Canada's new counter-tariffs run from 15 to 50% and cover around $20 billion of American goods, with the levies on US steel, aluminum and iron doubled to 50%.
The point of a pressure campaign is that the pressure works. Mike Moffatt, a Canadian economist, said every escalation so far has made Prime Minister Mark Carney more popular at home and given him more room to refuse the deal Washington wants signed.
"So if the administration is trying to force Canada to sign the deal, this is probably the worst possible thing to do, because it just makes Carney more popular in the eyes of Canadians and gives Carney more ability to back away from a bad deal."
Moffatt is the founding director of the Missing Middle Initiative and a returning guest on the show, and he was reading Canadian polling, oil prices and export data as the counter-tariffs landed.
I listened to the full segment so you can skip it.
Here are the 9 takeaways that matter.
👤 Guest: Mike Moffatt, Canadian economist and Founding Director of the Missing Middle Initiative
🎙️ Host: Ed, who presents Prof G Markets for Prof G Media
📰 Published: 9 September 2026 on YouTube (Prof G Markets)
🔴 YouTube | ⏱️ 37 min
Key Takeaways
Trump's attacks are making Carney harder to negotiate with, not easier
Moffatt called the hockey-stick video the worst possible move if the goal is a signed deal
Canada aimed its counter-tariffs at swing states and at goods it can buy from Japan or the EU instead
A year of these tariffs would cost Canada three to four-tenths of a point of GDP growth
Oil is cushioning it: Western Canadian Select has gone from about $50 a barrel to $80
Carney's party leads by 16 points, and non-Conservative voters back the counter-tariffs 90 to 95%
Even Conservative voters split about 50/50 on them
The share of Canadian exports going to the United States has fallen from about 80% to about 67%
Moffatt said the Trump administration has forced a diversification Canada talked about for decades
A Canada-EU deal short of membership could end the F-35 purchase
Even a signed deal would not restore business confidence, because nobody expects it to hold
Moffatt frames Carney as a wartime leader, and names the risk that comes with it
He raised Winston Churchill, then asked who becomes Clement Attlee once the war ends
1. How The Talks Collapsed
Ed opened with the news. The new Canadian levies range from 15 to 50% and cover around $20 billion of American goods; tariffs on US steel, aluminum and iron products doubled to 50%; and the targeted list includes furniture, clothing, appliances and dairy. It is retaliation for the 50% tariffs Trump put on Canada last month, after trade talks collapsed at the end of August.
Ed quoted Carney's pledge to hit back against Trump's bullying "dollar for dollar, rate for rate"
Moffatt dated the pattern well before the current fight: "But this has been happening before Trump was elected the first time, or at least before he was inaugurated the first time, in 2017." Flare-ups have recurred since, with more goods hit under the second Trump administration
Canada walked away from the summer negotiations, and the reason has not been made public. "It's not entirely clear what the tipping point was," Moffatt said. "Part of it is Canada not wanting to negotiate through the media, but it sounded like there were some last-minute changes that the Trump administration put on a deal between Canada and the U.S. that the Carney administration just couldn't abide"
The talks were about removing tariffs, not opening new markets: "Well, the negotiations were basically to take those tariffs off." The administration had threatened "$20 billion in tariffs," Canada went to Washington to work out a deal, and then walked back from it
He said the stories circulating in Canada point to automotive terms, or to limits on Canada's ability to sign other trade deals, without saying which was decisive
On the national mood: "I think Canadians are asking themselves that question—like, what did we do to deserve this?"
2. Where Canada Aimed Back
Moffatt's account is that the Canadian package was built in two parts: a mechanical match on some goods and a deliberately political selection on the rest.
Part of it is simple reciprocity. "So you put 50% on us, we'll put 50% on you"
The rest is aimed where it will be felt politically and where Canadian buyers have somewhere else to go. "But others are a little bit more targeted towards swing states, towards areas where Canada often buys, not 100% of its imports from the U.S., where we have a little bit of choice to buy from, say, the U.S. or Japan or the EU"
That choice is what limits the cost to Canadian households: "So the idea is that we don't want to raise Canadian prices as much, but instead, if Canadians can buy from Japan or the EU instead, that should dampen the effect of these tariffs"
He treated retaliation itself as unremarkable: "And, like any other country, Canada wasn't just going to sit there when it had tariffs put on it"
3. A GDP Hit, Cushioned By Oil
Asked how large the economic damage is on each side, Moffatt said the asymmetry is the point — the smaller economy absorbs more.
"Well, certainly a bigger hit for Canada—we're proportionately smaller"
He cited another economist's estimate rather than his own. "I've seen Trevor Tombe at the University of Calgary has estimated that if these continue for a year, it would shave about three to four-tenths of a percent off of GDP growth, which isn't fantastic"
The offset is the oil price, and it is not policy. "And one of Canada's biggest exports is oil, and the price of Western Canadian Select has gone from about $50 a barrel prior to the actions in Iran to $80 a barrel"
He called the timing luck rather than management: "So you never want to take a three-tenths of a point percentage point hit to GDP, but if you had to do it at some point, now's really not a bad time"
The same luck runs through the politics. Moffatt worked the polling into the same answer: "He's quite popular right now—he's ahead 16 points in the polls"
4. Plan B Is Europe
Ed asked whether the standoff simply continues, with neither side willing to be the one that backs down. Moffatt said Canada is running two tracks at once.
He is still hoping for a settlement: "Well, I certainly hope not. I hope that Canada and the U.S. can come to a deal"
The Canadian expectation is that American politics moves first. "I think there is some hope in Canada that the upcoming midterms might get the U.S. to come forward with an agreement that we can live with"
Carney was due in the European Union the following week. Moffatt said: "We've heard rumblings of a deal between Canada and the EU, which is not quite at the level of EU membership, but a close integration with the two countries"
The two tracks are meant to run together, not to replace each other. "So I think that's how Canada's playing it now—that we still want a deal with the United States, but we're also exploring plan B and trying to diversify our trade in the meantime"
5. The Hockey-Stick Video
Ed raised the week's most-shared item: an AI-generated cartoon video that Trump posted on Truth Social showing him beating Carney with a hockey stick on the ice.
Moffatt's first answer was about not reacting: "Yeah, we're certainly not happy about it, but I think Canadians are trying to take the position that we just shouldn't take the bait, right?"
He described the internal argument Canadians are having with themselves: "Okay, deep breaths, let's just calm down. This is what Trump is trying to get from Canadians, so let's calm down a little bit"
His substantive point is that the provocation strengthens the person it targets. "And ironically, when those things happen, there is kind of a rally around the flag, and Carney himself gets more popular. So if the administration is trying to force Canada to sign the deal, this is probably the worst possible thing to do, because it just makes Carney more popular in the eyes of Canadians and gives Carney more ability to back away from a bad deal"
6. Carney's 16-Point Lead
Ed said the same pattern has held every time: Trump attacks a smaller neighbor, and Canadians like Carney more. He cited the renaming of Lake Ontario — "We saw the same thing with changing the name of Lake Ontario to Lake America" — and asked how much of Carney's standing is a product of it. Moffatt's answer was "I think quite a bit," followed by numbers.
The polling, as he read it: "Right now, the latest polling I saw from Nanos has the Conservatives at 47%—or sorry, the Liberals, Mark Carney's party, at 47%, the Conservatives at 31%"
That margin means more in Canada than the same margin would in a two-party system: "And, like the UK, we are a multi-party country, so a 16-point lead is massive." His explanation is that non-Conservative voters, and some Conservatives, are parking their votes with the Liberals
Support for the counter-tariffs is close to unanimous outside the Conservative base. "And if you look at polling about the response to these tariffs, these counter-tariffs, Canadians who are non-Conservative voters support them, 90 to 95%. It's overwhelming. You can't get Canadians to agree on 90 to 95% on anything." He added: "And even Conservatives are about 50/50"
Ed also raised the image Trump posted of a US flag draped over a map that included Canada, Mexico and Greenland, and asked whether anyone in Canada still likes him. Moffatt put the pro-Trump share this way: "It does—I would say it's about 15% of the population, and it's about half of those Conservative voters that I mentioned" — people who have long wanted Canada to look more like the United States on taxation and social issues
The residue is a broader change in how Canadians see the country next door. "I think most of us are quite upset with the Trump administration, and it has made us, unfortunately, more kind of anti-American than we were a year or two ago"
7. Exports Down To 67%
Ed asked whether the global economy is rerouting itself away from the United States. Moffatt said Canada's trade data already shows it happening, and that the tariffs are the reason.
The uncertainty does the damage even if the tariffs come off. "And here in Canada, even if we had a deal tomorrow, there's just so much uncertainty—the deal would feel like it was written in pencil." Investors and businesses are diversifying on that basis
The export mix has already moved. In his words: "Canada—about 80% of Canadian exports used to go to the United States. A couple of years ago it was down to 70, it's now down to about 67%"
He described the effect as an accidental favor. "So, oddly, the Trump administration's kind of done us a bit of a favor in a strange way, because we've always talked in Canada about the need to diversify our trade—well, we're actually doing it now"
The irony is not lost on him. "As much as we hate the tariffs, we hate the hockey video memes, we are—it is kind of forcing us to do a bunch of things we probably should have gotten done decades ago but just never had the motivation to do it"
8. Defense And The F-35
Asked what else falls out of this over the longer run, Moffatt started with military procurement.
He expects defense spending to shift, and thinks the EU deal is where it shows up. "I think we're going to see a shift in defense spending. I think that may come out of this EU deal"
The clearest candidate is the fighter purchase Canada has argued about for years: "So, there's been this debate in Canada for decades about buying the F-35—we might see that go away"
On whether the relationship can be rebuilt, he was hedged but positive: "It will take a few administrations of goodwill, but I do think our countries have too much in common to be forever at odds"
He was blunt about how it feels now. "But it certainly feels that way right now—like this really does feel like we're going through a messy, angry divorce, and it does feel hard to reconcile"
9. The Churchill Comparison
Ed's last question was about Carney's legacy. Moffatt noted he has been in office only about a year and a half, then reached for a wartime analogy and immediately flagged its second half.
"But it's almost—you don't want to compare anybody to Winston Churchill, but it does kind of feel like this kind of wartime leader"
The comparison carries a warning about what happens after the fight ends. Moffatt asked whether someone will "become the Clement Attlee of the situation" once the war is over. Churchill led Britain through the Second World War and then lost the 1945 election to Attlee
His verdict for now is the crisis role. "I think that's how he's seen—as the kind of steady hand who's keeping us through this at a time of intense turmoil," and the judgment on him will come "20, 30 years from now"
Bonus Insights
Ed's market vitals read at the top of the show described the same Middle East tension Moffatt credits for Canadian oil revenue: "The major indices declined on tensions in the Middle East. Brent crude rose above $99 per barrel." The yield on 10-year Treasuries climbed, and SpaceX rose 4% on reports its weighting in the Nasdaq 100 may increase at this month's rebalance
Moffatt has been on the show before — Ed introduced him with "it's great to see you again"
He ended the geopolitical answer on his own disposition rather than on analysis: he called himself an optimist, "certainly hopeful that we can get through this"
On the pro-Trump minority in Canada, his framing was that it is a long-standing group rather than a new one: "They tend to be quite conservative, they tend to have been just sort of frustrated with Canada—they've always wanted Canada to be more like the United States when it comes to taxation and social issues and so on"
Moffatt's bottom line is that the tariff fight is costing Canada a few tenths of a point of growth at a moment when high oil prices can absorb it, while handing Carney a 16-point polling lead, near-unanimous public backing for retaliation and a reason to sign a deal with Europe instead — which is why he says the pressure campaign is producing the opposite of what it was designed to produce.
Products, Companies & Tools Mentioned
Western Canadian Select (The Canadian oil benchmark Moffatt says has gone from about $50 a barrel to $80 since the action in Iran, offsetting much of the tariff hit to GDP)
Missing Middle Initiative (The Canadian research organization Moffatt founded and directs)
Nanos Research (The pollster behind the numbers he cited: Liberals 47%, Conservatives 31%)
Truth Social (Where Trump posted the AI-generated video of himself beating Carney with a hockey stick, and the map image with a US flag over Canada, Mexico and Greenland)
The F-35 (The fighter Canada has debated buying for decades; Moffatt said a Canada-EU defense arrangement might end the purchase)
University of Calgary (Where Trevor Tombe, the economist whose GDP estimate Moffatt relayed, works)
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