Steel Handshakes and Empty Promises: Carney’s High-Stakes Gamble in Washington

Steel Handshakes and Empty Promises: Carney’s High-Stakes Gamble in Washington

After two and a half hours at the White House, Canada left with warm words but no real relief—just another promise of progress.

WASHINGTON — The script felt all too familiar. Prime Minister Mark Carney walked out of the White House Tuesday afternoon, cabinet ministers at his side, smiling as he praised “positive and effective” discussions. But behind the diplomatic language lay a stark reality. The tariffs choking Canadian industry didn’t budge.

The October 7 meeting with President Donald Trump was Carney’s second in five months. On the surface, it was cordial. Trump lauded Carney as “a great prime minister” and even joked, “he could represent me.” Moments later, though, he added a sharp edge: “He’s a nice man, but he can be nasty.” Praise and warning, wrapped into one.

For businesses on both sides of the border, the outcome landed with a thud. Ottawa has spent months peeling back pressure points—scrapping the digital services tax, lifting counter-tariffs, and promising faster defense spending. The idea was simple: create goodwill, make negotiations easier. Yet the core problem remains. U.S. tariffs on Canadian steel and aluminum stay locked at 50 percent. Extra duties on copper and cars continue. And new tariffs on trucks hover on the horizon like storm clouds.

Washington Holds the Cards

Trade Minister Dominic LeBlanc tried to sound upbeat. He said the Canadians left Washington believing Trump’s team was ready to “structure something” on steel and aluminum. “I’m more optimistic today than when I arrived,” he told reporters. But optimism doesn’t balance the books.

Canada’s strategy now looks like a gamble that may have backfired. By dropping counter-tariffs without a firm U.S. concession, Ottawa surrendered one of its few bargaining chips. That decision eased pressure on American exporters but left Canadian mills and manufacturers exposed. Trump, sensing the leverage shift, pocketed the goodwill and doubled down. Washington now holds both the stick and the carrot.

North America’s supply chains make the imbalance even sharper. Canadian aluminum feeds U.S. aerospace factories. Canadian steel props up Detroit’s assembly lines. But while both economies depend on the flow, the immediate pain lands harder north of the border. For Canadian producers, the squeeze feels like a vice tightening each week.

Annexation Talk: Theater, Not Policy

Trump’s repeated cracks about Canada becoming the “51st state” once again stole headlines. He dropped the line casually on Tuesday, as if it were just another joke in his repertoire. Markets shrugged it off. Traders see it as theater, not policy.

The annexation talk isn’t about maps. It’s about mind games. The rhetoric keeps Ottawa defensive, fires up Trump’s political base, and guarantees front-page attention. But investors know the real action lies elsewhere—in obscure regulatory tweaks, quota adjustments, and fine print buried in trade notices. Those bureaucratic levers, not offhand quips, will determine if Canadian exporters get breathing room.

The Clock Is Ticking

Back home, political pressure is building. Conservative leader Pierre Poilievre fired off a letter demanding Carney “negotiate a win,” warning that more excuses would mean failure. Ontario Premier Doug Ford went further, likening the situation to “a kid getting punched in the face every day.” His advice? “Time to hit back.”

Carney doesn’t have much runway left. Tactical retreat only works if it produces visible results fast. Otherwise, it starts to look like surrender. Even LeBlanc admitted as much, saying Canadians “understandably want to see results, and believe me, so do we.”

And then there’s the looming review of the Canada-U.S.-Mexico Agreement. With consultations already underway, Trump has little incentive to hand out broad concessions now. Incremental relief keeps him in control until next year’s renegotiation.

What’s Really on the Table

If there’s progress to be made, it’s likely in steel and aluminum. LeBlanc flagged both as areas where movement might come soon. But don’t expect sweeping tariff rollbacks. The more likely outcome is narrow, product-specific exemptions—just enough to show momentum without weakening Trump’s “tough on trade” image.

Defense and aerospace materials could see carve-outs first. They’re vital to U.S. security, which makes them politically easier to protect. That would help Canadian producers in those niches. The auto industry, however, looks stuck. The threat of a 25 percent tariff on trucks remains Trump’s ace card, especially with Ontario’s concentrated production. Any serious move there would signal a true breakthrough, not just tactical tinkering.

Markets Reading Between the Lines

Investors have seen this movie before: high-profile meetings that spark volatility, followed by a return to the same grind. Tuesday fit the pattern. Unless truck tariffs come off the table, currency markets will barely twitch. Steel and aluminum carve-outs might give certain companies a lift, but they won’t shift Canada’s overall economic picture.

Rail operators and logistics firms are bracing for more uncertainty. Even temporary boosts in shipments can’t replace long-term clarity. With Europe moving toward similar protectionist policies, global fragmentation only adds to the tension.

Redefining “Winning”

For Carney, success no longer means a grand trade deal. It means scraping together enough relief to show that his strategy wasn’t a mistake. Every week without progress fuels critics who say Canada gave up leverage too soon.

Trump, meanwhile, appears to relish the dynamic. He praises Carney, keeps relations cordial, but withholds the goods. It’s a masterclass in holding the leash tight—offering hope without deliverables.

As one analyst put it: “Markets want peace. The White House wants control.” On Tuesday, Canada got neither. Industry is still waiting for the day when symbolism finally turns into substance.

House Investment Thesis

Category	Summary
Current Situation (The Read)	Trump uses tariffs (steel, aluminum, trucks) as leverage, not for immediate deals. Canada conceded its Digital Services Tax and narrowed retaliation to focus on steel/aluminum, risking leverage. "Annexation" talk is a bargaining tactic, not real policy. Global protectionism is increasing (e.g., EU mirroring tariffs), validating the U.S. approach.
Root Causes	U.S. domestic politics reward tariff messaging. The ongoing USMCA review provides a series of leverage points. Canada's integrated supply chains make it more vulnerable to trade friction, encouraging concessions.
Sharp Takeaways	Canada traded retaliatory measures for a chance at a quicker deal; failure risks making it look weak. Expect any tariff relief to be small, specific, and easily reversible. Ignore annexation headlines; watch for official regulatory actions.
Near-Term Implications (1-3 Months)	Base case is a narrow steel/aluminum deal (exclusions/quotas). Autos/trucks remain a major threat. EU mirroring tariffs reduces pressure on the U.S. to de-escalate, bearish for global steel.
Sector-by-Sector Impact	Metals & Mining: Volatility persists; Canadian names may pop on relief headlines. Autos & Parts: Truck tariff overhang hurts Canadian-exposed companies. Lumber: U.S. mills benefit; homebuilders see mixed impacts. Aerospace/Defense: Most likely to get early tariff exclusions. Rails/Logistics: Cross-border volumes remain choppy. FX/Rates: CAD strength on headlines is fadeable; BoC may turn dovish.
Probabilistic Scenarios	1. Steel/Aluminum micro-deal (60%): Small, time-limited relief. 2. Autos waiver (40%): Temporary reprieve. 3. No deal, Canada re-escalates (30%): Risk-off for CAD assets. 4. Grand bargain (10%): Broad market relief. 5. Annexation policy (0%): Ignore.
Trade Ideas & Risk Management	Pair long Canadian steel/aluminum with defense exposure vs. short EU steel. Use options to position for autos waiver headlines. Pair long U.S. lumber producers vs. Canadian peers. Fade CAD strength on vague positive headlines. Watch official regulatory dockets for real catalysts.
What Would Change the Thesis	Written, permanent (not temporary) tariff relief. A clear carve-out for autos/trucks. The EU backing off its plans to mirror U.S. steel tariffs.
One-Liner Desk Quotes	"Markets want détente; the White House wants a leash." "Canada swapped tariffs for time—now it needs steel relief before politics snap back." "Treat every 'merger' headline as a decoy; trade the exclusion docket."

Investment takeaway: Expect narrow, reversible relief measures, not a sweeping resolution. Defense-linked steel and aluminum producers may see short-term gains, but auto and logistics firms remain under political pressure. Currency traders should stay cautious; any Canadian dollar spikes on good headlines are likely to fade without concrete moves on vehicles. For now, the smart play is tactical, not long-term conviction. NOT INVESTMENT ADVICE!