Mark Carney, World Hero

I’m not in the habit of touting central bankers as heroes, but Mark Carney definitely hit a home-run in his speech at Davos. He called out Donald Trump’s derangement and outlined the basis for a new structure of international relations that does not rely on the United States to play the leading role.

To his credit, Carney did not glorify the old system, acknowledging that in the “rules-based system” led by the United States, the rules were not always followed when it benefited the United States. He didn’t get into the specifics of the violations, maybe his list wouldn’t be as extensive as some of ours, but at least he acknowledged that all were not equal under the law.

But the key point was the recognition that Trump has destroyed the era of U.S. hegemony, and the rest of the world has to adjust to that fact. Carney called on the “middle powers,” which would include Germany, France, the UK, Italy, Japan, South Korea, and Canada, to band together to craft a new system.

Carney has taken big steps in that direction with Canada. He has moved to make new trade deals with Brazil, the European Union, and even Mexico in the event that Trump decides to nix the current tripartite USMCA that is up for renewal this year.

Perhaps most importantly, Carney has moved to strengthen trade ties with China. This both opens up substantial economic benefits and shows the sort of geo-political pragmatism that Canada and other democracies will need in confronting Trump.

On the economic side, China can be a huge market for Canada’s agricultural output, as well as its oil and natural gas, if Trump decides that he no longer wants it. China also can be a major supplier of solar panels, wind turbines, batteries, and electric vehicles.

On this last issue, Carney struck the perfect compromise. While Canada, like the United States, imposes prohibitive 100% tariffs on most Chinese EVs, it agreed to import 50,000 EVs a year with very low tariffs. This is similar to the voluntary export restraint (VER) agreement the United States had with Japan in the 1980s. At the time, high gas prices were causing a massive shift in demand from big gas guzzling U.S. cars to well-built high mileage Japanese cars.

In order to protect the domestic industry, the Reagan administration agreed to accept a limited number of Japanese cars. This gave the U.S. industry time to adjust and begin building higher quality small cars. The Carney deal with Chinese EVs can have the same effect. It will allow Canadian drivers to recognize the benefits of the low-cost high quality EVs produced by Chinese will at the same time providing breathing space for its domestic auto industry to produce EVs, likely in collaboration with the leading Chinese companies.

This sort of deal can also be a model for Europe, which is also struggling with Chinese competition in its auto industry. Unlike Donald Trump, the rest of the world recognizes the reality of global warming. This means that they have a very real interest in shifting as quickly as possible to EVs, while still preserving jobs in their auto industry. This will also raise living standards, as people can buy cars that cost less to buy and far less to operate.

Carney’s deals seem to already be paying off for the country’s economy. It added254,000 jobs in 2025, growth of 1.4%. This would be equivalent to an increase in jobs of more than 2.2 million in the United States, roughly four times what we generated last year. In spite of the drop in exports with the United States, Canada’s exports were 0.5% higher in 2025 than in 2024.

While it is common for pundits to boast that the United States economy has left other wealthy countries in the dust, measured in purchasing power parity terms, Canada’s economy has actually grown slightly more rapidly than the U.S. economy since the pandemic.

This doesn’t mean everything is great in Canada. At 6.8 percent, its unemployment rate is considerably higher than in the United States. But this was also true before the pandemic. Canada also has a problem of high housing prices, which Carney is attempting to address by promoting new construction. The jury is still out on that one, but it is helpful to have someone in charge who can think about these issues seriously.

The other part of this story is that Europe and other democracies need to approach China with the same sort of pragmatic clarity as Carney. China is not a democracy, and it has a long list of human rights abuses. Nonetheless, it is an essential ally in a world where Donald Trump insists that he can do whatever he wants.

If closer ties with China seems troublesome, people should look back to the alliance with the Soviet Union in World War II. No one thought Joseph Stalin was a nice guy, but Roosevelt, Churchill and the rest of the anti-fascist alliance understood the necessity of his role in defeating Hitler. It is unfortunate that we have come to the point where China would be seen as the stable super-power, but we have.

It would be great if Canada and other middle powers, to take Carney’s phrase, can reconstruct a international system of laws, where ideally they will be applied equally regardless of the power of the states in question. Hopefully, they will promote democracy and human rights in practice, not just in rhetoric.

But those are issues that will ultimately be determined down the road. For now, the issue at hand is putting together an alliance of countries that can tell Donald Trump he cannot do whatever he wants around the world. And if he doesn’t like it, maybe he can get his friend at FIFA to give him another peace prize.

This first ran on Dean Baker’s Beat the Press blog.

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