modi. So I think the bottom line is that the prime minister has become preoccupied with the international travel, preparing for the opening of the House, the budget, and so on. I think he's got some catch-up work to do.
I would say this as well, that it may be a mistake that Dominic LeBlanc is the minister responsible for the US-Canada file. And so he's been in Washington, and he's working on that every day. But he's also the minister responsible for interprovincial relations, and he is the best person in the government on that.
The premiers all like and respect him. He has a good relationship. He just hasn't had time to do the work that he should be doing. So I think the prime minister needs to make a point of reconnecting with the premiers. It could be virtual. I saw where he met with Lantz this week, and he's been talking with Eby on the forestry file, and he talks to Ford it seems like every week.
But he needs to get the premiers in concert, which I think would be a very positive thing. I don't think this is a front-burner issue. I think it's just simmering a little. I would say one thing, and I said this to the minister when we talked last night, and I've been saying it for a while now, one of the things that I think we should do-- and we should pick the biggest prize of all, which I think is India-- we should have a Team Canada mission go to India.
PETER HAYNES: Including industry representatives, not just the government?
RONA AMBROSE: Absolutely.
FRANK MCKENNA: Exactly. When we did the Team Canada missions, there were a couple of advantages. When you go with a delegation that large, you always get to see the president or the prime minister, and usually others, the governors and vice premiers and everybody as well. And when we went over, we had a plane that would have, I think, as many as 300 business people on board, plus all the premiers.
So I guess what I'm saying is, if you could do it, a large delegation like that, you bring corporate Canada in, but you also have all the premiers stuck for several days with the prime minister. And the amount of bonding and collegiality that comes out of that is really quite incredible.
The trade openings that come out of it is substantial, but the internal morale-building and building of chemistry is quite substantial as well. And I think we're-- again, I may be pushing the limits of what I can say, but I think that we're headed in that direction, that kind of a mission. There's a lot of groundwork that's had to be done, a lot of repair work in that relationship, but it's being done quite nicely at this stage.
RONA AMBROSE: Yeah. But to your point, I mean, it's important for the prime minister to meet with President Xi. And obviously, China's a huge market. But let's not forget that we have a very controversial relationship with China. When you look at things like their treatment of Chinese nationals in Canada, having their own police stations, I mean, I could go on and on, the two Michaels, having Canadian nationals killed in their justice system.
So it's controversial. So your point about India being the big prize, I mean, the government-- and I was on their panel, their strategy to pivot from China to other parts of Asia, and India was really the big prize. We do so little trade with India, and yet we have so many common-- yes, we've had some issues with India, but those are being, I think, solved.
But beyond that, we have commonalities. They're a federation, they're a democracy, and they are a booming economy. And so I just think anything we can do to expand trade with India is the right thing to do.
PETER HAYNES: So, Rona, let's just talk about the US right now. And you have some friends in the Republican Party. But starting with the fact that several of-- or there's starting to be some cracks in the party with respect to President Trump's tariff plans, I'm thinking about Rand Paul in Kentucky and some of the moderates in Maine and Alaska, Susan Collins and Lisa Murkowski, respectively. In your conversations with Republican insiders-- I know you're friends with Chris Christie, who's mentioned that in the past-- what is the view inside the party on Trump with tariffs?
RONA AMBROSE: I mean, I think he still has a lot of support. The Republican Party is starting to bleed support. But Trump has support. But he's not going to run again. I don't believe that. I know some people talk about it. I don't think it'll happen. He's going to be over 80.
And there are people coming up around him and behind him that want his job, and they're pushing hard. And they're already really pushing a succession with JD Vance. You can see it happening. What do they do without Trump? If he's the guy that's popular but the Republican Party is starting to erode their popularity, they have to think about, what about our policies? Because how are they going to replace him?
And that's going to be problematic. People like Murkowski and Collins and Rand Paul, they're outliers, so they do say things now and again. I think the canary in the coal mine for me is Marjorie Taylor Greene, who is the mother of MAGA.
FRANK MCKENNA: And her kids are going to have to pay more for their Medicare.
RONA AMBROSE: She's talking about Medicare. She's talking about affordability, grocery prices. And that is-- I mean, she has slowly, methodically, but very consistently now been out talking about, we don't have the right policies. Our people, MAGA people, the working class that supported us, are hurting.
And these lavish parties and all of the money that's being spent in certain sectors. And she doesn't talk about the insider dealing, but she alludes to it, about how wealthy Trump's family is becoming while their dad is in office.
So all that to say-- and she is the mother of MAGA. And so I think she's reflecting a bit of what the grassroots is feeling. We haven't seen it in the erosion of Trump popularity. We've definitely seen the erosion of popularity of the Republican Party. And the elections that were held yesterday showed us a bit of that, but definitely no support from young people at all.
FRANK MCKENNA: Are you going to talk about yesterday's elections? Because I would--
PETER HAYNES: Yeah, we got that one on the agenda.
FRANK MCKENNA: Because I wouldn't mind gravitating to that.
PETER HAYNES: Yeah. OK. Just before we do that, Frank, I want to get your take on the Supreme Court yesterday, which was very interesting. On our last podcast, both you and Chris Krueger had suggested that Trump was going to find a way to prevail at the Supreme Court on EPA, given the 6-3 leaning. Yet, you had Chief Justice Roberts yesterday-- I'm going to use the words that he used.
He said, Chief Roberts focused on a core element of the plaintiff's argument, and that is that tariffs were, quote, "an imposition of taxes"-- taxes-- "on Americans, and that has always been the core power of Congress." Are you changing your view yet on whether or not Trump's going to find a way to win?
FRANK MCKENNA: Yes, I am.
PETER HAYNES: Wow.
FRANK MCKENNA: I think he lost the case yesterday.
RONA AMBROSE: Yeah.
FRANK MCKENNA: And the three so-called liberal judges are clearly going to vote against his tariffs. But it was very interesting to watch the questioning of Chief Judge Roberts and Gorsuch, who is a very conservative judge, and Barrett. And they repeatedly used the word which Republicans absolutely cringe at. I mean, this is kryptonite to them. Taxes.
RONA AMBROSE: Taxes.
FRANK MCKENNA: This is a tax.
RONA AMBROSE: Yeah.
FRANK MCKENNA: This is what the Wall Street Journal has been saying now since this all started. This is what Doug Ford has been saying in his ads, that tariffs are a tax. And what Trump has done is inflicted on the United States the biggest tax increase in 50 years with his tariff walls.
So I think, not only will he lose the case, but I think, increasingly, seeping into the mind of the electorate and, in fact, the Republican Party, will be the idea that tariffs are really taxes. So that's an issue for him. Having said that, he will end up not losing the war. He will immediately remuster and find other ways of introducing those tariffs.
The tariffs that are at issue in the Supreme Court are so-called IEEPA tariffs, which require an emergency declaration by the president. This is an emergency. I have to have this weapon. Well, it's been going on for a hundred You'd say, why is it an emergency this week? But that's what he's saying. I have to have this weapon.
Tariffs are not spelled out. And under this so-called large questions doctrine, the Supreme Court says, you can't interpret words in that way. So I think they'll kick it out on that. What we don't know is whether or not they'll force disgorgement of all the tariffs that have been collected, which is $100 billion. And that would really hurt him if that were to happen. And the court may find a way to say, you're a bad boy, but it only starts now.
RONA AMBROSE: Yeah.
FRANK MCKENNA: And you're not going to have to disgorge. That's possible. So there are things we don't know. But he's got other tools. Section 232 is the tool that he's using on Canada almost invariably. Those are the so-called sectoral tariffs on steel, aluminum, autos, et cetera. He can use 238, 201. He's got all kinds of other tools.
In fact, if this case is won, the smallest winner out of all the countries in the plan is going to be Canada, because we only have one IEEPA tariff, which is the so-called fentanyl tariff, that really doesn't catch many people. So if we win, that's what we would win.
But it would be a symbolic victory. And I'll just say this and stop because I've got self-interest here. The Section 232 tariffs hit steel, aluminum, and so on. But as of a week ago, they also include furniture and kitchen cabinets. And my family happen to be in the kitchen cabinet manufacturing business.
So my son's been all over the news. I watch him on CNN and CTV and everything. I just say, Jesus, you're going to ruin the family name. But he was asked on CNN, why is Trump-- because this is a national security section of the Trade Act-- why is Trump attacking kitchen cabinets?
And he said, I think he woke up in the middle of the night and dreamed that a kitchen cabinet was chasing him down the street, and it was a national security issue. All of that is humorous, but it goes to say that if IEEPA has been ruled ultra vires by the court, if I were litigating this, I would litigate the Section 232 tariffs.
And I think you could make a case, if you're an American, that steel is essential to the country's national defense, maybe aluminum, probably aluminum. I don't know how you say that about cars, and I definitely don't know how you say it about furniture or kitchen cabinets. So it may be that somebody could attack this and say, you are abusing the statute, and you need to reverse those tariffs as well. So I live in hope that once the litigation starts, it'll snowball.
PETER HAYNES: So let's talk, Rona, about the Tuesday off-cycle votes that you referred to. We had a vote for mayor in New York. We had governors in Virginia and New Jersey, two females who won there. That was great. They all favored the Democrats. Republican pundits, and I guess Trump himself, on social media said that the read-through here is irrelevant because my name wasn't on the ballot, Trump. Do you agree with that?
RONA AMBROSE: I mean, in some of those areas, the Republicans have not historically won. But if you dig deeper into the numbers and you look at the results, they did worse than they've ever done. And so that's a signal to the party.
And yeah, he wasn't on the ballot. But still, he carries the brand for the Republicans. So it's hard to argue that it doesn't reflect on him. In New York, the Republicans didn't put up a good candidate. So, in the end, they had to come out and support the Democrat. And those two guys split the vote, and so the other guy won.
And he was popular, especially amongst young people who feel disenfranchised and have now embraced a Marxist message, which is hard to imagine in a city like New York. But it is what it is. And so the party has to, I think, regroup and think about why they did so poorly, even if they weren't expected to win in most of those areas.
And I think it's around domestic issues-- not necessarily relationships with other countries or foreign policy, but it's affordability. It's starting to hit people in the pocketbook. They're not seeing their wage-- at a certain income level, they're not seeing their wages increase. They're seeing affordability issues. They're worried about health care.
I wrote this down because I noted today that October US job cuts are highest for the month since October 2003. So US-based employers cut 153,000 jobs in October. So things are starting to pinch. And you can't blame all of that on, well, we've invested too much in AI, so we have to cut back. A lot of US-based employers are not making huge investments in AI, and they're still cutting jobs.
So I think the US economy is starting to weaken a bit. The support for the president is starting to weaken a bit, particularly the Republican Party. And so with midterms, I think they have to really think hard about what that means for a successor and what it means for how they position their domestic policies.
On the issue of the tariffs and Supreme Court, so much fun to listen to these arguments. I think that-- isn't it? It's so interesting. Because I think Trump will forever regret appointing intellectually principled people, because they are acting like that on the Supreme Court. And good for them.
So I do think that that case will be won. But I think a lot of people that are following this closely-- and you said this also-- he has other levers to use. It could take a bit of time for him to use them, but I don't think we can think that we're off the hook here.
PETER HAYNES: One thing Frank said earlier is those other levers are a little more rigid, i.e., the sections.
FRANK MCKENNA: They've got process involved. You need to have an investigation. Some of them are time-limited.
RONA AMBROSE: They'll take a little more time, but he definitely has other levers to use.
FRANK MCKENNA: I just want to spin off a little bit, because I think the results were actually extremely important for Democrats. The Democrat Party is just flat on its back and desperately needed a bit of oxygen. But these are two superb candidates.
One of them is a Navy helicopter pilot, the other one is a CIA agent, and they both ended up winning. The governor in Virginia had the highest margin of victory in, I don't know, 20 or 30 years. And 13 more state reps were carried along with her to create a supermajority there. And similarly, in New Jersey, they both were expected they'd probably win, but they really exceeded expectation. And these women ran on bread-and-butter issues.
RONA AMBROSE: And that needs to be the future of the Democratic Party, not Mamdani.
FRANK MCKENNA: And not--
RONA AMBROSE: And the Republicans will make it about him--
FRANK MCKENNA: Well--
RONA AMBROSE: --and his message.
FRANK MCKENNA: People would say, the only Republican win last night was Mamdani.
RONA AMBROSE: Yeah. I mean, that's what the Democrats are thinking about. How do we position these type of candidates, the bread and butter, the Joe Biden-type candidates--
PETER HAYNES: Do you not anticipate--
RONA AMBROSE: --for future?
PETER HAYNES: --Mamdani moving back to the middle? We already had guys like Bill Ackman who have come out and said, I'll be on your council. Whatever I can do to help. Jamie Dimon, the same thing. I know he's principled in this Marxist view you referred to. Do you guys not think he'll have to manage to the middle here?
RONA AMBROSE: I mean, he's pretty-- I mean, his ideology has not wavered. Not necessarily. But look, Jamie Dimon, Bill Ackman, that's exactly what you need to do as a business leader in your community. It doesn't matter who wins. You put up your hand and you help. And you say, where can I help?
You can also criticize. You can also offer other opposing ideas. And you can say, you should have done this, or I would do this differently. But you put up your hand and you say, I'll help because you're now the mayor. And that was the right thing to do.
I mean, it's an experiment, isn't it? It's an experiment. His ideology is very different than even a lot of Democrats.
PETER HAYNES: But it may not be practical.
RONA AMBROSE: No.
PETER HAYNES: How do you find houses for people in New York City? It's just a bit unrealistic.
RONA AMBROSE: Somebody has to pay for everything that he's talking about. And he's talking about free education, free busing system.
PETER HAYNES: The millionaires will pay for that.
RONA AMBROSE: Well, he's going to tax-- he said he'll just tax the millionaires by another 1%, which he says is not very much. But look, we know how this all works. People can move, and capital is very fluid. So we'll see. I mean, look, all that needs to happen is some things to go wrong and maybe-- look, he's going to want to stay on as mayor, and people will work with him. And hopefully, he'll find some practical solutions.
FRANK MCKENNA: John Crichton once said-- and the truest words I ever heard. He said, nothing moves as fast as a dollar bill. And it's true. People have choices. And already, Texas and Florida have put out the welcome mat. And you're seeing quite a transfer already of wealth from New York, Connecticut, Massachusetts, to Texas and to Florida.
PETER HAYNES: Frank, all I could think about as you were saying that was the Texas Stock Exchange, which wants to be the third competitor with the NYSE and NASDAQ. And this is just music to their ears, frankly, in terms--
FRANK MCKENNA: No, it is.
PETER HAYNES: --of helping the transfer of capital there. So, Frank, there was another important vote in the US that occurred on Tuesday, and that was in California, where voters approved a ballot measure that was put forward by Governor Newsom that would redraw the electoral map in California in favor of the Democrats.
Newsom's ballot measure was in response to Republican gerrymandering in Texas through the governor, and Missouri, and it will probably happen in other states in the future. Is all of this gerrymandering going to just wash out or balance out? And is there not a better system that we can come up with where we actually have proper representation at the state level?
FRANK MCKENNA: Emphatically yes to the latter. What's going on is that, traditionally, the party in power loses ground in the midterm elections. It's a natural reaction. The same way we usually lose the by-elections, if the prime minister loses by-elections that are called. It's a very natural thing.
Trump knows that. And he also knows that, in the House, they've got the slimmest minority historically, and that's 5 seats. And historically, you would expect the House to switch then. The Democrats have got a free crack at 13 seats that Kamala Harris actually won that have sitting Republican members. So he knows that. And I have to hand it to President Trump and these Republicans, when they go into a fight, they carry all the weapons. They are not backing off.
RONA AMBROSE: No.
FRANK MCKENNA: And they are-- and the Democrats, I think, sometimes don't know what hit them when they get into these battles. So he's setting out, a year and a half ahead of time, to try to rig the results. Let's put it that way. And so this gerrymandering-- Canadians wouldn't even appreciate it because we don't do it to any extent-- but it came from a governor in Massachusetts called Governor Gerry.
And he turned around and created a new electoral map in order to win more seats that looked like a salamander. And so somebody did a portmanteau and came up with the word "gerrymander," and it stuck ever since. So President Trump should be-- he should be the fire chief here instead of the chief arsonist. Let me put it that way.
So instead, he's the chief arsonist, and he says, Texas, give me the seats I need to win the midterm. So Abbott and Texas-- and Texas just turned around, as they usually do, very obsequiously, and said, how many seats do you want? And they gave him 5 seats by redistricting.
And then he's got more. Ohio's going to give him some more. North Carolina's going to give him another one. So he's now got at least 7 extra seats that he can count on, because you've moved the population around in such a way that you're probably going to win those seats.
California said, well, we can't take that lying down. We've got to fight back. The only difference there is that they actually have, by law, a Democratic process for redistricting. And the only way they could change that is with a referendum. So they actually triggered a referendum, and they won 2 to 1. It shows how dramatically polarized the United States is, that they feel like they have to countermand Texas by gerrymandering California.
So California will probably produce 5 more seats for the Democrats. The Virginia result will probably end up resulting in a gerrymandering there that will give the Democrats 2 more seats. So we probably have about 7 seats moved to the Republican side and probably at this stage 7 more moved to the Democratic side.
Now they each have more games to play-- Illinois for the Democrats, Missouri for the Republicans, and so on. The end result is a travesty of justice and democracy. So in Canada, what do we do instead? We have legal process for redistricting, which we do every 10 years, led by a judge and with a bipartisan panel. And I have never heard a serious complaint in decades about the result.
The last result, I think, gave the Conservative Party 3 or 4 additional seats. Everybody said, well, that's the math, and that's the way it works. So everybody accepts it. And that's the way it should be. Otherwise, people start doubting your democracy.
Now, there is one caveat, and I'll end on that, and that is that you never can truly predict that you'll get the result you want just because you move a lot of votes from one place to the other. It's like taking peanut butter on a slice of bread, and you're moving a lot of peanut butter over to the other side. But you might leave yourself too thin on the peanut butter and end up losing some of the seats that you've gerrymandered.
You may end up losing. You've moved a bunch of sure voters from this area to this area. You might end up losing some seats where you've moved those voters out. So you could end up getting a perverse result, especially in a year where there may be quite a significant shift in votes over to the Democratic side. So we'll see. It may not turn out exactly as Republicans hope, but it does give them their best chance.
Now, there's one other thing. They've got another card to play, and they're going to play it, and they're going to win. And that is an assault on the Voting Rights Act, which essentially was set up to make sure that African Americans in southern states would have a reasonable chance at winning an election in those states.
Supreme Court is now hearing a case that looks like they'll reverse that provision. And that'll open up, it could be dozens of seats, even, in the southern United States that the Republicans will probably end up winning. So you've got that. You've got Trump's attacks on absentee balloting, requirements of voter identification. Just a whole lot of gamesmanship going around to try to end up making sure the midterm elections don't result in a change in the House.
PETER HAYNES: We're going to finish on talking about the Canadian budget. But just before I get there, Frank, I thought where you were going to go with that was the notion that Trump was going to have the National Guard at the polling stations, protecting ICE agents who are standing there wanting to take immigrants who will be afraid to vote and won't show up.
FRANK MCKENNA: I say, very sadly, that would not surprise me. I had never thought we would see troops deployed within the United States in cities across America. So.
PETER HAYNES: So Frank, let's move on. With the time we have remaining, Frank and Rona, let's talk about the budget. Canadian budget, that is. Tuesday was a busy day here. Prime Minister Carney had his first budget. What was your first take, and was it what you expected?
FRANK MCKENNA: Well, it was what I expected. Most of it has been signaled-- the defense spending, the housing. There was a few new things, like the billion dollars for the lift-and-shift strategy, trying to take talented people out of the US. That was kind of predictable, but it was a little bit new.
I think we expected to have the accelerated depreciation for investments, capital investments. I think that's a good thing. And on average, it reduced the corporate tax rate by 2% and so on. So those were positives. I would say the overall impression-- not for me because I sort of expected this, but the overall reaction is generally negative.
I think the expectation was established too high. The budget underdelivered. So I think there's a gap in expectation and delivery, and I think that's the general consensus view. But I'll be honest with you, I haven't been happy with a budget for over 20 years. I'm a balanced-budget person. I think I'd like to see us living within our means, and we haven't done that for a long, long time. So I'd be a little disappointed there.
The fiscal anchors are a little flimsy. The deficit-to-GDP ratio has to decline, be in decline. We already have the lowest deficit-to-GDP ratio in the G7. It's got to continue to decline. And the operating budget needs to be balanced in 3 years. So they're a little loosey goosey.
But I would say-- and I'll just close on that-- I think the budget, whatever is said and everything, it's all going to be in the execution of the budget-- how quickly they can excite private sector investment, how quickly we can get housing built, how quickly we can actually pivot to a larger defense budget and spend more of that money domestically, stimulating domestic industries. So a lot of it is really going to be on the execution, I would say.
PETER HAYNES: Rona, I'm curious on your view from the West or the Western view of the budget. And also, interestingly, Prime Minister Carney's 3 votes short of a majority, and one conservative member of the caucus changed parties, announced that yesterday. So he's 2 votes short. What are your thoughts on-- there's a lot-- there are both pros and cons.
RONA AMBROSE: Yeah. I mean--
PETER HAYNES: A lot of noise on that.
RONA AMBROSE: --I'll just start by saying, the prime minister said that young people are going to have to sacrifice. And I think they will. I think, when I look at this budget, it was supposed to be a transformational budget. It's not surprising to me that every single demographic, other than Boomers, are choosing the conservative viewpoint, because they feel left behind, they feel there's no future for them, and that is real.
And this budget did not speak to young people. So when you look at the size of the debt and the deficit, there is a lot of assumptions in their numbers to even get to a place-- like Frank said, loosey goosey on the fiscal anchor, if we even really have one. So how do you stay on this track without eventually having to raise taxes?
I'll just speak, because Frank hit those notes, on the energy piece. There was some nuancing about relaxation of an emissions cap on the production of energy. Imagine if we had a production cap on automobiles. But this is what the West has to put up with.
So we have a production cap on whether or not we can make more money, create more revenue, create more jobs in the West, in the energy sector. So there's this nuance in there, we might relax the emissions cap over time, but only under these conditions. And the conditions are an increase and an acceleration of the industrial carbon tax, more investment, which will be billions and billions of investment, in carbon capture storage, and more restriction around methane emissions.
So it's not great news for the energy sector. There was this sense that, oh, OK, it looks like there might be a relaxation of the emissions cap. But when you look at what they're going to have to do to get that and where they've already come to date, it's a message that things really haven't changed.
One person in the energy sector very interestingly said, this is Trudeau's climate policy with a suit on. So there's some signaling, but it's not real. So here we are. We now are going to have an industrial carbon tax. I mean, fair point to Carney. He said, yeah, I'll get rid of the consumer carbon tax because it's not politically popular, even though I think it's fantastic policy, but I will increase the industrial carbon tax.
So the next fight will be about this because it's anti-competitive. No other country has it. The Americans don't have it. They're deregulating. We're not. And we will have this layer of industrial carbon tax hitting every one of our sectors.
So when I look at the budget, I don't see us working on competitiveness, I didn't see the tax reform that we need, and I didn't see any signal to young people. When you think about putting that much money into building homes, but the government will be in charge of building homes, just the idea that government is the answer to so much in this country, to me, is just philosophically wrong.
And this budget was exactly the same message that we've heard for the last 10 years, that the government is the answer to everything, instead of drastically cutting regulations, drastically cutting taxes, working our competitiveness, especially with the United States, and telling people that you'll be able to stay here, find a job, create a company.
And I'm talking to people all the time that are saying, I'm encouraging my kids to go to the US. And so was there a signal in this budget to young people that we're creating that level of competitiveness so they can stay here, start a business? No, it wasn't. So I saw it as a failure, and it definitely was not a generational, transformational budget.
PETER HAYNES: Rona, you were the leader of the opposition in Ottawa. And I'm curious-- I don't want to overplay the terminology, but for all intents and purposes, we consider ourselves at war right now. It's a trade war with the United States. And the country showed a lot of patriotism in coming together, probably more than we've ever seen in our lifetimes.
But life goes on in the democratic society. And there's a role to play for the opposition political leader. When you were in that position, as former leader of the opposition, what advice would you give Pierre Poilievre in terms of striking the proper balance between keeping the incumbent honest and making your honest views with respect to, say, something like the budget, without being so critical that you might weaken Canada at a time when it needs to stay together?
RONA AMBROSE: Yeah, absolutely. And look, I'll just say this. I think it's really important to call out this rhetoric that if you are criticizing the government, that you're not Canadian, that you're un-Canadian, and you're not on the Canadian team. We have a functioning democracy, and we should be able to be critical of any parts of the government's agenda.
Now, when it comes to trade specifically, I think we have to be supportive of the prime minister because he is the interlocutor. And Pierre has made a couple of comments, but really, he understands that that's an important role for him to play. But on the domestic agenda, absolutely. The leader of the opposition should represent the people that gave him an electoral mandate.
And that is many, many millions of Canadians that believe in smaller government, lower taxes, less regulation, and that's what he needs to represent. And so for people that say he shouldn't be critical at this time in history, he needs to because he believes that there is a better way to govern. And that's his role.
It's tough being the leader of the opposition because you only have so many levers. Parliament is a big part of that. And in the last decade, the Liberals have eroded the tools of parliament by doing something when they were in a majority. They passed an order in Parliament where the prime minister only shows up to question period now once a week. It used to be every day.
And so you could hold the prime minister to account and the cabinet ministers to account. Now it's one day a week. And Trudeau started that. And Prime Minister Carney, you're supposed to come for one day a week and answer all the questions because you're only there one day a week. He's not answering all the questions. He'll answer a couple and then sit down, and then someone else takes the rest.
So look, Parliament is the place where the opposition holds the government to account. So it's important for the prime minister to show up and answer those questions on behalf of the leader that represents millions and millions of people with a different viewpoint.
In terms of whether this budget will pass, it will pass. The NDP has no money, and they have no leader. They're in the middle of a leadership race. So they can go on TV and hum and haw. We might support it. We might not. They will absolutely support it, whether they abstain or vote in favor.
I do think that once the NDP has a leader, they are-- as weak as they've ever been since I've ever been associated with politics, they will be able to gain more seats in the next election. So I do think the NDP will work with the other parties and bring down this government next year.
And I can't predict at this point who will win the election, but I do think that the bloc has made it very clear that they want an election. The Conservatives will go if it happens, and we will oppose the government. And the Liberals want an election. There is no doubt. They want one as soon as possible.
If they could run an election on this budget, they would go, because the NDP is weak. While the Conservatives are strong, Pierre's popularity has weakened. And Carney still is on a honeymoon. And he hasn't worked with any of the opposition parties on the budget, which is highly unusual.
He has said, this is my budget, and I'll go to an election on it if I have to. I don't think he'll get it-- he'll get the election he wants. But that is where we're at. So there's a lot of posturing happening in Parliament right now.
PETER HAYNES: Frank?
RONA AMBROSE: Well, no, I was just going to say a funny little fact. If the new leader of the NDP is who I think it will be--
PETER HAYNES: Who's that? Not going to say?
FRANK MCKENNA: Yeah. No.
RONA AMBROSE: Heather Stevenson from Edmonton?
FRANK MCKENNA: Yeah. You'll have--
PETER HAYNES: What's her name?
RONA AMBROSE: Heather Stevenson. Is that-- McPherson.
FRANK MCKENNA: McPherson.
RONA AMBROSE: Sorry. McPherson,
FRANK MCKENNA: Heather McPherson will have all three party leaders from Alberta. And the rest of the country is going to say, this just isn't fair.
RONA AMBROSE: Right. That's right. The West wants in.
PETER HAYNES: I want to see if there's any questions from the audience.
FRANK MCKENNA: We're going to say, we want in.
RONA AMBROSE: You want-- that's right.
PETER HAYNES: We're going to start. Scott, there's been a question that's emailed to you. So is there microphones here? I just want to spend a couple of minutes on questions.
RONA AMBROSE: Yeah. I mean, if it's either Heather or it's Avi Lewis, they're very strong left-wing--
FRANK MCKENNA: Definitely.
RONA AMBROSE: Left-wing ideological leaders.
PETER HAYNES: Go ahead, Scott.
SCOTT: All right. The question was, do you give any credit to the idea that both President Xi and Trump might be secretly working together on tariffs, since both economies need to rebalance their trade away from each other, and that it would be convenient to blame each other for economic pain while they pivot away and move towards more consumption-based economies?
RONA AMBROSE: No, the anti-China sentiment is very real in the Trump administration around security issues.
FRANK MCKENNA: I wished Trump would acknowledge that Mexico and Canada have a major role in trying to deal with China. We should be inside the tent working together. Mexico is a bit of a problem. They've became a transshipment spot for cheap Chinese manufacturing going into the United States.
And that's not been true for Canada. It's probably slightly true maybe in terms of some steel products and so on. But we should really be working together. Canada's got, I don't know-- 90% of the critical minerals in the world we have in Canada. We can continue to be a massive source of wealth for the United States, with raw materials and so on, for their factories and so on. And Mexico as well. So hopefully, we'll get, through CUSMA, back together again.
RONA AMBROSE: Yeah.
FRANK MCKENNA: There's a real chance, by the way, that we might end up with a CUSMA, but it'll be a bilateral Canada-US, Mexico-US. That's what Trump likes to-- he likes to divide and conquer. I hope we don't end up in that spot, but there's a chance that could end up happening as well.
PETER HAYNES: Is there one more question from the audience? Yep, back here.
AUDIENCE: Rona, you said that you're forecasting or expecting that there will not be an election in the near term but possibly a year from now, two years from now. What is your view on whether Pierre Poilievre will be actually the leader of the Conservative Party at that time?
RONA AMBROSE: I think he will be. He still has all the caucus support. I know somebody defected to the Liberals, but that was a local political decision. And I'm not concerned about any more of that happening. Having said that, he has a leadership review. I think he'll get a high number.
We won't really know until we get on the cusp of an election. We really won't know. Up to this point, he's been able to have a lot of support from the grassroots, a lot of support from the party. The party is still polling in high 30s. And every demographic, other than the Boomers, are supporting the Conservative Party. On his leadership specifically, we really won't know until closer to an election because so many things can happen in politics. But I foresee that he'll still be the leader.
PETER HAYNES: OK. I thank you, Rona and Frank, for making time for us, as always. I know how much the audience appreciates that. Thanks again.
RONA AMBROSE: Absolutely.
FRANK MCKENNA: Glad to be here.
[APPLAUSE]
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.