Signed in Pencil: How Trump's 'Historic' Trade Deals Unravel

0:01 Donald Trump calls them historic trade deals. Mark Carney says they were signed in pencil. Who is right?

0:10 I'm Beau Kaufman. Welcome to The Sanity Project. This discussion began with one phrase from Prime Minister Mark Carney that I could not quite shake. He described America's latest trade deals as being signed in pencil. It was a clever line, but the more I looked into it, the more accurate it became. Deals with Britain, Japan, South Korea, and the European Union were announced with great fanfare, only to be reopened, reinterpreted, or left with important details still unresolved. So, what does that tell us about negotiating with Donald Trump?

0:46 More importantly, what does it mean for Canada as we navigate our own increasingly uncertain trade relationship with the United States? Let's take a closer look. You know, usually when you sign a major contract, there's, uh, there's this underlying expectation of absolute permanence. Right, of course. Like, imagine you buy a house, you sign the mountain of paperwork, the ink dries, you get the keys, and you just start moving your furniture in. The deal is done. Hmm. Yeah, that's the whole point of a contract.

1:15 Exactly. You wouldn't expect the previous owner to show up, you know, 3 months later erase your signature on the deed and announce that they've decided the kitchen actually still belongs to them. Right. Unless you agree to pay an extra 20% on your mortgage or something. Yeah. Which would completely defeat the purpose of having a contract in the first place. The entire concept of a legal agreement is that it serves as the definitive end of a negotiation. It establishes a baseline, right? A baseline of certainty so both parties can actually plan their futures.

1:44 But I mean, when you step into the world of international trade right now, that foundational certainty has essentially just vanished. We're looking at a global economic landscape that is, well, it's incredibly murky. It really is.

Mission & Sources for the Deep Dive

1:58 We keep seeing these massive headlines about historic trade deals being finalized on a Tuesday, only to see the exact same deals threatened with crippling tariffs by the following Friday. So welcome to today's deep dive. We are thrilled you're joining us. Glad to be here. Our mission today is to really decode the reality behind these headline-grabbing trade deals of Donald Trump's second term. And to do that, we are looking at a really comprehensive stack of sources today. We've pulled official government framework documents from the United States, Canada, and the European Union.

2:30 All the heavy reading. All of it. And we are cross-referencing those with detailed foreign policy tracking from the Council on Foreign Relations. And we're tying it all together with a very sharp analytical piece by Beau Kaufman from the Sanity Project. Perfect. And look, before we get going, we are explicitly looking at sources tracking Donald Trump's trade policies, which means we are dealing with highly charged political actions inherently. Yeah, but our mission today isn't to play politics or pick sides at all.

2:58 We're acting strictly as translators for you. We just want to look impartially at these government documents to understand mechanically how these deals are actually functioning, because the central paradox across all these sources is pretty wild, right? How can a trade agreement be publicly celebrated by an administration as finished, only to be reopened, delayed, or weaponized before the ink is even dry?

Mark Carney: ’Signed in pencil’ explained

3:23 Okay, let's unpack this. So the clearest lens for looking at this paradox, it actually comes from a warning issued by Prime Minister Mark Carney. It has essentially become the central thesis of our sources today. I know the quote you're talking about. Yeah. He warned that agreements with the Trump administration are, quote, Signed in pencil. Signed in pencil. That is just a fantastic visual. It perfectly captures the dynamic, right? But we do need to be clear about what Carney actually meant by that phrase.

3:49 Right. He wasn't saying they're completely useless. No, not at all. He wasn't saying these deals are totally meaningless or just empty political theater. An agreement signed in pencil does offer real, tangible, temporary relief for businesses operating under the threat of tariffs. Okay. But it lacks lasting certainty. Because Donald Trump's approach to trade is fundamentally, unapologetically transactional. I mean, he treats them like running negotiations. Exactly. He routinely attempts to rewrite or reinterpret the terms of a deal whenever his political priorities or just the domestic economic winds decide to shift.

4:25 So the pencil gives your supply chain a break from tariffs today, but there's always a massive eraser sitting on the Oval Office desk for tomorrow. That is the reality of the situation. And to really understand how this eraser actually works in practice, we have to establish a taxonomy of trade deals. Yeah, let's lay those out, 'cause I suspect this is where the public misunderstanding really begins. Definitely. The core of the confusion in the media right now lies in how casually we throw around the phrase trade deal.

4:51 Our sources break down these recent international arrangements into 4 distinct tiers. Okay, what's Tier 1? Tier 1 is your fully ratified freight agreement. This is the heavyweight category. Think of the USMCA, or CUSMA as it's known in Canada. The permanent ink. Yes, the permanent ink. A Tier 1 agreement has detailed legal obligations, binding dispute resolution mechanisms, and crucially, it requires formal legislative approval from the lawmakers of every single participating country. Right. Congress has to sign off on it.

5:21 What's Tier 2? Moving down, Tier 2 is a political framework. A framework might identify some mutual goals or, say, temporary tariff rates, like a baseline cap of 15%. But it leaves massive critical details to future negotiations. Okay, got it. Then Tier 3 is an investment memorandum. This documents serious financial intentions between nations, but it does not carry the binding legal force of a ratified treaty. Basically just saying we plan to spend money. Pretty much. And finally, Tier 4 consists of corporate expressions of interest.

5:53 This is essentially private companies saying they might build a factory someday. Hold on, I have to jump in here and challenge this classification. Are these Tier 2 and Tier 3 arrangements genuine trade deals? Well, it depends on who you ask. Right. But are they, or are they merely temporary political understandings disguised as treaties for a press conference? Because calling all 4 of these things trade deals, I mean, it feels a bit like calling a napkin sketch, a building permit, and a finished move-in-ready house the exact same thing.

6:22 That's a great way to put it. You wouldn't move your living room furniture into a napkin sketch. The Council on Foreign Relations tracker would actually agree with your skepticism there. Their data shows that many of the agreements negotiated during Trump's second term, particularly those prompted by his sweeping Liberation Day tariffs in April 2025, they fall squarely into the napkin sketch and building permit categories. Wow, so they're mostly Tier 2 and 3. Yeah. By using frameworks and memoranda, the administration deliberately bypasses Congress.

6:53 They leave huge areas of economic policy entirely open, and they include specific clauses that allow for rapid unilateral termination. So we've seen the theory of this taxonomy, but how does this napkin sketch strategy actually hold up when it collides with the real world? It gets messy.

Europe case study: UK fragility

7:12 I bet. Let's look across the Atlantic at Europe because the fragility of these term sheets seems to be causing absolute chaos over there. The United Kingdom provides probably the most glaring example of this fragility, largely because the US government's own documents basically contained a warning label. Really? A warning label? Essentially, yeah. Yeah. In May 2025, the US and the UK announced what was billed globally as a historic economic prosperity deal. Oh, I remember the headlines for that.

7:43 But when you actually read the source text, it was what, like a 5-page term sheet? 5 pages. To put that in perspective, a standard software terms of service agreement you click accept on is usually longer than that. That is wild! And this document explicitly stated that it, quote, does not constitute a legally binding agreement. The mechanism for ending the deal was incredibly simple— either country could terminate it just by giving written notice. So, no congressional approval, no tribunals, just an email saying we're done.

8:11 Exactly. Now, it did provide some real, immediate preferential treatment for British automotive exports, so it wasn't a fake document. It did something. Right. But because it was so structurally weak and easily modifiable, non-trade politics instantly infected it. This brings us to the Greenland dispute, which feels like it was pulled from a political satire, but it actually happened. It really did. In January 2026, the Trump administration threatened the UK with a 25% tariff over a completely unrelated, highly publicized diplomatic dispute concerning Greenland.

8:46 Over Greenland? Yeah. And the administration dropped that specific threat a few days later, but fast forward to April, and the White House threatened the entire trade arrangement again. This time over the UK's foreign policy approach toward Iran. So, the deal didn't become erasable due to some unforeseen trade crisis. The eraser was built into the structural design from day one. It was a feature, not a bug. It's like updating your relationship status to it's complicated on a macroeconomic level.

9:12 And we saw a variation of that exact same dynamic play out with the European Union, but the mechanical breakdown was a little different. How so?

EU framework and tariff ceiling

9:20 In July 2025, the U.S. and the EU agreed on a political framework that established a 15% tariff ceiling on most European exports, including their massive auto sector. Which was a big deal at the time. Huge! At the time, European leaders, particularly Commission President Ursula von der Leyen, heavily touted this framework as a return to stability after months of relentless tariff threats. Wait, I have to push back on von der Leyen and the European leadership here. Go for it. How is it stable if the central concession of a deal can be weaponized with a tweet?

9:54 Did the EU genuinely believe this was secure, or were they just buying time? Because, you know, you can't build a billion-dollar car factory based on a tariff rate that might change next Tuesday. They were likely buying time. But they were also trapped by their own structural mechanics. What do you mean? Well, the European Commission can negotiate a broad framework with the United States, but von der Leyen cannot instantly rewrite the domestic laws of 27 sovereign member states overnight. Oh, right, the 27 countries.

10:23 Yeah. Ratifying trade concessions across the EU requires navigating 27 different legal systems, domestic parliaments, and local political climates. That kind of legislative friction takes an enormous amount of time. And Washington wasn't exactly willing to wait for European democracy to grind its gears. Precisely. While the EU was navigating that complex democratic process to formalize the deal, Trump accused them of intentionally stalling and failing to honor the framework. Even though that's just how their government works.

10:55 Right. By May 2026, he issued an ultimatum, threatening to hike auto tariffs back up to 25% if the EU didn't immediately finalize the terms. Jeez. The Council on Foreign Relations concluded from this that reaching a settlement no longer guarantees predictability. The settlement just establishes the starting position for the next round of threats. Wow. So we've seen how easily a lightweight term sheet can collapse under political pressure or legislative friction in Europe. Right. But what happens when the stakes aren't just tariff percentages?

11:25 But hundreds of billions of dollars in physical cash. Because when you apply this exact same napkin sketch strategy to massive economies in Asia, the macroeconomic cracks get much, much bigger.

Asia case study: Japan investment claims

11:38 Here's where it gets really interesting. The investment numbers promised in the Asian frameworks are almost difficult to comprehend. Let's look at Japan first. Okay. In September 2025, the US and Japan announced a framework where Japan would allegedly invest $550 billion into the United States. $550 billion. The White House presented this to the public as a finished, locked-in commitment that was going to fundamentally rebuild American heavy industry. That is a staggering number. But reading the fine print in our sources, there's a massive amount of assembly required to actually get that money, isn't there?

12:13 A tremendous amount. When you analyze Tokyo's official language surrounding the announcement, it was noticeably softer and highly conditional. Surprise, surprise. Right. The Japanese government clarified that these figures were largely corporate expressions of interest. That's our Tier 4 category from earlier. Ah, the expression of interest. Exactly. The dollar amounts were projections for potential private sector projects in energy infrastructure and artificial intelligence. They were not legally binding sovereign contracts for $550 billion.

12:43 It honestly reminds me of one of those oversized novelty checks they hand out at a charity golf tournament? Uh-huh. Like, it looks absolutely fantastic for the press photo, and you can hold it up for the cameras all day long, but you can't actually walk into a local bank and cash a 3-foot piece of cardboard until a mountain of underlying financial paperwork is fully processed. That is the perfect analogy. And the situation gets even more precarious when you realize who controls the authorization of that novelty check.

13:13 Who is it? Under the terms of the memorandum, an investment committee chaired by the U.S. Secretary of Commerce makes recommendations, and the U.S. President has the final discretionary authority on which specific Japanese projects get funded. Wait, really? Yes. Furthermore, if Japanese corporations decline to fund the specific projects that Washington selects, the U.S. retains the right to reimpose higher tariffs on Japanese goods. Let me make sure I'm hearing this right. It's not a general invitation to invest in America.

13:41 The mechanism is literally: invest in the exact domestic projects we dictate, or we will penalize your exports. That is the underlying mechanism, yes. And if you think the Japanese framework was tense, the situation with South Korea offers a

South Korea: $350B and currency risks

13:54 terrifying look at what happens when political announcements outpace macroeconomic reality. I was reading this part in the sources, and it's wild. It is. In July 2025, an arrangement was unveiled stating: South Korea would invest $350 billion in U.S. industries in exchange for a 15% tariff cap. Trump publicly described this as a massive influx of cash that would be controlled by the U.S. And according to the analysis from the Sanity Project, South Korea essentially immediately hit the panic button.

14:23 They absolutely did. Yeah. South Korean finance officials urgently warned that attempting to produce $350 billion in liquid cash strictly on Washington's timeline and terms Well, it could severely destabilize their national currency. Wow. They actually went on record warning it could trigger a repeat of their devastating 1997 financial crisis. Okay, we need to pause and explain the mechanics of that. Because how does investing in a partner country threaten to bankrupt an entire economy? How do we get to a 1997-level crisis from a trade deal?

14:58 It comes down to foreign exchange reserves and currency valuation. Okay. If you suddenly mandate that South Korean conglomerates drain $350 billion in physical capital out of their domestic system, convert it all into U.S. dollars, and move it across the ocean to build factories in Ohio or Texas, you are creating massive capital flight. Oh, I see. Yeah, that level of sudden currency conversion devalues the South Korean won, it spikes domestic interest rates, and it drains the central bank's foreign reserves, which they desperately need to defend their currency.

15:28 So you are essentially hollowing out their financial system to appease a trade demand. Exactly. That is incredibly dark. You're forced into agreeing to a trade framework to save your export economy from tariffs, but the actual mechanical execution of the deal might physically bankrupt your country. Which is exactly why the negotiations stalled out. The South Korean legislature tried to pump the brakes to protect their economy. Obviously. But in January 2026, Trump accused them of intentional delays and threatened them with punitive 25% tariffs on autos and pharmaceuticals.

16:01 So, they're back to the threats. Right. Seoul sped up their internal legislation, and the White House withdrew the threat. But look at the timeline. By September 2026, more than a full year after this deal was globally broadcasted as a completed victory, fundamental terms were still being actively negotiated. Terms like what? Corporate profit sharing, commercial viability metrics, and even massive nuclear energy investments. So a bargain celebrated as a total win didn't even have its core financial plumbing installed a year later.

16:32 I mean, that completely shatters any normal understanding of the word finished. It brings us right back to your napkin sketch analogy. It is a powerful statement of geopolitical intent, but the actual binding mechanics required to move the money are completely unresolved. Okay. We thoroughly examined term sheets and investment memos, right? But I want to bring this closer to home and look at North American Yeah, let's do it. What happens when we apply this signed-in-pencil reality to an actual, fully ratified, Tier 1 treaty?

North America: USMCA overview

17:02 Let's talk about the USMCA, or CUSMA. This is where the rubber really meets the road for the signed-in-pencil theory. The USMCA is a completely different beast compared to the lightweight frameworks we saw in the UK, Japan, or South Korea. Right, it's actual law. It is. This agreement was heavily negotiated during Trump's first first term. It was formally approved by the U.S. Congress, ratified by the legislative bodies in Canada and Mexico, and entered into force in July 2020. We are talking about hundreds of pages of complex permanent ink.

17:31 Exactly. It dictates everything from dispute tribunals to highly specific rules of origin. Let's define rules of origin for a second, just so we're all on the same page. Certainly. Rules of origin are the technical regulations that determine how much of a product must be manufactured within North America to qualify for tariff-free status. Give us an example. So, if a car is assembled in Ontario, a certain, very high percentage of its steel, aluminum, and internal parts must originate in the U.S., Canada, or Mexico for it to cross the border without being taxed.

18:05 Right. It is the complex mechanical glue that holds the North American supply chain together. It really is. So, we have fully ratified treaty with incredibly detailed mechanical glue. But even permanent ink has an eraser if you look hard enough, doesn't it? It does when the political winds demand one. A defining feature built into the USMCA is Article 34.7. Okay, what does that do? This article mandated a formal joint review on the 6th anniversary of the agreement, which landed in July 2026. During this specific review, the 3 nations had to decide if they wanted to officially extend the agreement's 16-year term.

18:40 So if I'm understanding this correctly, the U.S. administration couldn't legally just cross out a ratified treaty on a whim, so they used the 2026 joint review as a backdoor loophole to force a rewrite. That is exactly the mechanism they used. During the review, the United States formally declined to support a 16-year extension of the very same agreement that Donald Trump himself originally negotiated and celebrated as a crowning achievement in his first term. That is wild. So, mechanically, what does that actually mean for the treaty?

19:10 Did the USMCA just drop dead? No, it didn't expire immediately. The treaty technically remains in legal force until 2036. Oh, okay. However, by declining the extension, Washington started what trade analysts call a decade-long countdown clock toward possible expiration. That sounds ominous. It is. But the long-term countdown isn't even the biggest issue. Refusing the extension instantly injected massive, immediate instability into the North American supply chain. Because everyone is suddenly unsure of the future.

19:39 Right. And even though the core treaty is still legally active, the Trump administration has essentially bypassed it by imposing targeted sectoral tariffs on Canadian and Mexican goods anyway. Wait, if the treaty is active and mandates tariff-free trade, how do they legally justify slapping new tariffs on their neighbors? By utilizing Section 232 of the Trade Expansion Act. Which is what, exactly? Break that down for us. Section 232 is a Cold War-era legal loophole in U.S. domestic law. It grants the president the broad executive authority to impose tariffs on imports if the Department of Commerce determines those imports threaten to impair U.S. national security.

20:18 Ah, so they bypass the trade treaty by classifying Canadian steel or aluminum as a national security threat. Security threat, which allows the executive branch to bypass Congress entirely. That is the mechanical workaround, yeah. Furthermore, Washington recently initiated separate bilateral negotiations exclusively with Mexico, leaving Canada out. Exactly. This maneuver effectively fractures the trilateral integrated approach that the entire North American manufacturing sector relies upon to function.

20:46 So what does this all mean?

Section 232 workaround and bilateral splits

20:48 Here is the ultimate dilemma for a country like Canada. You go through the grueling, multi-year process of negotiating, drafting legislation, and ratifying a massive Tier 1 trade treaty, right? You play by every rule, you secure the permanent ink, but you still wake up every morning checking your newsfeed to see if your largest export market is going to cost 20% more by noon just because of Cold War national security loopholes. Poll was invoked on Twitter. It's a nightmare for businesses. It seems to me the core issue isn't whether Canada can successfully negotiate a deal with Trump.

21:22 The real issue is whether any agreement on Earth is actually dependable the morning after the press conference. Which brings us to an incredibly vital question about sovereign survival. Hmm. How does an export-driven nation like Canada navigate this new environment? What do our sources suggest? Well, the hard truth synthesized across our policy sources is twofold. First, the Canadian government, alongside their newly formed Advisory Committee on Canada-U.S. Economic Relations, they must absolutely stay at the table and continue negotiating with Washington.

Canada’s dilemma & policy recommendations

21:53 Because the American market is simply too massive to ignore. You can't just pack up and leave North America. You can't. But the second, and arguably more critical truth, is that Canada must aggressively adapt. Right. It is more vital than ever for the Canadian economy to fundamentally diversify its global trade relationships. They must rapidly strengthen domestic manufacturing capacity and systematically reduce their total economic dependence on a single, highly unpredictable customer. Because if your entire national economy relies on a contract that is permanently signed in pencil, you are entirely at the mercy of the person holding the eraser.

22:30 Absolutely. The overarching objective going forward isn't to stop trading with the United States. That would be economic suicide. The objective is to structurally insulate the domestic economy. So that a single executive order, a sudden tariff threat, or a late-night social media post cannot inflict catastrophic systemic damage. And for you listening, understanding the mechanics of how these deals are structured and how easily they are dismantled is really the ultimate cheat code for cutting through the daily noise of breaking news.

23:00 It really is. The next time a notification pops up on your phone blaring about a historic new trade deal, you now know exactly what to look for. You won't just look at the massive billions of dollars promised in the headline. No, you'll look for the fine print.

How to read trade headlines — look for fine print

23:14 Exactly. You will ask the critical questions. Is this a fully ratified Tier 1 treaty backed by Congress, or is it a temporary Tier 2 truce? Is this a finished house or just a very expensive, highly erasable napkin sketch? Understanding that taxonomy completely changes how you consume international economic news. It really does. It gives you the X-ray vision to see the actual mechanics at play. And I want to leave you with one final provocative thought to mull over today, something that builds on everything we've analyzed.

23:45 Okay, let's hear it. If the world's largest economy is permanently shifting away from binding long-term trade laws and moving entirely toward short-term, highly transactional handshakes, what happens to the global referee? Oh, that's a good question. Will international regulatory bodies like the World Trade Organization simply become irrelevant, powerless museums of 20th century diplomacy? If the biggest players are just constantly making and breaking bilateral side deals based on political whims, does the global rulebook even matter anymore?

24:18 That is a deeply unsettling yet absolutely necessary question for anyone invested in the future of global commerce. Definitely something to think about the next time you sign a contract and assume the ink is permanent. Thank you so much for joining us on this deep dive. Keep reading the fine print, keep questioning the mechanics of the world around you, and we'll catch you next time. Donald Trump describes his international trade agreements as historic victories. Prime Minister Mark Carney says they are signed in pencil.

24:46 This discussion examined what happened after the announcements involving Britain, Japan, South Korea, and the European Union, and asks what their unraveling could mean for Canada, CUSMA, and our economic relationship with an increasingly unpredictable United States. If you appreciate these types of discussions, make sure to subscribe wherever this podcast is playing. Also, check out our Substack at thesanity.org. Talk to you soon. If you want more facts and less fear, hit subscribe. Check out the next breakdown wherever you're listening or watching.

25:20 Stay sane,