The Tariff Thread

[Manhattanboy]

Someone sent this to me. Don’t know much about the author, but well said:

“ BY MARCEL LEBRUN

The Day American Trust Died

We can analyze and debate the harms or benefits of tariffs on both the American and Canadian economies, but something far more significant has happened:

The withdrawal of trust.

Canadians are angry today because a trust has been broken. That’s understandable.

But I would argue that it is Americans who have suffered the greater loss.

Americans, who cherish liberty and freedom, have just had two of their fundamental freedoms taken away.

First, the freedom to trade. Once, Americans were free to buy and sell from anyone in the world. Now, they face artificial barriers—a tax on their choices, an economic fence around their markets.

But that is minor compared to the far greater loss: stability and trust.

The freedom to make a commitment and be trusted is the bedrock of business success. Trade relationships depend on trust—trust in systems, laws, and reputation. Now, American businesses find the rug pulled from under them.

They have lost the freedom to make reliable commitments to the world.
They have lost the freedom to be trusted.

Stability is replaced by uncertainty—a president with no boundaries, who governs by whim and intentionally uses and creates uncertainty. This is a massive blow to trust in American businesses and their standing in the world.

Look at any country where trust in business or government is low. They struggle economically. Corruption flourishes. Investment dries up.

Investors seek one thing above all: trust.

Yes, the President’s actions are harmful to Canada and the world. But with trouble comes opportunity.
• An opportunity to double down on trust.
• An opportunity to innovate, to create solutions that might not have emerged otherwise.
• An opportunity to strengthen—not weaken—our core character and identity.
• An opportunity to respond with peace, confidence, kindness, and resolve.

Canada, let’s make trust the foundation of our actions and responses. Let’s not lose ourselves, compromise our values, or get distracted trying to “get even” with a bully.

Instead, let’s expect trouble (without liking it), use it to innovate and create value, and step forward as the trusted partner the world can rely on.

Trust.”

[SebC]

Originally Posted by Strange Brew

Lots of reasons for trade imbalances. The population of a country impacts both its exports and imports and the smaller country isn't necessarily going to have a trade surplus.

The biggest reason for the imbalance right now is that the American economy is outperforming Canada, so Americans have more money to spend.

Trudeau is right though. Canada is probably the best choice for the Americans to have a trade imbalance with. And it's not even that big, mainly due to energy. The imbalance has grown since the pandemic as the US economy has boomed.

Population is kind of relevant. Our imports are more tied to our population than our exports, as our exports are partially driven by land (and therefore resources). With a higher population we would both consume more of our resources internally and have higher demand for foreign goods. Not that would necessarily be a net positive thing for the USA.

[TrentCrimmIndependent]

Uhhh. Our fruit loops, for one.

[Strange Brew]

Originally Posted by SebC

Population is kind of relevant. Our imports are more tied to our population than our exports, as our exports are partially driven by land (and therefore resources). With a higher population we would both consume more of our resources internally and have higher demand for foreign goods. Not that would necessarily be a net positive thing for the USA.

It's about the relative amount of imports/exports. Even with their natural resources, Canada had a trade deficit with the US as recently as 2016 to 2020.

The recent surplus is all about energy. Pipeline expansion and the US refinery capabilities are two of the big reasons. Honestly though, not hard to see a world where this could change. Just not because of tariffs though.

[GGG]

Originally Posted by TrentCrimmIndependent

And the unfair trade deficit.

How do you expect a nation with 1/10 of your population to import more than you do.

There's a fraction of people there to buy the products lol.

The trade deficit being a problem is a myth. We have a slight surplus if you don’t count the oil and gas we ship them which is essentially a flow through credit that they mark up $10 a barrel on.

Essentially they generate a trade surplus with other nations by selling our oil and a trade deficit by buying our oil. This transaction is a huge win for them.

Tombes discussion on the topic
https://thehub.ca/2025/01/22/trevor-...better-option/

[butterfly]

Originally Posted by butterfly

Build powerful infrastructure to all three coasts that will be the envy of the world. No NIMBYs, no lifelong environmental studies with obvious denials, no negotiating. Get it done.

They will never do this, but that's the way out of it.

Build oil refineries that can do 2 million barrels per day. How many of the top 20 yielding oil refineries in the world are in Canada? Zero. And a pipeline impasse. I mean...wow.

Lead the world instead of sitting around moping about Donald Trump. What will happen when there's an intelligent president who is hostile to Canada?

[Manhattanboy]

Beer. We do beer better. Much better.

[Doctorfever]

So this whole tariff and boarder drugs stuff is all smoke and mirrors.

The goal of Trump is to devalue the Canadian dollar so our goods are cheaper for the US to purchase.

My opinion.

[Strange Brew]

Originally Posted by GGG

The trade deficit being a problem is a myth. We have a slight surplus if you don’t count the oil and gas we ship them which is essentially a flow through credit that they mark up $10 a barrel on.

Essentially they generate a trade surplus with other nations by selling our oil and a trade deficit by buying our oil. This transaction is a huge win for them.

Tombes discussion on the topic
https://thehub.ca/2025/01/22/trevor-...better-option/

US does not have surplus with other countries, it runs a massive deficit. But cheap Canadian oil doesn't seem like a bad thing for the US, I agree.

I read his article. His suggestion is that a stronger Canadian economy results in higher CAD, fewer exports, more imports and a trade deficit.

Everything goes in cycles. Long term trade deficits at some point correct themselves and vice versa. No one has really cracked the code on the perfect balance or else we would never see recessions, inflation etc.

It's a complicated ####ing world. Made more complicated when some of the largest economies in the world don't operate under free market principles.

Everyone who claims to know how to "fix" things is full of it.

[GGG]

Originally Posted by butterfly

They will never do this, but that's the way out of it.

Build oil refineries that can do 2 million barrels per day. How many of the top 20 yielding oil refineries in the world are in Canada? Zero. And a pipeline impasse. I mean...wow.

Lead the world instead of sitting around moping about Donald Trump. What will happen when there's an intelligent president who is hostile to Canada?

Are you aware of how the economics of shipping refined products work?

[GGG]

Originally Posted by Strange Brew

US does not have surplus with other countries, it runs a massive deficit. But cheap Canadian oil doesn't seem like a bad thing for the US, I agree.

I read his article. His suggestion is that a stronger Canadian economy results in higher CAD, fewer exports, more imports and a trade deficit.

Everything goes in cycles. Long term trade deficits at some point correct themselves and vice versa. No one has really cracked the code on the perfect balance or else we would never see recessions, inflation etc.

It's a complicated ####ing world. Made more complicated when some of the largest economies in the world don't operate under free market principles.

Everyone who claims to know how to "fix" things is full of it.

That ignores the financial inflows that the US gets as a result. Everything has to sum to zero.

[butterfly]

Originally Posted by GGG

Are you aware of how the economics of shipping refined products work?

Maybe we should ask India, Venezuela, and Korea who lead the world with their refining facilities conveniently located right on their respective coasts.

[Strange Brew]

Originally Posted by butterfly

They will never do this, but that's the way out of it.

Build oil refineries that can do 2 million barrels per day. How many of the top 20 yielding oil refineries in the world are in Canada? Zero. And a pipeline impasse. I mean...wow.

Lead the world instead of sitting around moping about Donald Trump. What will happen when there's an intelligent president who is hostile to Canada?

Why not add computer chips, clothing, movies and shows, cars and airplanes...

You can't build everything.

It's one planet. Free trade and cooperation is the name of the game, just won't always be easy.

Long term, the answer is to make sure Canada remains innovative and competitive. If the best and brightest don't want to live somewhere, that becomes a problem eventually.

[TrentCrimmIndependent]

Sure, but at the same time I don't see Trump as being the type that's able to keep his real intentions under wraps if there was a specific ulterior motive that required such outlandish smoke and mirrors.

I think there's an equally good chance that he's doing things for the sake of doing them and running with narratives he made up or heard from someone in his inner circle and is finding out the consequences along the way.

We may be overestimating the method to the madness.

[Strange Brew]

Originally Posted by GGG

That ignores the financial inflows that the US gets as a result. Everything has to sum to zero.

What do you mean?

Trade deficits and surpluses exist, trade does not sum to zero for individual countries.

[butterfly]

Originally Posted by Strange Brew

Why not add computer chips, clothing, movies and shows, cars and airplanes...

You can't build everything.

It's one planet. Free trade and cooperation is the name of the game, just won't always be easy.

Long term, the answer is to make sure Canada remains innovative and competitive. If the best and brightest don't want to live somewhere, that becomes a problem eventually.

I agree wholeheartedly. But start with the low hanging fruit to reduce vulnerability to something like this later.

There's no earthly reason Canadians should be relying on 1960s infrastructure. And why is the productivity so lackadaisical when it has been booming since the Biden years here (chart on prior page of the thread)? Italians are more productive than Canadians now.

[GGG]

Originally Posted by butterfly

Maybe we should ask India, Venezuela, and Korea who lead the world with their refining facilities conveniently located right on their respective coasts.

Your getting close to figuring it out.

[DoubleK]

Originally Posted by EldrickOnIce

We are probably pushing the limit of what are acceptable personal attacks. I think we can be better than this

Dude... I've gone from being not progressive enough to being not conservative enough in the span of a few months.

This is nothing.

[GGG]

Originally Posted by Strange Brew

What do you mean?

Trade deficits and surpluses exist, trade does not sum to zero for individual countries.

The sum of all financial inflows and outflow of a country balances to zero otherwise currencies adjust to make it zero. This is true across all trading partners not each specific one.

Toombes alludes to this affect

For a country with a flexible exchange rate like Canada, trade balances are always offset by financial and capital flows, which means any trade surplus is matched, dollar for dollar, by capital outflows. (That’s not true with respect to each trading partner, to be clear, but it is true overall.)

[opendoor]

Originally Posted by butterfly

Italians are more productive than Canadians now.

No they're not. There is no current ranking I'm aware of that has Italy above Canada in GDP per capita.

And the only reason they're even close to Canada in any rankings is because of PPP adjustments. Because Italy is a place that has had a declining population for over 10 years now, some things like real estate are quite cheap. But having a declining population is not a good thing for a country or an economy. In terms of actual GDP per capita, Canada is about 35-40% higher than Italy.