Host: U.S. President Donald Trump has made it pretty clear he's no fan of the Canada-U.S.-Mexico Agreement (CUSMA). Well, "I'm not looking to renew it. Hey, we don't need anything that Canada has." Now, he said that last week with a critical deadline looming. So what does that mean for the future of this trade deal? Drew Fagan is a professor at the Munk School of Global Affairs and Public Policy at the University of Toronto, and he joins me in studio. How are you doing, sir?

Drew Fagan: Hey. All right.

Host: With about two weeks to go before the July 1st deadline, it's the million-dollar question. What do you think Trump will do on CUSMA? So I think...

Drew Fagan: We're not going to have an answer by July 1st by any means. I'm not even sure we'll have an answer one way or the other in the fall or even into 2027. July 1st is really an assessment point more than a deadline. Basically, it means the three parties come together and check where they're at, and then technically decide yay or nay on whether the agreement should be extended for another six years. That doesn't mean six years from now, that means 2036 to 2042. Trade agreements think long term. I think it's likely that that's not going to happen either now or into the fall. And we're going to be into almost an elongated, possibly constant process of negotiations, given the way the Trump administration plays this kind of of this thing.

Host: With that being said, what should Canada's strategy be?

Drew Fagan: Well, so one, don't overreact. All the senior officials know that. Don't take the bait. And and that's a logical thing to do because we've been doing that for a long, long time. And CUSMA is as big a stakes get with regard to Canada-U.S. relations. Then there's the issue of some degree of national unity. You think back to the free trade agreement in the 80s, NAFTA and the 90s, CUSMA in Trump one as we call it. It was important that the little guy—that's us. We're not a small economy. We're the 10th biggest economy in the world. But they're the big guy. They're the big dog. We need to speak with one voice, and that's hard, given the size of the country and the many economies within it. It's up to the Prime Minister and his team to ensure that the Premier's business, if they're not on one page, they understand where everybody's out and where is where everybody's at and where the trade offs are. And that is happening.

Host: We've seen with Premier Doug Ford singing a different tune. Is that what that's signaling towards?

Drew Fagan: Absolutely. He's a bit of an unknowable, but I think lately he's become a little bit more disciplined and a little bit more of the team. He played an interesting role early as kind of this Captain Canada thing. That was in part during the period between Trudeau and Carney, and he became the voice. Now Carney disciplined, focused policy wonk is really in charge. And I think you can see that coming to the fore. And he's going to have to make some tough decisions on the give and take in the context of how big the country is and how many economies there are.

Host: Well, let's talk about that. What's the best case scenario for Canada here? Is it, for example, the existing tariffs being removed or is there more on the table here?

Drew Fagan: So the existing tariffs the Trump administration insists will not be removed. The first point is they only exist on a small percentage of Canadian exports to the United States, 10 to 15%. So they haven't been devastating. And the Trump administration, however problematic they are up until now, has respected, by and large the technical terms of CUSMA. So Washington insists some tariffs will remain. We want to get those down in the first negotiation of CUSMA in 2018, we managed to get tariffs that were applied to the same products off Washington CSIS not. And then it's an issue of getting a deal as quickly as possible given the uncertainty. And I do think it's going to take a while. That is close to the status quo. I say close to because it's probably they're probably going to be some gives that we're going to have to make to get that.

Host: Well, let's talk about those. What are some of the compromises that Canada might have to make?

Drew Fagan: To make? Well, you've already seen one with regard to online streaming and the issue of culture and the degree to which Canada views culture as something of national sovereignty, and the United States views it as entertainment, that's been an issue going back to the original free trade agreements. So the step the Prime Minister and Cabinet took last week to limit the kind of tax, if you like, on American streamers that fund a Canadian production, they stepped back from that. Last week. I'd mention a couple of other things supply management, our dairy and poultry producers. You know, I think that is a give that we made. First of all, we made it in Trump. One, we opened the market, you know, to some extent, it did cost the taxpayer about three, $4 billion in compensation. The same thing may happen here. And I think the Prime Minister wouldn't be upset to see that happen, because I think he understands very well the fact that it's a bit of a drag on the Canadian economy. The other point is autos, and that's fundamental, obviously, to Doug Ford. It's not a sector of the future for this country or, for that matter, the United States. We have to protect, protect, protect production, assembly to the extent we can in that sector. The world beaters are really the parts producers less than the assembly assemblers. Right. But we're going to have to balance that out as well.

Host: Worst case scenario here, I don't want to want to, you know, be the negative one here. But if a deal is not reached, how does what's the impact here on Canada's economy?

Drew Fagan: So the issue of whether a deal is reached is not going to be answered. I don't think, for some time. In some ways, what's perfect for the Trump administration is to keep the agreement in place and change it piece by piece, over an extended period of time into 27, possibly even past that. We want something quicker, but we know that we want the right deal, you know, and we will take the time necessary. I think that's where they're at right now to get the right deal.

Host: So what does the right deal look like? It's not like we don't have cards to play. To use President Trump's term.

Drew Fagan: Critical minerals energy. The United States needs that. When Trump says we don't need anything from Canada, it's obviously not true. We have a marginal trade surplus he complains about. But critical minerals, I think, could be to this agreement, assuming it happens, what energy was in the 1980s? They really looked to us in a market that or mining that funds. And health is a fundamental part of 21st, the 21st century technological economy and is controlled now by China. So then you get into a conversation between his rhetoric, which sounds like Fortress America and his best interests were a little bit more Fortress North America. And that's what we've got to move him to.

Host: All right. Well, as you mentioned, it looks like this is not going to go away anytime soon, which means that we will probably have to bring you back in to talk about it years down the line as well. Drew, I really appreciate it. Always. Thank you so much for your insights.

Drew Fagan: Pleasure.