Vipal Monga
Appearances
The Journal.
Canada’s New Leader Is Ready To Take on Trump
The countries are really wedded together. You know, there's many families that have relatives on both sides of the border. Canadians love to travel to the U.S. and vice versa. I think Canada's the only country that has teams in the National Hockey League, NBA, and Major League Baseball.
The Journal.
Canada’s New Leader Is Ready To Take on Trump
Canada is the largest foreign exporter of oil and gas and hydropower to the United States. It sends a lot of cars to the US. A lot of the Detroit manufacturers build cars here, about a million cars a year, and auto parts to the US as well. Canada sends a lot of lumber, a lot of natural resources broadly.
The Journal.
Canada’s New Leader Is Ready To Take on Trump
The two countries share a supply chain, so it's really hard to overstate just how close the countries are and to what extent the border between the two countries, at least from a business standpoint, is a bit of a fiction.
The Journal.
Canada’s New Leader Is Ready To Take on Trump
He's levied 25% tariffs on steel and aluminum, which really impacts major sectors of Canada's manufacturing economy. He's leveled tariffs on automobiles and auto parts and continues to threaten tariffs and reduce access for Canadians to the U.S. market. That threatens to send Canada into a deep recession. The Bank of Canada has warned that a trade war with the U.S.
The Journal.
Canada’s New Leader Is Ready To Take on Trump
could reduce Canadian standards of living. It's that serious.
The Journal.
Canada’s New Leader Is Ready To Take on Trump
The real shock to Canada's psyche was this idea that Trump floated publicly that Canada should become the 51st state.
The Journal.
Canada’s New Leader Is Ready To Take on Trump
That was deeply offensive to many Canadians and frankly very frightening. And I think the sort of stark reality of that, the geopolitical reality of that was a real shock to the system.
The Journal.
Canada’s New Leader Is Ready To Take on Trump
Well, they're quite angry. I mean, you know, there's this whole idea of elbows up that, you know, Canada is going to fight back against the U.S. And I do think the country has become unified in a real fundamental way. Canada is a huge country with very disparate regions, and there's a lot of internal fighting.
The Journal.
Canada’s New Leader Is Ready To Take on Trump
And in many ways, there had been schisms forming in Canadian society that, for now at least, Trump, the common enemy, has papered over.
The Journal.
Canada’s New Leader Is Ready To Take on Trump
What resonated with Canadians emotionally was this sense of we're not going to back down, we're really strong, but we're tough and we're going to definitely hit back.
The Journal.
Canada’s New Leader Is Ready To Take on Trump
He also tapped into this idea, I don't think he sugar-coated it, and Canadians appreciated that, that standing up to the U.S. and changing this relationship is going to be very painful for Canadians. But he also reminded Canadians that, you know, the country would stick together and help each other, and I think Canadians really like that.
The Journal.
Canada’s New Leader Is Ready To Take on Trump
He was born to two school teachers in Fort Smith, Northwest Territories, which is in the subarctic. I mean, it's not even considered far north, but it's far. And he grew up wanting to play hockey, but he ended up going to Harvard and Oxford to study economics.
The Journal.
Canada’s New Leader Is Ready To Take on Trump
From there, he became a globetrotting investment banker for Goldman Sachs and worked there for 13 years and then decided, you know, I'm going to go into public service.
The Journal.
Canada’s New Leader Is Ready To Take on Trump
And then by 2012, he had become such a rock star in central banking, if you can imagine that.
The Journal.
Canada’s New Leader Is Ready To Take on Trump
That he was recruited by the UK government to become the Bank of England's governor.
The Journal.
Canada’s New Leader Is Ready To Take on Trump
and became the face of the UK trying to deal with this massive change in their own society.
The Journal.
Canada’s New Leader Is Ready To Take on Trump
He has. So he definitely has a reputation for keeping a cool head under fire and being able to deal with extremely complex issues in a very thoughtful way.
The Journal.
Canada’s New Leader Is Ready To Take on Trump
I think it was. You have to remember that in January, right before Justin Trudeau quit, the Liberal Party had been in power for about nine years, and they were about 20 points beneath the conservatives in the polls, dead in the water. And then Carney came along, and I was skeptical that he'd actually be able to turn it around.
The Journal.
Canada’s New Leader Is Ready To Take on Trump
And I'm not sure if Trump hadn't continually mentioned the 51st state that he would have turned it around. It's a remarkable comeback. I don't think anything like this has ever been seen in Canadian elections.
The Journal.
Canada’s New Leader Is Ready To Take on Trump
The Canadian economy was completely in the doldrums. We were looking at a potential recession. There was stagnant productivity. Inflation was high. And the biggest problem facing Canadians was lack of housing. There weren't enough houses being built. Rents were skyrocketing. It was a real problem. And those problems continue to persist.
The Journal.
Canada’s New Leader Is Ready To Take on Trump
And a lot of it was focused at the U.S. In some ways, firing warning shots at Trump, letting him know that Canada realizes that his threats to annex Canada, his tariff war, are a betrayal.
The Journal.
Canada’s New Leader Is Ready To Take on Trump
Yes. We've already seen signs of a slowdown. The data is still a little bit mixed, but the Bank of Canada has definitely warned that you could see a big hit to GDP going forward. We've already seen some auto plants start to close in Ontario, which is the industrial heartland and the country's most populous province. So the tariffs are already starting to have a big impact.
The Journal.
Canada’s New Leader Is Ready To Take on Trump
He does want to renegotiate a deal for access to the U.S. market. And he's once doubled down on trading relationships that Canada already has with Europe. And they're also part of the TPP deal that includes a lot of Asian countries.
The Journal.
Canada’s New Leader Is Ready To Take on Trump
Very much so. And we've got some indications that he might push for deeper integration with the European Union in terms of being a member of the European Economic Area, like Norway or Iceland. It's not clear that Europe would necessarily be open to that, but I think that's where his head is at. He wants to find other allies.
The Journal.
Canada’s New Leader Is Ready To Take on Trump
Nothing can replace the U.S. Again, Canada's so close to the U.S. in that they're bonded so closely together that I don't think there's any expectation that the loss of access to the U.S. market is easily replaceable.
The Journal.
Canada’s New Leader Is Ready To Take on Trump
Carney has said that he demands respect from Trump, that Canada is only going to deal with Trump as a sovereign nation.
The Journal.
Canada’s New Leader Is Ready To Take on Trump
Trump has already kind of tempered his tone a little bit. His antipathy for Justin Trudeau ran so deep that he stopped calling Trudeau prime minister. He called him Governor Trudeau. He's been calling Carney prime minister so far. So there's something of an improvement there.
The Journal.
Canada’s New Leader Is Ready To Take on Trump
I think Canada has a lot more leverage than the U.S. realizes. Again, the supply chains are really tightly enmeshed. So breaking those apart will also hurt the United States economy. And I'm not sure if the U.S. policymakers realize just how deeply wedded those two economies are. The other thing that Canada has is an abundance of natural resources.
The Journal.
Canada’s New Leader Is Ready To Take on Trump
They have lots of oil and gas, and Canada can use that sort of as a card. The other thing that Carney, maybe more than any other leader in the world, understands how the financial system works, he's an expert in the plumbing.
The Journal.
Canada’s New Leader Is Ready To Take on Trump
That is his superpower. And I do think that having that knowledge gives Canada a lot more soft leverage, if you will, over the U.S. than the U.S. might realize. I do think that this is a big wake-up call for Canada that, you know, the sort of the easy days of them just being able to send, you know, supplies, natural resources and goods to the U.S.
The Journal.
Canada’s New Leader Is Ready To Take on Trump
are over and that they're going to have to find other ways to grow. Carney has called all this a tragedy. And I think he really means it's a global tragedy. It's a tragedy for Canadians. In some ways, it's a tragedy for the U.S. in the way that this global order that the U.S. itself created is now being broken by the U.S. But he's also very pointedly said, this is our new reality.
The Journal.
Canada’s New Leader Is Ready To Take on Trump
I think Carney represents sort of a turning of the page for Canada-U.S. relations longer term. What this means is breaking, in many ways, of one of the strongest global partnerships in the world.
WSJ What’s News
Surrender or Resist? The Dilemma Facing Allies Caught in Trump’s Trade War
It's a game of psychology at this point. People are just trying to read Trump because I think everyone realizes in the end that despite the people around him, the only guy who makes a decision is Trump ultimately. So they are trying to use whatever levers they think work with this very complicated man.
WSJ What’s News
Surrender or Resist? The Dilemma Facing Allies Caught in Trump’s Trade War
So Canada has taken a very strong position against the tariffs. They've immediately come out of the gate and said they're going to retaliate dollar for dollar. And they're specifically trying to target red states that they feel will hurt Republicans and get those Republicans to talk to Trump and get him to back off. The European Union also has decided to go for retaliatory tariffs.
WSJ What’s News
Surrender or Resist? The Dilemma Facing Allies Caught in Trump’s Trade War
And they're making the same calculation as Canada to some extent. They think that Trump is a bully and bullies don't particularly respect people who roll over. So you've got to hit back. Punch him in the mouth is the attitude. And it's early to say whether that works or not. We do know that he's a very emotional leader. And when people do retaliate, he has not reacted well in the past.
WSJ What’s News
Surrender or Resist? The Dilemma Facing Allies Caught in Trump’s Trade War
So Mexico also has a lot at stake, in theory as much at stake as Canada does. But Mexico has decided not to retaliate for now. President Claudia Sheinbaum, she's very forceful with Trump apparently in the calls, but extremely respectful when they talk.
WSJ What’s News
Surrender or Resist? The Dilemma Facing Allies Caught in Trump’s Trade War
And they've decided not to hit back in the hopes that what they're creating is an environment where Trump goes easier on them when he finally comes out with his full slate of tariffs.
WSJ What’s News
Surrender or Resist? The Dilemma Facing Allies Caught in Trump’s Trade War
The UK has a lot at stake because since Brexit, they've been trying to create trade deals with the US, world's largest economy, in a way to help fix their own economic problems.
WSJ What’s News
Surrender or Resist? The Dilemma Facing Allies Caught in Trump’s Trade War
It's a game of psychology at this point. People are just trying to read Trump because I think everyone realizes in the end that despite the people around him, the only guy who makes a decision is Trump, ultimately. So they are trying to use whatever levers they think work with this very complicated man. Now, that's in the short term.
WSJ What’s News
Surrender or Resist? The Dilemma Facing Allies Caught in Trump’s Trade War
In the longer term, a few of the people I've talked to, particularly in Canada, think that Trump's strategic approach has been terrible. There's a theory that if you cook the frog slowly, they won't notice they're being cooked. But what Trump did was he turned up the heat all the way and the frog is effectively totally cooked.
WSJ What’s News
Surrender or Resist? The Dilemma Facing Allies Caught in Trump’s Trade War
And what this has done is made the country's leaders, all of them, focus on things that they've avoided for the past, which is building up their own industrial capacity, building out trade agreements with other countries like Europe. finding other sources for their resources than the United States. So in the longer term, this could really hurt the U.S.
WSJ What’s News
Surrender or Resist? The Dilemma Facing Allies Caught in Trump’s Trade War
's position in the world as other countries realize that they need other sources, other markets to look to.
WSJ What’s News
Tariffs on Canada and Mexico Go Into Effect at Midnight, Trump Says
That makes the prospect of adding tariffs to this entire supply chain really frightening for carmakers. And will tariffs be imposed on that part every time it crosses one of those borders? We don't really have any detail on how this actually would play out.
WSJ What’s News
Tariffs on Canada and Mexico Go Into Effect at Midnight, Trump Says
But based on what Trump has said and what we've heard out of our Washington sources is that each time the part crosses the U.S.-Canada border or the U.S.-Mexico border, there would be a 25% tariff on that part. Now, you start off with, let's say, a little part that goes into transmission. That part in itself might be a couple hundred dollars.
WSJ What’s News
Tariffs on Canada and Mexico Go Into Effect at Midnight, Trump Says
That part is added to another piece of equipment that becomes a much more expensive piece of equipment. So you can see how the numbers really add up very quickly.
WSJ What’s News
Tariffs on Canada and Mexico Go Into Effect at Midnight, Trump Says
The integration of the supply chain is something that has taken decades, that won't be very easy to unwind. To be easy to destroy, but to recreate and unwind is a really hard task.
WSJ What’s News
Tariffs on Canada and Mexico Go Into Effect at Midnight, Trump Says
We've been reporting a lot about how tightly integrated the automotive supply chain is across North America. It's Canada, the US, and then Mexico. You cannot make an automobile in North America without parts touching all three of those countries. So, for example, to make a transmission...
WSJ What’s News
Tariffs on Canada and Mexico Go Into Effect at Midnight, Trump Says
What you have to do is send parts from Ontario through Pennsylvania, Ohio, Illinois, and back again, as well as Mexico, before the part is finally installed in a car in Ontario, which is then sold all across the United States. Just that one part goes across the borders six or seven times, depending on how you count.