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The Situation Room

Canada Hits Back with Counter-Tariffs; China Retaliates with 84 Percent Tariffs Against U.S.; Escalating Tension Over the Panama Canal. Aired 10:30-11a ET

Aired April 09, 2025 - 10:30   ET

THIS IS A RUSH TRANSCRIPT. THIS COPY MAY NOT BE IN ITS FINAL FORM AND MAY BE UPDATED.

[10:30:00]

WOLF BLITZER, CNN ANCHOR: As China and the European Union are now fighting back against the latest round of U.S. tariffs, Canada's moving ahead with retaliation of its own, imposing new levies on American-made automobiles. Yes. And the new Canadian prime minister, Mark Carney, is placing the blame squarely on the United States for starting this trade war.

(BEGIN VIDEO CLIP)

MARK CARNEY, CANADIAN PRIME MINISTER: So, the U.S. is driving itself into a recession, pressure on the world if the U.S. doesn't change course. But what we can control is where we invest here, how we support our people, and that's what we're doing.

(END VIDEO CLIP)

PAMELA BROWN, CNN ANCHOR: Joining us now is the former premier of Quebec and former Canadian deputy prime minister Jean Charest. So, you just heard the prime minister say the U.S. is driving itself into a recession. If that happens, given the close economic ties between the U.S. and Canada, do you believe the Canadian economy will hit a recession as well?

JEAN CHAREST, FORMER QUEBEC PREMIER, FORMER CANADIAN DEPUTY PRIME MINISTER AND PARTNER, THERRIEN, COUTURE, JOLI-COEUR: Yes, we will. We will hit a recession. And actually, the evidence now are, you know, employment numbers came out last week. We've been losing jobs. And so, our economy is slowing down as we speak. We are very tied to the American economy. And like everyone else, we're in this, you know, logic of tariffs and retaliatory tariffs or tariffs came in to force last night at midnight, 25 percent tariffs on cars that are outside of the USMCA, by the way, same thing for parts, but still, tariffs.

And so, we're going to reply, not because we want to, and we also recognize that this hurts us. I mean, we're actually -- that's the terrible logic of all of this, whether it's China, whether it's the United States or the European Union, we're all hurting ourselves as we proceed. So, we're looking for the off-ramp. We're looking -- we're hoping that there -- an off ramp is within sight so that we can all sit down and sort this out.

BLITZER: That would be great if that happens. But as you know, Canada's obviously retaliating with counter tariffs on some U.S. autos, which go into effect today.

[10:35:00]

Is that the right move, Premier, or do you worry it could only escalate this trade war?

CHAREST: It is the best move out of all the bad choices we have, Wolf. I mean, this is a world of very bad choices. And so, we recognize that. We know that. Canadians know that. So, we're going to reply because we have to reply and establish a position of force. Otherwise, we'll just be steamrolled. And no one is going to accept that, whether it's Canada or another country in the world.

And so, and by the way, you know, as the 25 percent tariff supply, just as a point of interest to your viewers, 50 percent of the cars going into the United States of the content is American. I mean, this is -- we -- most of what we export to the United States, Wolf, is from the United States. And so, in the 25 percent tariffs imposed by the Trump administration, they're saying, we'll discount that. But how does this make sense in a world where we have very efficient supply chains? It would take years to redo the whole industry.

It made much more sense for us to work closely together under the USMCA than put ourselves through the ringer here and put our economies at risk.

BLITZER: Yes. And, Pamela, it makes sense because so many of those car parts used to make American cars in the United States are coming from Canada.

BROWN: Right. There's no such thing as a fully American-made car because so many parts come from Canada and Mexico, you know. And part of the equation here is just the uncertainty, right? I know countries like Canada are trying to figure out, is the president intending for his tariffs to be permanent? Are they up for negotiation? We've heard conflicting messages. How are Canadians reading that uncertainty?

CHAREST: Well, last week there was a first sigh of relief because we were not on the list of the countries that were targeted with either a minimum of 10 percent or the maximums. But still, I mean, we're hit by 25 percent tariffs on aluminum, on steel. We're hit by 25 percent tariffs -- or 10 percent tariffs on potash and energy.

Potash, Pam, very good example. Why is the administration hurting and attacking American farmers? This is the -- what they need at this point of the season as a fertilizer. They can't do without it. Canada supplies 80 percent of it. And we're delighted to supply potash to American farmers, and they'll need it also in the fall. And yet, the American administration's putting a 10 percent tariff, which increases the price of food for American consumers across the board. It just doesn't make sense.

So, we're -- we are anticipating that there will be a broader discussion under probably USMCA on that agreement, and that we can sort this out and come to a situation where we're all winners in a trade agreement, where we're able to make each other more competitive, vis-a-vis the world, including China.

BLITZER: As you know, Premier, Canada is holding elections later this month. Obviously, the tariffs are going to be a huge political issue. How much pressure are candidates feeling right now to stand up to President Trump and could that change once elections are actually over?

CHAREST: Wolf, President Trump has defined the ballot question in this election campaign in Canada. And our political situation has turned 180 degrees. Until Mr. Trudeau resign, he seemed to be the one -- the issue. He's very unpopular after nine years in government. And now, the issue is who can best stand up to Donald Trump.

And so, prime Minister Carney certainly is talking about this. And the issue of tariffs is on the trail every day. It's an issue for all of the major party leaders in this campaign as they propose ways for Canada to respond to the Trump administration.

BLITZER: Yes, the stakes for Canada and the stakes for the U.S. are enormous right now. Jean Charest, thank you so much for joining us as usual.

BROWN: Thank you.

CHAREST: Thank you.

BROWN: And just ahead, we're answering your questions on tariffs and what they mean for you. We're going to speak to the U.S. national editor for the Financial Times to try to help get you some answers as we sort through this. That's next.

(COMMERCIAL BREAK)

[10:40:00]

BROWN: Returning now to our breaking news, China is hitting back in a big way in this escalating global trade war. This morning, Beijing announced it is raising its retaliatory tariffs going from 34 to 84 percent on imports of U.S. goods. And now, there are growing concerns of just how far the world's two biggest economies will go with this tit for tat tariffs. Also, this morning, the E.U. voted on countermeasures toward the U.S. We're still waiting for specifics on that.

We are joined now by U.S. national editor for the Financial Times, Edward Luce. Thank you so much for coming on. So, I reached out to the viewers, because I know a lot of people are trying to sort through this in one -- and they're asking, what does this mean for me? So, I want to get right to the questions here. Off the bat, what are the top things that we should be concerned about in the short-term?

ED LUCE, U.S. NATIONAL EDITOR, FINANCIAL TIMES: So, in the immediate term, just this morning and yesterday, it's the sell-off in the treasury market. That should not be happening --

BROWN: Those are bonds, right? LUCE: Those are bonds.

BROWN: The treasury bonds.

LUCE: And so, bond yields are going up, interest rates are getting more expensive as we speak. And that's not normally what happens when there's a share -- an equity market sell-off. It means that people are losing confidence in the U.S. dollar, and that is a three-alarm fire straight there.

[10:45:00]

BROWN: And that means that if someone tries to go borrow money for a car or a home, it's going to be more money, essentially, because of what's happening there in the bond market?

LUCE: In real-time, more money. And these are moving quite quickly. So, normally, whether it's COVID or whether it's 2008 financial crash, there is a flight to safety. And safety is U.S. treasury bonds. If the world is now reevaluating whether they are safe, this is a whole new territory. And that means real interest rate increases for American consumers on their car loans, on their credit card debt, on their spending right now.

BROWN: Another viewer asks, how soon will price increases -- will prices increase, especially with 104 percent China tariffs?

LUCE: Well, China, I mean, provides huge amounts of household goods, appliances, parts for cars. And so, pretty quickly that'll feed in. We are talking about 104 percent tariff on China. I would say you saw Jamie Dimon, the head of J.P. Morgan, saying a recession is probably coming. I'd say this -- as 104 percent chance of a recession. This is going to happen.

BROWN: It's a certainty in your view?

LUCE: It's a certainty unless Trump dramatically changes course.

BROWN: And what does that look like, dramatically changing course?

LUCE: That means climbing down from these very punitive tariffs very, very quickly. Not doing a slow one by one negotiation with each of these countries, but actually, just reversing the whole strategy. And I think given his psychology and his sort of stubborn belief that this is a weapon that works, that's unlikely to happen.

BROWN: Which is probably why you're seeing what's happening in the bond market as well, right? I mean, people are concerned, they're losing trust and they don't believe that Trump will back down. And these one-on-one negotiations, they take time, right? It's not an overnight situation. And our reporting is that some of these countries are still waiting for a call back to negotiate.

Next question from a viewer, will used car prices go up.

LUCE: That's a good question. The last time they went up -- last time car prices went up was, you know, with the chips shortage, the supply chain problems during COVID. Used cars, you know, I guess once you get a generalized price increase, which we're going to have, then all prices -- the knock-on effect on all goods will be high. But I expect used cars will be more in demand than new cars because new cars are going to be hit by the tariffs.

So, that will produce a shortage of used cars, if there's a rush to buy those, which will push the price up too. All prices are going to be increasing.

BROWN: No matter what. And like you said, old -- that's just old- fashioned supply and demand, right? Just given --

LUCE: Absolutely.

BROWN: -- what we're dealing with here. I know a lot of us are wondering as we're watching our 401(k)s just nose dive --

LUCE: Our 301(k)s, our 201(k)s.

BROWN: Exactly. Everything is tanking right now. And I think a lot of us are wondering, will it eventually go back up to where it was? Do we just hang in there? I mean, for those of us that have the luxury of waiting?

LUCE: Yes. I mean, it depends how long you've got to wait. If you are retiring in the next year or two, this is extremely bad news. If you are, you know, 45, then of course you can afford to wait. But a lot of it depends on, is this a permanent shift to deglobalize? Because if you're going to deglobalize, then -- and everything becomes less efficient and prices just go up structurally, and that means that the returns on equities, the stock market growth is reduced.

So, a lot depends on just how sustained this war of Trump against the whole world happens. I mean, normally when you go to war, any kind of war, including economic war, you go to war with allies. In this case, the allies and America's adversaries, say the Europeans and Canadians or the Chinese, are all together against America. It's not a bet that I would think has a very high chance of paying off.

BROWN: So, what I hear you laying now is just sort of like the underpinnings of what sparks growth in the stock market might be fading away with this, as you call it, war, economic war globally. What direction are we heading in right now for all of Americans who are just wondering what to do right now, what to do with our money? Where are we going here?

LUCE: So, there is a dash for cash going on right now, and that is part of why hedge funds are unwinding their treasuries because their clients are making calls on them. So, they're selling their treasuries to pay their clients because their clients are so nervous. So, there is a dash for liquidity for cash going on.

There's not really any other asset that's considered safe. I mean, the German bonds to some degree, certainly not Chinese. Everybody's seeing their bond yields rise. Their interest rates rise. So, cash is going to be king whilst everybody's deeply uncertain and nervous about where things are going.

BROWN: Ed Luce, very concerning what you just laid out there. Thank you very much for coming on to give your analysis. Wolf.

BLITZER: Yes, thanks very much --

LUCE: Thank you.

BLITZER: -- Edward, right?

BROWN: Well, he said Edward on first. But then I can call him Ed.

LUCE: Ed is perfect.

BLITZER: Ed is good too. All right.

LUCE: Thank you.

[10:50:00]

BLITZER: Thank you. Coming up, escalating tension over the Panama Canal. The comments from the U.S. defense secretary, Pete Hegseth, that are garnering a fiery response from Beijing. That's next.

(COMMERCIAL BREAK)

BLITZER: Right now, escalating tension over the Panama Canal after the U.S. defense secretary, Pete Hegseth, said, the vital international shipping channel faces ongoing threats from China. Listen.

Hegseth's remarks, by the way, triggered a fiery response from the Chinese government. For more on that, I want to go live right now to CNN Correspondent Natasha Bertrand. She's over at the Pentagon for us. Update our viewers, Natasha.

[10:55:00]

NATASHA BERTRAND, CNN CORRESPONDENT: Well, China is not happy about Secretary Hegseth remarks over the last couple days in Panama, and they released a statement today from China's embassy in Panama saying that the U.S. has, quote, "carried out a sensationalistic campaign" about the, quote, "theoretical Chinese threat" in an attempt to sabotage Chinese Panamanian cooperation, which is all just rooted in the United States' own geopolitical interests.

Now, obviously, tensions between the U.S. and China are already high with the tariffs, but Secretary Hegseth actually doubled down just moments ago and he said in a statement to reporters that growing an adversarial control of strategic land by China and critical infrastructure in this hemisphere cannot and will not stand.

Now, obviously, the Panama Canal has been a fixation for President Trump to say the least over the last several months, and several high- level officials, including Secretary of State Marco Rubio, have traveled there in order to speak to the Panamanians about what they believe is increasing Chinese control over the Panama Canal and essentially increasing Chinese influence writ-large in the region. And that is something that Panama has denied.

But President Trump has actually gone as far in recent weeks as to say that perhaps the U.S. should never have given the Panama Canal to -- back to Panama in the first place and perhaps should now even try to take it back. Now, President -- Panama's president has obviously gotten angry about these remarks, denying that it is the case that China has undue control over the Canal.

Notably in readout just yesterday, Panama's president said that Secretary Hegseth recognized Panama's sovereignty over the Canal, but that was nowhere in the Department of Defense's readout of their meeting. Wolf.

BLITZER: All right. Natasha Bertrand at the Pentagon for us. Natasha, thank you very, very much. Pamela.

BROWN: All right. And coming up a Situation Room exclusive. We're going to speak to the wife of the man mistakenly deported back to El Salvador. We're going to get an update on how he's doing as the Trump administration is fighting efforts to bring him back to the U.S. That's next.

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