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How Canada’s innovation minister is bracing for a U.S. trade war
00:24:01
President-elect Donald Trump’s return is making waves in Canada. This week, tensions over how Ottawa should fight a looming trade war with the U.S. prompted Prime Minister Justin Trudeau’s deputy to resign. But Canada has been responding to Trump’s tariff threats by making the case that the two countries have intertwined economies, especially in key areas like critical minerals, artificial intelligence and energy. On POLITICO Tech, François-Philippe Champagne, Canada’s minister of innovation, science and industry, joins host Steven Overly to discuss the turmoil on both sides of the border.
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- [00:01]
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- [00:27]
Stephen Overlea
Hey, welcome back to Politico tech. Today's Thursday, December 19th. I'm Stephen Overle. President elect Donald Trump isn't yet in office, but his pending return is already making waves in Canada, or as Trump has taken to calling it, the 51st state. Canada's deputy Prime Minister and Finance Minister Chrystia Freeland quit earlier this week, and in her resignation letter, she warned that a trade war with Trump is coming and that she doesn't think Prime Minister Justin Trudeau is adequately prepared. Trump has threatened to slap Canada and Mexico with tariffs if they don't do more to secure the U.S. border. And since his election win, he's taken many shots at Canada and Trudeau personally. On social media. Francois Philippe Champagne is also a member of Trudeau's cabinet, serving as Canada's Minister of Innovation, Science and Industry. This year, Champagne co chaired an effort called Team Canada to essentially prepare for Trump's potential return. And when I called him up, he told me Inauguration Day is the main thing on his mind. On the show today, Champagne tells me he's standing by Trudeau and explains the economic pitch he's been making to officials across the US Whether Trump will listen or not, here's our conversation. Minister, welcome to Politico Tech.
- [02:01]
Francois Philippe Champagne
Thank you very much for having me.
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Stephen Overlea
It's been a tumultuous week for you there in Canada, I have to say, at least if the headlines are to be believed, Right? You know, we've seen some ministers stepping down, we've seen some questions about the future of the prime minister. Where's your head at?
- [02:16]
Francois Philippe Champagne
Well, listen, our focus is to deliver for Canadians. You know, this is a very particular time for the world. We know there is an incoming president of the United States on January 20th. And I would say from my perspective as one of the cabinet minister in the government of Canada, is to best prepare our country for the arrival of President Trump, to make sure that we work to foster growth in North America, to secure our border, to secure our supply chain. So on one end, yes, there might be issues that we need to deal domestically, but I think when I look at the state of the world today, we need to make sure that we stay strong together. And that's really, you know, if you ask me, all of my time and energy is focused on preparing the arrival of President Elect Trump. Make sure they understand that we are very focused on security of the north, the Arctic, the border, resilient supply chain, and critical minerals and semiconductors. So the focus is really looking forward. I cannot change yesterday, but I can plan for tomorrow.
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Stephen Overlea
Got it. You know, when I told my colleagues in Ottawa that you were coming on the podcast, I have to say there were two questions that they said I had to ask. And so I am going to get those. I'm going to get those in up front. Do you think Prime Minister Justin Trudeau should resign and then do you want his job?
- [03:39]
Francois Philippe Champagne
Well, I said let me take the first one. I would say to everyone listening, you don't change the pilot in flight. I think we would all agree that when you're flying, you don't change the pilot during the course of the flight. And what I said before applies to that, again, is that we need to prepare. We have heard President Trump talking about tariffs. That for me is priority number one. How we work with them and the upcoming administration to show them that Canada is the not only the friendly neighbor of the north, but the strategic partner for the 21st century. And tariffs that have a huge impact on consumers, US Consumers, but also on markets on both side of the border. You know, I've been in that job long enough. I used to be international trade minister. I was foreign minister, which is your equivalent of Secretary of State during the first Trump presidency or part of it. And I know one thing that we care on both side is the impact on markets, financial markets, and making sure that we provide growth. And to your other question, listen, life is a long journey. My focus is now serving Canadian in that capacity to the best of my ability and like I said, relentless focus on getting the job done. Because for me, priority number one now is, is how we prepare for the incoming Trump administration to make that a real success story.
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Stephen Overlea
Let's talk more about that preparedness, because this week in her resignation letter, the deputy prime minister, Chrystia Freeland, said that Trump poses real economic risks for Canada, whether that's tariffs and America first policies. She didn't seem confident in the approach that the Trudeau government is taking to set Canada up for that. How would you size up Canada's preparedness for a second Trump administration?
- [05:28]
Francois Philippe Champagne
Well, I always say you always need to take seriously what president elected Trump is saying, but you also need to approach that systematically in a sense that we've been working for months now to prepare. I have with my colleague, the Minister of International Trade, we've been co chair of what we've called Team Canada to engage with governors, with senators, with people in Congress, with mayors and you know, my job as Stephen has really been connecting the dots. And I'll give you a very practical example. You know, 80% of all the semiconductors that are manufactured in the United States are packaged and tested in Canada. That is one data point that I always bring back is that, you know, one thing that we have seen from the last administration to this one is our supply chain are more integrated than ever. It is true when it comes to semiconductor. It is true. For example, when it comes to critical minerals. We have made significant investment in cobalt for example and titanium to make sure that we can supply the US Defense industry. We have invested in energy assets to make sure that we can continue to work with the United States on the energy front. And making the case also that trade is really balanced between our two countries. If you exclude the oil imports. You know, the United States imports 60% of its oil from Canada. But that is helping U.S. consumer, that is helping U.S. businesses. Because for me, if you say no to Canada, you're basically saying yes to China. When it comes to strategic supply chain. I don't think that's what the American people would want. You know, we have been working n in n in Canada I manage the equivalent of the CFIUS process in the United States. We have been engaging with China with eyes wide open. We have said no to investments when it would be harmful to our national security. We have blocked investments in for example in critical minerals that would hurt our long term prosperity because we know that economic security is national security. So I would say that we've done everything together to make sure that we would have a resilient economy in North America. Because what do you need today? You need people, you need resources, you need critical minerals, you need energy and you need markets and we have all of that. I remember talking to one of the governor I think was in, in one of the southern states to say the big auto plant you have today, which is great depends on the aluminum which is coming for example from next to my district in Canada. And that was a fact that he didn't know. And you know what, I'll have to give you the story. So I come and it's a Monday morning and I can see in his face, he's probably wondering why Am I meeting this Canadian guy? I need to fire my scheduler. And I looked at him, I said, governor, I think I'm gonna be the most important person you're gonna meet today. And he kind of looked at me, he said, really? And I said, governor, I know the big auto plant you brought in your state. I happened to know the CEO. So then he went on, he said, oh, you know him? And I said, my exact story of the aluminium. I said, by the way, Governor, your plan will not be functioning if we don't invest in our capacity to provide you more aluminum in Canada. And, you know, within two minutes, he said, can I get your cell phone number? Because we need to work together. We know all of that as Canadians because that is the. A very strategic relationship. But sometime I think our US Friends take us for granted and forget that the trade between our two countries is equivalent to $150 million per hour. Just think about that. By the time we will have finished this interview, there will be close to 100 million of trade that will have happened between our two country.
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Stephen Overlea
Those relationships that you've developed with governors or other politicians around the US as part of this Team Canada effort, how are you gonna lean into those with Trump returning to office? Because the President elect, as you know, has not always been the kindest to Canada. He's now taken to referring to you all as this great state of Canada, implying you're sort of the 51st state of the US so how much will you be leaning into these other relationships?
- [09:43]
Francois Philippe Champagne
Well, I'd say to you, Canada is a proud nation. Canada is a key member of the G7. Canada is a big G7 country. And you have to take these comments with a grain of salt. I would say the good thing, what I see with President Elect is that he thinks a lot about Canada, which is a good thing. That means that we matter, that we are strategic, that we need to foster that relationship because we want to have security of supply in critical minerals. We want to have resilient supply chain in the auto parts sectors. We want to have better price for consumers when it comes to agricultural products. We want to work with Canadians on the energy side because that's how we can have a price of oil which is making the United States and North America competitive. You know, my. My point is that I think you would want to say yes to Canada. We want to do more. We think that we can do more together. Because you know what? I've always said a decision on one side of the border will have an impact on both. Because you know what, 50% of what Canada export to the United States come from the United States in the first place. So that's why when you're talking about tariffs, you're basically talking about tariffs that would impact U.S. goods. And that's why we need to work together to say what we need is not, in my view, tariffs, but what we need is more economic integration, to do more together so that we can be more competitive, we can be more innovative, and we can sell more together to the rest of the world. That's a blueprint for, for growth.
- [11:14]
Stephen Overlea
You know, I hear your point about working with the US and finding areas for sort of joint opportunity. I do wonder, though, if Trump's reelection gives you a chance to be more opportunistic. You know, I know you've pitched Canada as kind of a stable partner for investment compared to the U.S. you know, Trump, frankly, is likely to upend a lot of US Trade relationships. He did that in his first term. He's talking now about a 10% tax on all imports, essentially. Is this an opportunity for Canada to sort of swoop in and present itself as a US Alternative?
- [11:50]
Francois Philippe Champagne
Well, one thing I would say is that in my days in business, I spent 20 years in Europe before I came back to Canada to run for office. And one thing that I know that business people cherish is stability and predictability. That is the key components if you want to attract investments. And I think that presenting ourselves as a very stable, predictable and a nation based on the rule of law is really a differentiator today. And that would be something, I think, that President Trump listens to in a sense, that if you're going to do billions of dollar investments or 10 of billions, obviously your rate of return is over a decade or beyond. So you need kind of that level playing field to know that your investment will be profitable over multiple decades to make these big bet. You know what we're asking people. We've seen that in industry which are in transformation. Look at, for example in AI, artificial intelligence. Look at in quantum, for example. Look at in the investment we've done in steel to reassure manufacturing. I'm a big believer, just like I think the upcoming administration of the power of manufacturing. I think it was a strategic mistake of the last century to let manufacturing go to China. You've seen nations which have created jobs. Prosperity for millions of people are countries which have huge manufacturing sector. Think about Germany, think about South Korea, think about Japan. So, you know, what we have been achieving over the last decade is front shoring on shoring but the thing that we always have to remember when we talk Canada and the United States, there is no trading relationship like that in the world. I've called that the indispensable relationship because the United States will need energy to power its digital economy. The United States will need national resources to keep price low for American consumers and Canadian consumers. The United States will need the critical minerals to be able to produce the defense equipment that you're going to be needing in the world, which is more challenging. And again, that's why I say if you say no to Canada, you're saying yes to China. When it comes to these critical supply chain, I don't think that's the way we want to go.
- [14:15]
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- [14:45]
Stephen Overlea
You know AI is part of your portfolio. The Trump administration will be coming in with a new set of priorities around artificial intelligence. The Biden administration has been very focused on AI safety. Trump seems much more focused on US Competitiveness, especially when it comes to things like national security and energy. What common ground do you expect to find on AI in particular?
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Francois Philippe Champagne
Well, we are very aligned when it comes to national security. You may know that Canada was with the United States when we announced the Eye Safety Institute in San Francisco. You know, we were one of the very few country which says we need to put a national security lens on that. But let me tell you, I think that if we want to move from fear to opportunity, we need to build trust. And trust you need guardrails. And with trust you will foster adoption which will lead to innovation. So for me, that's kind of the framework I see because the real challenge we have, Stephen, I think, is adoption. 98% of businesses in Canada are small and medium sized businesses and I would suspect in the United States it must be around these numbers. I don't have the number exactly, but it must be small and medium sized businesses is the bedrock of our economy on both sides of the border. And how do you foster adoption for me is when you build trust, is when people and businesses know that AI is there to serve them, that it's going to help them to be more competitive, more productive. You know, we all have a productivity challenge. And in that sense, that's what I see as the holy grail of productivity. And if we, you know, because the United States and Canada think about companies that cohere in Canada, think about, obviously chatgpt, think about Xana doing quantum. We are fueling the economy of the 21st century with our talent, with our energy and our digital companies. You know, so the tech companies, the tech world of today is going to drive growth and markets and better price for consumers. So again, to your point, I think that we're going to work with the next demonstration on AI safety. We were one of the, we were the first country in the world with a AI national strategy. We have always been there for a responsible AI. And so I think that again, there, the United States should rely on Canada to be its best partner in the G7. And I think in the world which is divided, the United States should rely more and more on Canada to be kind of that voice to rally allies around the world to make sure we do the right thing for national security and for our people.
- [17:30]
Stephen Overlea
There is growing concern in the US at least about the amount of energy that will be necessary to power AI data centers and other infrastructure associated with AI. How much does that weigh on your mind? And given that energy, particularly oil, is Canada's biggest export to the US Is this AI boom in economic opportunity for you?
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Francois Philippe Champagne
Well, it is, and I think you're spot on. You cannot talk about AI today without talking about energy. These two things are related because if you want to fuel the digital revolution that we're seeing in the digital economy, which we're going to have an impact on every sector of our economy and every industry, you need energy. You may have heard, I think it's Gary Cohn, which used to be an advisor to President Trump, former CEO of Goldman Sachs, vice Chairman of IBM. I met Gary and I think he's been very vocal to highlight that point that we will need more generation of energy in order to meet the challenge and the opportunities of AI. And in that context, I can tell you that a number of tech CEOs, some of the largest companies in the United States have been after me to say, minister, this is, we need to work with Canada because without Canada, it's going to be very difficult for us to reach that momentum that we need when it comes to data centers, when it comes to the type of energy we're going to need. And we have been blessed with energy in North America. We can invest together in small nuclear modular reactor that I've seen a number of tech giants, I think Microsoft and Google were trying to partner with a number of companies. The other thing you need to know that probably your listeners don't know, but if there's one thing they remember, they may think about that. Canada and the United States, to a combination of companies on both sides of the border, own now about 50% of the civilian nuclear installed base in the world. We could together be the nuclear energy superpower of the world and make sure that we can help our allies in Europe think about our allies in Australia, to be able to help them with renewable energy like nuclear power. So that's why I'm saying I always see that as you can look at this as a challenge, or you can turn everything we said as an opportunity.
- [19:56]
Stephen Overlea
I hear your message about working with the US and sort of seizing this moment. I hear your optimism about this relationship. I guess I would challenge you to identify the biggest risk or hurdle you'll need to overcome in order to achieve that. Because as we saw with Trump's first term, things can get rocky. You know, it's not guaranteed that the relationship between the U.S. and Canada will be smooth sailing the next four years. So what is the big risk or the big obstacle you'll need to overcome?
- [20:26]
Francois Philippe Champagne
Well, I think it's to make sure that our message is heard, because I think when you talk to business people, when you talk to union leaders, when you talk to community organizers, when you talk to governors and senators, and we have the time to explain just exactly what we did, Stephen, and. And then you go to the next level and say, you know what, these are amazing opportunities that we need to work on together. Titanium, I'll tell you, Stephen, was a great example. We are now displacing Russia as the supplier of choice when it comes to titanium. You know what you do with titanium, you do powder with titanium powder. You do 3D printing of parts. With 3D printings of titanium parts, you can repair jets on US aircraft carriers. That is the fundamentally strategic relationship we have today. So the biggest challenge is for me to talk to more people like you, to engage with more governors, to engage with the next team that's gonna be in the White House and really highlighting, you know, my job, Stephen, has been over the last few months is I'm calling, I'm myself. Like I said, my job is to connect the dots. I'm like the connector in chief, you know, making sure that people understand these key relationships. We just announced a big plan of more than a billion to secure a border. Talking about Joint Strike Force. We're talking about more assets in the border, how we can work together to interdict fentanyl in North America. You know, the world has changed significantly over the last 10 years and over the last few decades, I don't think you can see us. When I see us, Canada and United States, as you know, not working one without the other. And by the way, just as a last thing, and I'm sure you're going to smile, I always say to my American friends, I hope you're happy to see me because I'm your biggest customer. Canada buys more from the United States than China, Japan, the UK and France combined. So when I used to be in business, when I walked in, I always said, I hope you're happy to see me because I'm your biggest customer. Sometimes I have to remind that to my US Friend is that Canada is by far, by far, far, far the largest consumer and customer to the United States of America. So let's build on that. Let's work together. And I think that this will be to the benefit of our people, our workers and consumers on both sides of the border.
- [22:50]
Stephen Overlea
Well, Minister, thanks for being here on Politico Tech.
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Francois Philippe Champagne
That was very good. Thank you very much. And Merry Christmas to you and your family and happy holidays to everyone.
- [23:02]
Stephen Overlea
That's all for today's Politico Tech. If you enjoy Politico Tech, please subscribe. And for more tech news, subscribe to our newsletters, Digital Future Daily and Morning Tech. Our managing producer is Annie Reiss. Our producer is Afra Abdullah. I'm Stephen Overlea. See you back here tomorrow.