Donald Trump’s remark about Canada becoming the 51st U.S. state with Justin Trudeau as its Governor was laughed off by those attending the recent dinner at Mar-a-Lago.
“In a three-hour social evening at the president’s residence in Florida on a long weekend of American Thanksgiving, the conversation was going to be light-hearted. The president was telling jokes, the president was teasing us, it was, of course, in no way a serious comment,” said Public Safety Minister Dominic LeBlanc.
Was it really just a joke? If so, it’s wearing pretty thin, as Mr. Trump keeps repeating it. He also posted an AI-generated picture of himself standing by a Canadian flag overlooking a mountain range that was supposedly the Rockies. In fact, it was the Swiss Alps. But never mind. Truth has never been one of Trump’s strengths.
Last week, he encouraged the audience at a Fox News event to chant “Fifty-one, fifty-one, fifty-one”. What’s up with that?
Mr. Trump is not known as a great wit. So, when he fixates on an issue, as he is here, laughing it off is a bad idea.
Consider the situation. Mr. Trump is about to start his second term. That means he is a lame duck President. Unless he tries to attempt a coup d’état in 2029, his time in office will end under the rules of the U.S. constitution, which does not permit a third term.
But what if Mr. Trump has something even more ambitious in the back of his mind? This is a man with a huge ego. He wants to be remembered as the greatest president in U.S. history. His actions over the next four years will be calculated to achieve that goal. Exerting complete U.S. dominance over the economies of his country’s two closest neighbors would be a good start for him.
Perhaps he believes that by bludgeoning Canada’s economy into a recession/depression, he can force us to come begging, hat in hand, for admission to his land of milk and honey. He could then be remembered as the president who doubled the geographic size of the U.S. and brought it a treasure trove of petroleum, minerals, agricultural land, hydroelectricity and skilled workers. That would certainly impress historians.
So far, Canada’s response has been disappointing and disunited. Everyone now agrees the threat is real and imminent. But no one agrees on what to do about it. Team Canada is dysfunctional and divided. Ontario Premier Doug Ford talks of cutting off power supplies to northern states. Alberta Premier Danielle Smith says no way. Ottawa hasn’t said anything definitive yet. The Liberals are reviewing the situation, while the clock ticks.
Explainer: Doug Ford wants to cut energy flows to the U.S. How’d that work?
Where is this going? Consider this possible scenario. Trump acts as promised and imposes 25-per-cent tariffs on all imports from Canada and Mexico on Jan. 20. As Mr. Trudeau suggested in Halifax last week, Canada responds with its own tariffs on selected U.S. imports including steel and aluminum. Mr. Trump, instead of backing down, decides to escalate, telling the American people that Canada has been ripping them off for decades and he intends to end it once and for all by eliminating the trade deficit between the two countries, which he seems to think of as a “subsidy”. Note how that word has crept into his rhetoric after he first claimed this was all about securing the border.
John Heinzl: Don’t let Trump’s tariff taunts mess with your investing plan
The inevitable result is that Canada would lapse into a recession as the tariffs force many exporting companies to reduce production or even close down. Inflation could reignite as a sinking loonie combines with our own tariffs on U.S. imports to push up prices on everything from oranges to trucks.
Perhaps the escape hatch from this vicious cycle will be the renegotiation of the United States-Mexico-Canada Agreement (USMCA, NAFTA’s replacement accord), which Trump negotiated, and praised, during his first term. If all three participating countries are feeling the pain, there may be a willingness on the part of the U.S. administration to reach a deal that would allow Trump to proclaim it to be “a beautiful win for America”. Of course, such an agreement would probably be heavily one-sided in favour of the U.S., but it would be better than allowing the trade war to drag on.
And much better than begging Mr. Trump to deign to allow us to join his disunited country.
Whatever happens, it’s going to be a rough year. I reiterate my advice to take profits, especially on export-oriented Canadian companies, and raise cash with an emphasis on U.S. dollars. One low-risk way of doing that is to buy U.S. dollar units of the iShares 0-5 Years TIPS Bond Index ETF (XSTP.U-T). It invests in short-term inflation protected U.S. Treasury bonds and is ahead 4.82 per cent year-to-date.
Gordon Pape is editor and publisher of the Internet Wealth Builder and Income Investor newsletters.
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Publish date : 2024-12-15 19:16:00
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