A hate-love-hate relationship with Canada

If you were under the impression that tensions in the US-Canada relationship had eased since the election of a new prime minister, President Donald Trump had a surprise for you last week. Vancouver bureau chief Thomas Seal updates us on the state of the trade war between neighbors. Plus: Companies featured on Shark Tank have to navigate tariffs too, and Thailand's "green rush" into cannabis farming hits a hurdle.

If this email was forwarded to you, click here to sign up.

After months of deriding Canada as a country that shouldn't exist, calling then-Prime Minister Justin Trudeau "governor" of a future US state and levying enormous tariffs that undermined one of the biggest bilateral trading relationships in the world, President Donald Trump seemed to experience an outbreak of diplomatic goodwill after the April 28 election of Mark Carney.

"I think we're going to have a great relationship," Trump told reporters two days later. "He's a very nice gentleman." After he'd threatened to use "economic force" to annex the US's northern neighbor, the bar was certainly low—but it was seen as a breakthrough in Canada that Trump called Carney, a former governor of the Bank of Canada and Bank of England, by his title of prime minister.

"I think Canada chose a very talented person, a good person," Trump said when Carney—also former chairman of Brookfield Asset Management Ltd. and Bloomberg LP—visited the Oval Office in May. Carney reciprocated, calling Trump a "transformational president" while making sure to mouth "never" to cameras when Trump returned to his "51st state" spiel.

Carney and Trump on May 6 at the White House. Photographer: Anna Moneymaker/Getty Images

The about-face was surprising enough that CNN's Christiane Amanpour described Carney as the "Trump whisperer" as recently as June 24, when Canada joined other NATO allies in meeting a long-standing White House demand to pay far more on defense. As Carney talked up the possibility of a July 21 trade and security deal with the US, the vibes seemed good.

But just three days after that CNN interview, it all went sour again. Trump posted on Truth Social that he'd walked away from trade talks altogether because the country had gone ahead with a 3% digital tax on certain revenue US tech giants earned from Canadian users. Canada promptly dropped the levy.

Trump inveighed against the "very nasty" Canadians on Fox News and returned to his litany of complaints focused on their dairy trade controls—considered politically untouchable in Canada because of their importance to farmers in the influential and vote-dense province of Quebec. Canada imposes tariffs as high as 200% to 300% if quotas for imported butter, cheese and milk are exceeded, so they generally aren't. Trump says this is justification for high tariffs in return.

Any goodwill that might have accrued from Carney's conflict-averse tactics and flattery didn't appear to save Canada—a neighbor so close it shares with the US everything from basketball and baseball games to the world's only binational military command, NORAD. It received a letter on July 10 with a headline tariff higher than that of far-flung South Africa or less-friendly Libya—a stunning 35%, supposedly starting on Aug. 1.

(In reality, a large percentage of Canada's exports to the US appear to be exempt or subject to lower levies due to a carve-out for the US-Mexico-Canada trade agreement, and special lower taxes on key commodities the US craves, like oil.)

Trump's letter reiterated old complaints, such as fentanyl smuggling—Canada has made efforts to bolster security, and US customs statistics show trafficking from the north is an almost invisible sliver compared with what's coming over the southern border. He decried the US's trade deficit. That's a result of American refiners importing millions of barrels per day of Canadian crude oil. And finally, Canada's dairy system, dubbed locally "supply management."

The sacred cow of dairy taxes may be one concession too far for Carney, whose ministers have already said it's off the table in talks. The decades-old system carries with it far more baggage than a digital tax, which, in the end, never brought a cent to Canada's taxman.

In his understated response to Trump's message, Carney simply said that the US president's Aug. 1 tariff date is a new deadline for negotiations—implying the public letter isn't the conclusion of this process, but merely the latest step in a particularly high-stakes negotiation.

In Brief

Trump said the US will send more weapons to Ukraine and threatened 100% "secondary" tariffs on Russia if there's no ceasefire deal in 50 days.
Meta CEO Mark Zuckerberg said the company is building several AI data centers the size of "a significant part of the footprint of Manhattan," with the first expected to come online next year.
Saudi Arabia has asked consulting firms to conduct a strategic review of its ambitious plans for building a futuristic city known as The Line in its Neom project. Previously in Businessweek: MBS's $500 Billion Desert Dream Just Keeps Getting Weirder

Not Seen on TV: The Cost of Tariffs

Illustration: Dominic Kesterton for Bloomberg Businessweek

For years, it was a winning business model: A startup in the US would have a clever idea for the kind of everyday product that everybody else wished they'd thought of first. The design and innovation were American, but the manufacturing was outsourced to a country with much cheaper production costs, such as China, Mexico or Vietnam.

That model was a feature of many of the businesses that appear on the hit television series Shark Tank, in which entrepreneurs pitch their idea to a panel of potential investors. Landing a spot on the show has been a coveted prize for any small business given the visibility—and sales boost—it typically brings.

But now, as President Donald Trump plows ahead with promises to upend trade and force more manufacturing back to the US, the designed-in-America, made-in-China model is in doubt—at least for companies that lack the deep pockets and lobbying muscle of, say, Apple Inc.

Enda Curran and María Paula Mijares Torres spoke to four Shark Tank company founders to learn how they're navigating the made-for-TV drama of the trade war: 'The Turbulence Is Brutal': Four Shark Tank Businesses on Tariffs

Where Cannabis Fields Flourish

A Hmong woman hangs freshly harvested plants in a drying room. Photographer: Gianmarco Di Costanzo

When Thailand became the first Southeast Asian nation to decriminalize cannabis, in 2022, it ignited a "green rush," swiftly reshaping the economic landscape and challenging long-held cultural norms. Dispensaries proliferated in urban centers such as Bangkok, ballooning to more than 10,000 across the country. But the agricultural communities in the lush northern countryside are perhaps benefiting the most from the burgeoning industry—assuming the government doesn't shut the whole thing down.

In the mountains of northern Thailand, which are blessed with an ideal climate and fertile soil, generations of Hmong and other ethnic minorities have long tended the land, preserving an intimate knowledge of indigenous plants and sustainable cultivation practices. Historically these communities were linked to illicit opium cultivation, before they shifted to more wholesome crops including corn, tea and vegetables starting in the late 1960s.

Legal cannabis, a more than $1 billion-a-year industry in Thailand, offered them a lucrative pivot these past few years. Now the industry has been thrown into chaos after the Thai government announced an abrupt legislative backtrack in late June.

Gianmarco Di Costanzo has the story and photos from the fields: Thailand's Changing Cannabis Rules Leave Farmers in a Tough Spot

More Confidence in Coins

$120,000

Bitcoin breached that level on its way to record highs on Monday morning. Investor enthusiasm shows few signs of dimming as the US House of Representatives prepares to consider key industry legislation during its "Crypto Week."

Medical Breakthroughs

"It wouldn't be sensationalist to suggest that China will overtake the US in the next few years purely in terms of numbers of drugs that it's bringing through into its pipeline."

Daniel Chancellor

Vice president of thought leadership at Norstella, a pharma intelligence solutions provider

Chinese biotech's advance has been as ferocious as the nation's breakthrough efforts in AI and EVs, eclipsing the European Union and catching up to the US. Read the full story here.