Stay informed
What Iran Can Teach Canada about Negotiating with Trump
The memorandum of understanding United States president Donald Trump cobbled together with Iran’s leadership may seem far removed from Canada’s negotiations over the future of the Canada–United States–Mexico Agreement, or CUSMA.
However, the Iran deal, hastily concluded under intense economic pressure, offers three clear lessons for Ottawa: know your leverage, understand what truly frightens Trump, and resist the urge to fold too early.
On paper, Iran and Canada both appear to be junior negotiating partners facing a far more powerful United States. In practice, each holds cards that Washington cannot ignore.
For Iran, its Trump card (to adapt the president’s favourite negotiating metaphor) was its control over the Strait of Hormuz, a critical choke point for global oil shipments. By closing the strait, Tehran pushed energy prices sharply higher and roiled global markets. The memorandum’s core trade-off reflects that reality.
Iran ceases to threaten shipping in the strait. In return, the United States lifts its naval blockade and offers sanctions relief and reconstruction funds. Why? Because the US cannot afford a prolonged squeeze on oil.
Canada’s leverage in the CUSMA negotiations is different but no less substantial. It lies in our critical role as a supplier of intermediate goods and commodities to the US economy.
Canadian steel and aluminum are embedded in American cars, airplanes, missiles, beer cans, and nearly everything else that requires these inputs. Canadian crude feeds US refineries. Canadian electricity keeps the lights on in New York and other regions that depend on cross-border power flows. Canadian potash underpins North American food production.
When Trump slaps tariffs on these inputs, he is not outsmarting Ottawa. He is wounding his own producers and consumers, raising costs throughout US supply chains that have already taken a huge hit from the rise in energy prices—prices that won’t return to the status quo ante any time soon.
The wound is self inflicted. It is also within Trump’s authority to cauterize it by lifting those tariffs. That is the leverage point Ottawa needs to exert at a time when Americans are feeling real pain in their pocketbooks.
The second lesson from the Iran deal is that, with Trump, it really is the economy, stupid, to repeat the old adage.
Iran’s leverage did not stem from the missiles and drones it launched at Israel and its Gulf neighbours. It stemmed from the inflationary shock triggered by surging energy prices. As oil markets tightened and the Strait of Hormuz remained under threat, Trump began to sound less like a swaggering commander in chief and more like a man staring at his own political oblivion.
By Trump’s own admission during his parting news conference in Évian, the world was four weeks away from a global depression if the conflict and disruption of oil supplies had continued.
That is an extraordinary confession from a president who has built his brand on economic competence. It was accompanied by the admission that he did not want to become America’s twenty-first-century Herbert Hoover.
“So rather than possibly going into a depression, rather than having your favourite president be Herbert Hoover—he was always the one I didn’t want to be,” Trump said of the thirty-first president.
Hoover, after all, is remembered not for causing the Great Depression but for failing to prevent or mitigate it. Trump is clearly terrified of being labelled the same way. As strategic petroleum reserves were drawn down to buffer the price shocks of the war and a recession, if not depression, loomed, the risk was no longer an abstraction.
Canada’s negotiators must relate that same fear to North American trade. With a crisis in the Gulf that is not yet over, Ottawa needs to persuade Trump that lifting tariffs and stabilizing CUSMA is the best insurance against his worst nightmare.
A robust, predictable flow of Canadian oil can dampen future price spikes. A Keystone pipeline—if he pays for it—combined with the opening of the Gordie Howe Bridge will strengthen continental supply chains. Lower input costs from lower tariffs on Canadian steel and aluminum, along with access to critical minerals, will ease inflation and boost productivity. It will also keep Trump out of Herbert Hoover’s shadow.
The third lesson is about toughness. Iran did not capitulate at the first sign of pressure as the bombs fell. It played the clock, extracting significant sanctions relief and financial commitments in exchange for a time-limited ceasefire and a phased reopening of Hormuz.
But it bears mention that it may have played its hand too cleverly. Trump is already facing a backlash at home for paying too high a price for a deal many in Washington view as flimsy. He will be in no mood to go soft on Iran’s nuclear ambitions in the upcoming negotiations if it tries to rag the puck.
For Canada, the temptation in CUSMA talks will be to accept a bad deal quickly on the grounds that “a bad deal is better than no deal,” because it will reduce the political uncertainty hanging over the Canadian economy like a giant sword of Damocles.
That view is dangerous, which is why Prime Minister Mark Carney’s posture has been that no deal is better than a bad one.
Trump can bluster about tearing up CUSMA, but the reality is that—even if it were possible without the approval of Congress—a full withdrawal would hit a fragile US economy very hard. Disrupting deeply integrated markets for autos, agriculture, and manufacturing would send shock waves throughout the Midwest and border communities on which the Republican Party’s political fortunes depend.
If we lock ourselves into a lopsided set of agreements now to placate that fear, a future president may enforce its provisions, with far more consistency and far less drama, to our obvious detriment.
The better course is to keep our heads down and continue negotiating while remaining firm, patient, and clear about our leverage. At this table, it’s better to be like Tehran than like Washington.
This story was originally published by Policy Magazine as “Lessons from Trump’s Iran Deal for Canada’s CUSMA Negotiators.” It has been reprinted here with permission.
The post What Iran Can Teach Canada about Negotiating with Trump first appeared on The Walrus.
Unpublished Newswire
Comments
Be the first to comment