Can globalist former central banker Mark Carney take the fight to Donald Trump’s tariffs?
It’s the most uneven match up. Canada is betting it all on a former central banker with almost no political experience to take on Donald Trump’s tariffs.
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Globalist, elite, and a green central banker. Mark Carney is the most unlikely figure to lead Canada in an almighty trade war against a street-fighting protectionist, US President Donald Trump.
Carney, a political novice, was overwhelmingly named by the flagging Liberals as the all-or-nothing replacement for Canadian Prime Minister Justin Trudeau, who had lost support and resigned earlier this year.
The Canadians are betting the house on Carney. A formal central banker and a novice politician who now stands between the White House and the potential for their economy to be crushed.
Carney represents a real chance for Trudeau’s tired Liberals to wrestle back an unwinnable election. He is expected to capitalise on the moment and call an election in coming weeks.
On being named prime minster designate, Carney said Canada cannot let Trump succeed.
The stakes couldn’t be higher. At risk is the future of the Canadian economy as Trump wields 25 per cent across the board tariffs. There has been yet another reprieve for both Canadians and Mexicans on carmakers and some other industries, yet Trump has vowed to push ahead.
The Canadians have retaliated with their own tariff on $US155bn of goods imported from the US. However, Canada is so exposed the US economy, that a trade war has the potential to cripple them.
Carney is the polar opposite of Trump in every way.
Both Harvard and Oxford educated in economics, Carney launched his banking career with Goldman Sachs on mostly around bonds and financing.
He headed both the Bank of Canada and became the first non-British governor to head the Bank of England. Carney is an inflation fighter, he is pro-trade; diplomatic; and someone who goes with reason over emotion. There’s a generational gulf – Carney is 59, and Trump is 78.
Carney is cut from the same Canadian cloth as the Rio Tinto chairman and former diplomate Dominic Barton, or BHP’s intellectually-charged leadership team of chair Ken McKenzie and chief executive Mike Henry.
In Australia, Carney was the more friendly public face of Brookfield’s since-aborted $20bn bid for energy generator Origin Energy. At the time, Carney headed up Brookfield’s global transition fund that promised to take old world polluting assets and turn them into clean green-friendly energy assets.
Even so, at the time former PM Paul Keating saw through it, hitting out at Brookfield as a “profiteering private equity fund”. Despite the tap from Keating, Carney is extremely well-connected in Australian business circles. His handling of Trump will be watched by business and politicians here.
It was during the lead up to the UK’s heated Brexit vote, when as Bank of England governor Carney drew controversy he warned of the likely damage to the economy for pulling out of the European Union. This was seen as straying into politics – a no-go area for central bankers.
In an interview with The Australian in Sydney two years ago, Carney said since the Covid-19 pandemic there had been “a rewiring of globalisation” which has created a supply shock for trade.
“An extreme version of that was Brexit, which absolutely was a supply shock,” Carney said at the time.
“And if I go back to that situation, which I lived through – we said at Bank of England right from the start that in the situation where you get large supply shocks it will have several consequences”.
“One of them is that the economy will slow because the supply capacity is slow. Secondly, that inflation will go up because you’ve had a supply demand imbalance. And thirdly, that it’s likely necessary that monetary policy be tightened. And we said that absolutely, clearly. There were a number of commentators who found that very improbable, but that’s exactly what’s happened on a large scale”. The Bank of England raised the cash rate months after Brexit was enacted.
For a globalist like Carney, tariffs represents another extension of a supply shock.
Is Carney really the one to take on Trump?
To be sure, this is an uneven match-up. It almost seems unfair. Trump is attracted to ruthlessness and power. Carney, with almost no political experience, still faces a contested general election leading a tired government.
In many ways, an opponent like Carney is a very Canadian response to Trump.
For one, Carney is also politically well-connected in Europe which is facing its own battles with the White House. He also has the backing of centralists in the UK.
Carney could make headway to forge an alliance among a pro-trade bloc including Australia against Trump’s tariffs.
He could endlessly frustrated Trump and make pointed inroads into the president’s biggest vulnerability – that is the potential for tariffs to damage the US economy (and the stock market). Whether Trump listens is anyone’s guess.
Star struck
Bally’s might be very late to the Star saga, however like a winning streak that’s come on suddenly, it’s enough to sit up and take notice.
The US casino operator has been stalking Star from a distance since late last year and Soo Kim, the Korean-American behind Bally’s, did his own tour of Star’s three Australian properties last month.
Kim’s $250m financing offer from Bally’s with the promise of more raises the stakes. Essentially, what it does is pit Star’s long-suffering bankers against the equally suffering shareholders. Except it’s the banks calling the shots as they attempt to get certainty on their debt. Shareholders are just along for the ride as Star slices and dices itself to survive.
What has made it interesting, as my colleague Bridget Carter reveals, Star’s bankers haven’t exactly been bowled over by the three-step survival plan.
The deal outlined late Friday threatens to make Star’s existing bankers subordinate under a $250m bridging financing facility offered by New YOrk-based King Street Capital, meaning they lose all security if the later monster refinancing falls through.
Bally’s planned convertible note offer proposes to remain subordinate to existing banks, but by securing as much as 50.1 per cent of Star on the conversion, this crowd out existing equity holders.
And Bally’s would be getting a big chunk of Star, wounded as it is, on the cheap while the banks keep security. The key to Bally’s plan is the Star remaining intact – which puts Brisbane bank in the frame.
Late as it is, Star’s board will consider the Bally’s offer in parallel to the financing deal it has on the table. But even that rescue plan is not sealed and delivered.
But there is a determination inside Star to push ahead with Project Antares the ambitious break-up proposal of chief executive Steve McCann
This would see a clean asset swap with Star’s Hong Kong partners led by Chow Tai Fook, who take all the new multi-billion Queen’s Wharf operations in Brisbane while Star gets to consolidate its position on the Gold Coast, with full control of two new hotel towers.
Under that deal, Star got $32m cash in the bank last Friday night. That was enough to keep administrators at bay for the next few weeks while financing is finalised.
Importantly for Star, the exit from Brisbane solves the biggest problem facing the casino, which is the crushing debt and interest bill as well as future cash injection for the massive project – including a $220m payment at the end of this month.
Bally’s cash offer doesn’t solve the very real cash strains facing Star, although Kim says he’d be happy to “explore alternative structures” that would preserve value for all key constituents, including regulators, creditors, equity holders and employees.
Whether Bally’s, itself a relative minnow, with net assets of $US635m ($1bn) and a market value of $US586m, has the balance sheet muscle to take on Star’s Brisbane woes is another question.
eric.johnston@news.com.au
Originally published as Can globalist former central banker Mark Carney take the fight to Donald Trump’s tariffs?
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