An Early Look at Midterm Elections

Frank McKenna:
This is just an appalling case of blackmail and we should not capitulate to it. We should just wait it out if necessary.
Peter Haynes:
Welcome to episode 79 of Geopolitics, a monthly TD Securities podcast. My name is Peter Haynes and I'm the host of this podcast, where I get to speak to my colleague, the honorable Frank McKenna, about global geopolitical issues. Frank, we are team minus four and a half months from midterm elections in the United States. And to say the November 2026 election cycle is important is an understatement. As such, I thought it made sense to invite our good friend and colleague, Chris Krueger, from TD's Washington Research Group to this month's discussion. Chris, thanks for joining us today. And also, congratulations on your appointment as global head of macro research for TD Securities.
Chris Krueger:
Great to be with you both. I hope I make it back for the 100s.
Peter Haynes:
Yeah, absolutely. We'll have you on before then. I'm sure we'll have a lot more to talk about and dive in. But just before we get to the US politics side, I want to talk about a couple global matters that are dripping wet right now. First of all, the Iran peace agreement and the news as we tape Monday morning, that UK Prime Minister Keir Starmer announced his resignation. So, Frank, I'm going to start with you on the Iranian peace deal that was announced a few days ago. And I am literally going to ask you the same question I did last month, when there were just rumors of a deal. What is different between the terms of this peace agreement negotiated by President Trump and the one negotiated with Iran that took over 18 months and was signed by President Obama in 2015?
Frank McKenna:
Well, you're asking a question I think that's right at the heart of a dilemma for President Trump and government of the United States. And that is, how do you characterize the deal today as a better deal after several months of warfare? As you know, Trump said the Obama deal is a road to a nuclear weapon and ours is a wall against a nuclear weapon. And of course, all of the rhetoric that he's spinning is around that objective. So, let's dive into it very quickly. The 2015 deal took 15 months to negotiate. It had 159 pages in it. A lot of it very technical text around the nuclear proliferation issue. The Trump deal is several months of warfare. And at the end result, which cost about a billion dollars a day, but he's got 14 paragraph agreement, an MOU, which is essentially an agreement to get an agreement. So, that is the top level difference.
Secondly, in terms of inclusivity, the Obama agreement included all of Europe, China, and Russia. The Trump agreement is inclusive only on that the neighborhood all ended up becoming involved because they were bombed by Iran. The UAE, Saudi Arabia, all of these countries. And of course, it was a massive impact on India, which were suffering fuel shortages in Russia, which ended up being enriched because of the price of oil, Ukraine, et cetera, et cetera. So, we've got all of those differences. Then in terms of the major issues, ballistic missiles, neither agreement will end up reducing ballistic missiles. In fact, Trump has said it's a tough neighborhood. And of course Iran, will need missiles to protect itself. In terms of regime change, there was no regime change. In terms of the Strait of Hormuz, that's the big difference. Trump did get the Strait of Hormuz opened.
Unfortunately, he's the one who got it closed. So, it's hard for him to claim much of an improvement over the Obama agreement in that respect. In terms of nuclear, both agreements indicate no nuclear weapons will be built. Iran made that agreement back in 2015, is making that agreement again. In terms of enrichment, the 2015 agreement capped it at 3.67% purity for 15 years, which is below the 60% purity needed for a weapon. The Trump deal we don't know, because that's to be negotiated over the next 60 days. And then the big one, of course, again, in terms of reparations, Obama agreed to give $1.7 billion to Iran, which was an old arbitration claim that they settled. And in terms of Trump, he has basically signed onto a $300 billion reconciliation fund, which will be funded from various sources, including many of the Middle Eastern neighbors.
And then finally, in terms of sanctions relief, both agreements would end up giving Iran sanctions relief in exchange for some of these other concessions. So, all in all, you'd be hard-pressed to make the argument that after tearing up the agreement that Obama had put in place, you'd be hard-pressed to say that Trump at this stage has been able to get anything better after three months of war and 40 or $50 billion.
Peter Haynes:
Chris, were you surprised by the bipartisan criticism of this deal? Or is it simply a case of the Republican critics being members of the party that are not running against, such as Bill Cassidy or Thomas Massie?
Chris Krueger:
It's a great question. I mean, I think there's a lot of frustration with members on both sides of the aisle, that there aren't details on what is an incredibly complex situation. I remember when we were on before, a couple days before the State of the Union and the initial Epic Fury strikes began, and there really wasn't a mention of it in the State of the Union. So, I think that at the end of the day, it's a frustration with a lack of an endgame, details. You also have the 2015 legislation passed on a bipartisan basis that opens up any deals with Iran, specifically on their nukes to the Congress. So, the Congress is going to have to help to finance some of this. The Pentagon just put out a $78 billion figure, so a long ways to go on what is obviously a ever-changing story.
Peter Haynes:
How much of the decision to settle with Iran or to work towards the settlement do you think is being done to stop the bleeding in the opinion polls ahead of midterms?
Chris Krueger:
I mean, without question, I mean, we're seeing it in the country with gas prices, with groceries, et cetera. And again, unlike 2003 with George W. Bush, or there wasn't really a super strong and clear and consistent case for these strikes that so far have killed 13 US servicemen. So, I think it's not a particularly popular war. This is also a president who probably won 2016 because Hillary Clinton supported the Iraq war. This was or this is a president who's... one of his pillars of his message to the electorate was ending forever war, specifically those in the Middle East. And you've seen that with a number of the president's most ardent supporters leave the MAGA coalition. And by that, I'm thinking of people like Tucker Carlson and others.
Peter Haynes:
Frank, let's move on to the UK and discuss something that's been brewing, I guess, for a couple of weeks, and that is the resignation of Keir Starmer. You've been a very outspoken critic of the Brexit decision. And I think tomorrow is the 10-year anniversary of the signing or completion of the vote by the UK to separate from the European Union. So, now Starmer's decision to step down as prime minister will mean that that country has now had seven leaders in just over 10 years. What do you make of Starmer's decision to resign? And is there any way that the current political climate can ever lead to some form of stability at 10 Downing Street?
Frank McKenna:
Public opinion seems to be divided into those who believe the UK was in secular decline at any rate, and those who believe that Brexit has led to that secular decline. And I was not surprised that Starmer ended up resigning. He simply ended up running out of support within his own party. And quite frankly, his popularity within the country was at an all time low. So, here's what we're going to have, just to cut to the chase. Andy Burnham was elected yesterday in Manchester, where he'd been the mayor of Manchester. He's a Cambridge guy. He's a political lifer. His only job really has been in the political sphere. He's got a reputation as being quite charismatic and quite popular. Certainly was popular as a mayor. He's a former cabinet minister with labor, held a treasury portfolio. And you can put a fork in it. This is all over.
Starmer has resigned because he saw the writing on the wall. Wes Streeting, who's the health secretarian was the other favorite to win a leadership if it were to take place, has already come out and endorsed Andy Burnham. He's considered, for those interested, as a more business-friendly socialist. They called him a soft lefty, so to speak. He's already committed himself to not raising borrowing and not raising taxes. And he seems to be much more cut out of the cloth of Gordon Brown or Tony Blair. So, that's the situation framed up. In terms of the political environment, I repeat the UK is a hot mess. You've got separatist movements all over the country, literally Wales, Scotland, et cetera, Northern Ireland.
You've got a four-party competition going on. And the only blessing for labor is that there are three parties on the right. The restore party, which is far right. The reform party, which is a very polarizing party in the center. And then the conservative party, the traditional conservative party. And finally, the big issue is around immigration, very hot button issue in the UK. The government is trying to argue that it's managing it successfully. There's been a 42% decrease in small boat crossings just in the last six months and 400 asylum hotels have been reduced down to 190. So, they're trying to argue that they're dealing with the issue, but that still represents the polarizing issue of our present time in the UK.
Peter Haynes:
You mentioned the far right. And you have Nigel Lafarge out there. It appears as a star might be on the decline. And he was out today suggesting that the UK should... similar to, I think, Polly Evro when Carney came in, that they should be going to an election right now and looking for a new leader. If that was to happen, are you believing that Nigel Lafarge would potentially end up forming a government or is his support capped as some are suggesting?
Frank McKenna:
Yeah. I would say the problem that he's got is the three party split. And so, one party would have to emerge dramatically out of that three party split. Or the three parties would have to get together, which is ultimately what'll have to happen, as happened in Canada with reforming the Conservative Party. Nigel Lafarge is popular in some circles, but he was described in a way that people in the UK would understand, well, as having a Mermite problem. And of course, Mermite is the spread, which is quite popular in the UK. People put it on their bread, toast, and so on. And the saying would go that it's led by its base, but toxic to many others. And that's the case of Nigel Lafarge. He's popular with his base, but he's very unpopular with many others. So, he's got a ceiling that it was going to be very difficult for him to crack through.
So, I would say that even though the labor government is in a lot of trouble, Lafarge is not necessarily the recipient of that. In fact, his popularity has been in decline for the last five or six months. And any association with Trump, which he used to trumpet, is now a huge negative forum as it is all across Europe with the right wing parties.
Peter Haynes:
That's a great segue to the next question I have for Chris. But I believe just to tie out on Britain, given that it looks like it may be unanimous for Andy Burnham, I believe he can be prime minister as soon as the middle of July, so we'll watch that closely. So, Chris, at the G7 leaders meeting in France that occurred just a few days ago, there was a dispute between Italian Prime Minister Giorgia Meloni and President Trump, over Trump's claim to an Italian news outlet that Meloni "begged for a photo with him." Meloni said Trump's claim was entirely made up. And it has become a petty diplomatic dispute between the two countries, yet it points to a trend amongst global leaders to stand up rather than bend knee to the president. How do you expect Americans to react to global leaders criticizing President Trump's behavior? Will they stand together in defense or will they pile on? And what impact will the midterms have on relations with other G7 and global countries that used to be partners of the United States?
Chris Krueger:
I think there's a tremendous frustration within the White House with Europe over the past 110 days, with the Iran strikes, with flyover, et cetera. Our concern is that this could continue down a pretty negative route. You do have the NATO Summit in Turkey in a couple weeks. President Trump has said he will be attending that. But I think the scar tissue I think is going to carry over for a while with Secretaries Hegseth, Rubio, President Trump, Vice President Vance. I mean, every country has to weigh their domestic calculus differently. For Prime Minister Carney, very different than President Sheinbaum in Mexico, who recently has tacked more towards a sort of Carney elbows up type posture with President Trump around the USMCA.
But then you also have what happened in Columbia over the weekend. You have a very pro-Trump candidate who was endorsed by President Trump and looks like has won that election in Columbia. So, every country is different and every country has to weigh their domestic calculus in their own language and in their own customs.
Frank McKenna:
Peter, I'd just weigh in on this one and say, from the outside, it looks to me a little bit like an own net goal, to use a popular soccer analogy. Meloni was one of Trump's best friends in Europe, a steadfast ally. And leave that aside, why a world leader would gratuitously slag another leader, I just don't know. There's no upside for Trump in saying that Meloni begged for a picture and a lot of downside. And she has no other choice but to fight back for the pride of Italy and her own pride. So, I just asked the rhetorical question, why do it? You're the leader of the biggest, most powerful country in the world. Why would you end up gratuitously insulting an ally? I don't get it.
Peter Haynes:
It makes for difficult cross-border relations, I'm sure. And Frank, we talked about this last month, that Canadians are going to have to be prepared for some slagging, along with Mexicans, as we start the negotiations for CUSMA, which we'll get to a little bit later. I have a feeling there's going to be some things that are said that are going to be difficult for everyone to stomach. Chris, let's move on to the midterms, your area of expertise. I know you worked on the House floor at one time and you follow this closer than just about anyone in the world. So, let's split the discussion about the midterms into two distinct conversations, first of all with the House and then the Senate. And let's keep in mind, in terms of the audience that we're speaking to, I'll consider the audience knowledgeable on US politics but not grad school level.
So, when we start with the House, can you walk our audience through the numbers for us? And I want to know, will the widely-held view that aggressive gerrymandering that's taken place in several states have an outcome on who wins control of the House in the second half of Trump's 47 term?
Chris Krueger:
Yeah. Well, so the House is the quote, unquote, "lower body." It's 435 members of the House. They have a two-year term. Every state has at least one and then it's broken down by population. I think the average is about 750,000 individuals per House member and they're up every two years. The Senate is 100 Senators. It's a six-year term. Each state gets two. Only about a third of the Senate is up every two years. So, geography and just the fate of the map is a really big deal. And for Republicans, they got really, really lucky this time around. They are defending a relatively easy map. Now, if the Strait of Hormuz is still closed on election day, most bets are off. But when you just look at the map and how many seats are up for grabs, Democrats essentially have to, essentially, win seven of the 10 most competitive races.
And these are in places like Alaska, Texas, Iowa, Ohio, places where President Trump has won three times. I think the Senate is going to be a lot harder than maybe people think it might be right now, given where President Trump's approval numbers are, but we're still working our way through the primaries. I would keep an eye on the Michigan primary. That could be a problem for Democrats, if they get one of the more progressive candidates coming out of what is one of the bigger swing states. The House, typically, in the US, you take the census, you count everybody every 10 years. The last time the census happened was in 2020. That was obviously in the midst of COVID and there was a lot of controversy around how that occurred.
Fast-forward, states typically redistrict after the census is taken. This has happened in the past, but it is pretty unusual how many states have redistrict this time around. You also have the Supreme Court striking down one of the key civil rights laws from the 1960s, that basically mandated that you had to have minority representation in these districts. You had to have what are known as majority minority districts. The Supreme Court struck that down. So, net-net, it's about a three seat majority right now, one of the most narrow majorities in US history. Republicans are projected to pick up anywhere from six to 10 seats just on redistricting alone.
However, I'm a little dubious of that because a lot of these districts are being redrawn off the Trump 2024 numbers. And they are presuming that Trump's coalition from 2024, which was really supercharged by both Latinos and by younger men, that those individuals are going to show up for generic Republicans. And I'm just not sure that's the case. When all is said and done, we expect the House to flip to the Democrats. 19 of the last 21 midterms, the president's party in control loses seats in the House. So, you've got a huge historic tailwind, as well as a lot of enthusiasm within the Democratic Party.
President Trump's numbers with independence have also really taken a hit. And President Trump's coalition is most devoted supporters, which we mentioned earlier, people like Tucker Carlson, are now actively campaigning against him. So, all is that to say, we hope it's a clear, cut, decisive outcome, but we may be in recounts, we may be in litigation until January.
Peter Haynes:
Okay. So, you've got the House flipping to the Democrats and the Senate, it being still less than call it 50% chance that the Democrats will be able to flip the Senate. Frank, would you agree with Chris's assessment? Do you take anything differently? And how important would it be for the Democrats to actually be successful in flipping both chambers of Congress?
Frank McKenna:
Yeah. No, I agree with Chris's assessment, that you could call it 50/50, 45/50, 55/40, the odds of the Senate flipping. It shouldn't really be in play. Chris is absolutely right. The math totally favors the Republicans, but they've fielded a couple of strong candidates in competitive seats. And there are some reasons associated with the President's popularity, which throw one or two seats into play. So, I think the Dems will pick up some ground on the Senate. Will they pick up enough to get over the line? The problem the president will have though, even if it gets close, let's say within one or two seats, the only way that'll happen is if somebody like Susan Collins is reelected. And she would be a bit of a nemesis for him because she's not always on his side.
To cut to your question, if the Senate is picked up, it's a nightmare for Trump, because it means the House has flipped and the Senate and it'll make it extremely difficult for him to get anything done. There'll be gridlock. And that's not all bad for the economy, by the way, but there'll be gridlock. The Senate has a strong role in case of treaties, so that's relevant, confirming presidential appointments, especially Supreme Court of the United States. If somebody like Alito or somebody else were to step down or leave during that period of time, it would open up a seat on the Supreme Court. Impeachment is more likely with a Senate. Committee assignments, investigations, budgets, taxes, this would be a big deal. If the Senate were to go and follow the House and change sides, it would be a big deal. It would make the president's agenda very untenable.
Peter Haynes:
So, Chris, as we look to 2028. And we think about the actual next time we're voting for president, I think a lot of the talk about a third term for Trump seems to have quieted down. But when we think of the Democratic primary nomination process, do you see any potential leaders emerging at this stage?
Chris Krueger:
I think one of the narratives from 2020 was that the Democratic nominee seemed to be headed from the Senate. You had a number of very high profile Democratic senators. This time around, I think the narrative will be the state houses, whether that's Gavin Newsom in California, Josh Shapiro in Pennsylvania, JB Pritzker in Illinois, Andy Beshear in Kentucky, Wes Moore in Maryland. You can really go down the list of a number of governors. And I mean, some of the most successful Democratic candidates have been, whether that was Governor Jimmy Carter from Georgia or Bill Clinton from Arkansas. So, the positioning has begun. Shapiro is an interesting one to watch. He's running for reelection in Pennsylvania. And if he, I think, won by a convincing margin in what is probably the most important state in the electoral college, that might have people thinking.
I would throw one other name out too, who seems to be winning the policy primary and that's Rahm Emanuel, former mayor of Chicago, most recently ambassador to Japan. He's actually been putting out a lot of new policy agenda items for Democrats to think about. So, I would put him as winning the policy primary. I think it's still very much TBD on the eventual nominee, though.
Peter Haynes:
When does that process start to really shape? Obviously, a lot of people that are out there floating. Gavin Newsom's had his ongoing battles with President Trump and has made a lot of comments. When will we get a sense of who is going to stand up on stage and try and win the nomination?
Chris Krueger:
Oh, I think we're already there. I think we've been there for quite a while. You've already seen prominent figures, Gretchen Whitmer in Michigan, saying they wouldn't be running. So, I think we're there. And remember too, in the US, it's not a snap election, even though Harris v. Trump was basically a 100-day snap election. But I mean, the primaries really start the January of '28. So, ballots start being cast in about a year and a half.
Peter Haynes:
Yeah. The constant election cycle that Frank talks about a lot in the United States. So, Frank, as you look across the aisle of who will be running for the Republicans, who do you favor between Marco Rubio and J.D. Vance for the 2028 Republican presidential candidate? And is there any dark horse on that side of the aisle?
Frank McKenna:
Well, I think there will be dark horses. People like Ted Cruz have indicated they're interested in running. Look, it's so early on, but if I had to handicap it now, I'd say Marco Rubio is showing a little bit better. He's very surefooted, very good on his feet, slick, some people might say. But he's also associated with the overthrow of the government in Venezuela and probably will be associated with the overthrow of the government in Cuba. So, he's got a couple of arrows in his quiver, whereas J.D. Vance is being thrown a little bit to the wolves by being assigned the responsibility for the Iranian peace negotiations. And Trump has made it clear if it doesn't go well, he's at fault.
And if it's a good negotiation, that Trump takes the credit. He's been quite open about that. I also think that Vance is a little bit further associated with the MAGA wing. And if Trump ends up continuing to be very unpopular and we're seeing a significant reaction against MAGA, I think that would probably affect Vance as well. But both of them are pretty accomplished politicians, so anything is possible.
Peter Haynes:
So, Chris, on your take on the Republican nominee, do you share Frank's view that even though Vance has said publicly he was a supporter of President Trump, he was skeptical about the war and now he's the one that has to deal with the settlement between the two countries? Are you thinking that plays against Vance? And how do you handicap that race between those two candidates?
Chris Krueger:
Yeah. Look, I mean, I think those are probably candidate 1A and 1B. I looked on one of those sites this morning. Donald Trump, Jr., is number three. Tucker Carlson is number four. I might say it's Hunter Biden verse Donald Trump, Jr., for the ultimate... all the marbles. But I think what's interesting is Vance and Rubio are both very young. JD Vance I think just turned 40. Back to this idea of MAGA and America first having a fisher. I do think you will have someone from that more sort of isolationist wing. I don't know if it's Tucker, but someone like Marjorie Taylor Greene. I could see someone like Thomas Massie run. I agree with Frank that Ted Cruz is making... also very young. Josh Hawley from Missouri I think is... There's also sort of like a Mike Pence type lane of just a traditional Republican social conservative.
And I don't expect President Trump to endorse early. I think he's going to... Because once he endorses, he'll never be a lame duck, just given his force of personality. But I think this is the season finale of The Apprentice and I think it'll be must watch TV.
Peter Haynes:
Yep. Someone's going to get fired for sure. Moving on to an emerging dispute between Canada and the United States, as we narrow in on our relationship between the two countries. There's a new bridge that was built between Detroit and Windsor, and it's known as the Gordie Howe Bridge. Last week, the opening of this new connection point for goods and services to cross between the two countries was delayed. Frank, can you please update our listeners on what is actually happening with this dispute? And when will we start to see commerce flow through this new artery?
Frank McKenna:
This is a bridge desperately needed. There's more business that will be going across that bridge than the United States does with the entire country of Japan. It's a critical connection. Work started on trying to get this bridge in place back when I was ambassador in Washington. It's now got a longer gestation period than an entire herd of elephants. But it finally ended up going through all of the political machinations and construction. And it's built and it's ready to open. So, what's the problem now? Well, to start with, during the negotiations, United States showed very little inclination to be responsible for the bridge in any way. So, Canada ended up taking the bridge on its own balance sheet. We paid for the bridge completely. And we've agreed with the United States that we would be repaid in tolls, and so that will happen. In exchange, we will turn around and give half the ownership of the bridge to the State of Michigan.
That's all been agreed, contractually agreed, done and dusted, bridge ready to open. But now, at the last minute, after 20 years of lobbying, the Moroun family in Detroit who have the other bridge, have tried everything. They've tried everything and I mean everything to stop this bridge being built, because they didn't want the competition. So, now just with days to go before it's supposed to open, they go to Washington, they lobbied Howard Lutnick and basically say, "Look, you've got to stop this bridge being built." And then they turn around and wrote a check for a million dollars for the ballroom. So, the connection is pretty obvious and Lutnick put his finger on the scale with Trump. Got Trump to put his finger on the scale. Trump said, "Look, that bridge is not going to open unless the United States has half of it." Unfortunately, he was poorly briefed and didn't know that he's getting half of it.
The State of Michigan's getting half of it. The US briefers to Trump had been doing a very poor job of arming him because there is no excuse that he can make. The last refuge now, the Moroun want some kind of compensation for the fact that a competitor is going to be in business. And it looks as if they're looking for some financial relief, in some way tolls or for something, that will compensate them for the loss of the business, which will happen when that bridge opens. I'm very much on the side of the mayor of Windsor, who I thought very appropriately said, "Look, if we have to wait two years for this bridge to open, we'll wait. We've waited for 20 years, but we will not end up capitulating to the United States to this blackmail, quite frankly. And if we have to wait it out, we'll wait it out."
In the meantime, the State of Detroit is totally on our side or the City of Detroit. The State of Michigan is totally on our side. It's a very competitive state in terms of the Republican Party. And I think they're not going to like the idea of sitting there day after day with a clock ticking, with a bridge ready to open, and provide relief to Detroit, and Michigan, all kept at bay because of a stubborn president and a kleptocratic buddy in the Moroun family. So, I'm speaking a little harshly, but I think I'm reflecting the views in the Detroit-Windsor area and saying that this is just an appalling case of blackmail and we should not capitulate to it. We should just wait it out if necessary, until such time as saner heads and minds prevail. And I think they will. I think the pressure is going to ultimately all come down on the US side to try to find a resolution to this.
Peter Haynes:
I don't know where to go from there. Chris, I know where I am going to go. I'm going to go into the tariff discussion here. On June 2nd, the US government launched new tariffs on just about every trading partner that it has in the world, citing forced labor practices for the justification of these new taxes. Is this simply a replacement strategy for the tariffs that were shot down by the Supreme Court? And if so, how does this impact goods that are currently subject to free trade agreements covered under CUSMA?
Chris Krueger:
Yeah. So, this is the third justification for basically the Liberation Day type tariffs. I'm sure that this third round of Section 301 tariffs, should they be applied in mid to late July, there will be litigation on this. So, the IEPA tariffs were struck down by the court. The initial replacement for that was the Section 122, the so called balance of payments tariff. That was struck down by the Court of International Trade. It has yet to make it to the Supreme Court, but if that is struck down by the court, these most recent 301s might as well. And yes, to be clear, the USMCA compliant goods retain their exemption within, but 232s are still tariffs. So, that's Canadian steel, aluminum, autos, lumber, et cetera.
One of the most recent developments within the tariff space is the refunds, which are showing up in importer bank accounts. About 20 billion in IEPA refunds plus 6% interest is in importer bank accounts. There's about another 30 billion that should go next week. IEPA totals were about $166 billion. So, you can back into what these replacements would be as well and that's real cash.
Peter Haynes:
Wow. There's a lot going on here. I'm glad to hear though that the money is flowing right now. I know there's a lot of concern. If I was an end customer and I had to pay an extra tax to get a good, is there a refund process that goes from the people receiving the refunds back to their end clients? Do you know if it's going to get to that point or is someone actually going to be a net winner in this?
Chris Krueger:
I'll tell you who the net winners are. They are the trade attorneys. It's going to be based on some of these bigger, are you willing to pay the compliance and legal costs? Does that outweigh the amount you ended up paying? Does the board believe that you have a fiduciary duty to sue? Do you want to be in the position of suing the federal government? I mean, it's a lot of questions, but the refunds, they are flowing.
Peter Haynes:
Excellent. Okay. Frank, speaking of CUSMA, USMCA, it was reported that next week Canada's trade negotiation team will begin discussions on the trilateral agreement, which comes up for renewal on July 1st. As of today, I'm looking for your current expectations of these negotiations. And how much of an impact will any midterm flip-flops in the House and, or Senate have on the CUSMA renewal?
Frank McKenna:
I think there'll be lots of twists and turns on the road to Damascus here. I do think the internal politics matter, because to the extent that affordability is an issue and tariffs are associated with affordability, it will embolden those people who are critics of tariffs. And that may help if this issue gets close to the House and the Senate. I think there's a general consensus where we're headed here. The core CUSMA arrangement or NAFTA, whatever it might be, will remain intact. The big fights will be around the so called side deals. And that will be around steel, aluminum, autos, for example, whether or not there'll be some relief from the Section 232 tariffs.
And I suspect that relief can only take the forum of tariff quotas, where there's some agreement on things like the quantum of goods that'll be sent in the course of the year. There may be some tariff associated as well. There'll certainly be restrictive rules around non-North American content. So, I think there'll be a lot of negotiation around that. In terms of the CUSMA, it will be intact. The only question is whether the United States will end up renewing it for the 16-year term as intended. Or whether it'll be a year over year, over year, over year renewable process, which would go for 10 years. I suspect President Trump would prefer that approach. And that may be where we land, which would create more uncertainty for a business. But they're living with a lot of uncertainty now, so it may not be as disruptive as we might think.
Peter Haynes:
Chris, what's the mood in Washington towards tariffs and trade these days? Is there actually a groundswell of support for reverting to pre-tariffs status quo with existing trade agreements like CUSMA or is there growing support for President Trump's tariff initiatives?
Chris Krueger:
I don't have a great answer to that one.
Peter Haynes:
Well, we'll be watching to see what the mood in Washington is like, as I'm sure, as I said earlier, there's going to be a lot of back and forth coming from the White House towards the other partners in the CUSMA renewal. And hopefully, it doesn't get too loud and back and forth here. So, Chris, thank you, by the way, very much for joining us to get us rolling here on what to expect in November and some of the other hot buttons that are happening right now. There is a lot to cover. And I know we left out several topics that we'll be digging in. Chris, we'll definitely be having you back. And just before we wrap up here, Frank, and I know you're off to another engagement right now. I was at the Rogers Center with you just a month ago. And the Jays were not really playing great baseball at that time.
Here we are a month later and we're getting a bit more healthy and we're starting to play better baseball. We're a couple of weeks away from the trade deadline. So, Frank, just before we leave, I want you to give me one move you would like to see the Jays make at the trade deadline.
Frank McKenna:
Yeah, I would say a pitcher. As you get into the dog days of summer and into the fall, you can never have enough arms. And we've got at least three, I think, really top pitchers, starting with Gausman and Sis or Trey Yesavage. But we could always use a really quality arm, either a really good bulk reliever or a really strong starting pitcher. I would say out of all of the needs we have, they would be at the top of the list.
Peter Haynes:
What I found interesting in the last few days was the fact that the Blue Jays have been changing up their defensive alignment to give better defense. And we had some problems in the corners. Both Piñango and Sanchez, I think have both struggled on their defense and cost us important situations. So, be interesting to see.
Frank McKenna:
Made a difference in the last game too, just having really strong defensive outfielders.
Peter Haynes:
Yep. And that'll be interesting to see how we handle that. So, it's nice to see Vladi getting a few more important hits here. We'll be back on the Vladi discussion next month. Chris, thanks again for joining us today. And Frank, thanks again and we'll talk to you again next month.
Chris Krueger:
Thanks, guys.
Frank McKenna:
Thank you.
Peter Haynes:
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