Trudeau Just Wrote a Check Canadians Can't Cash
The outgoing PM is mortgaging the Canadian economy in an attempt to salvage his legacy.
Let’s pretend you’re a world leader in the twilight of their reign. Due to some unique circumstances, and a conveniently popular family name, you’ve managed to be the face of your political party for nearly ten years. You had a good run, but it’s clear the party is coming to an end and the real political brains behind your regime have lost faith in you.
You’re at risk of getting booted out of office, so in an effort to save face, you announce that you will be resigning in the coming months, giving you just enough time to make one final attempt to burnish your legacy. But then something happens. Your southern neighbor and top trading partner announces they are going to apply tariffs to your goods. This doesn’t come as a total surprise, but there’s not much you can do. You don’t have the time in office to solve things diplomatically and you’ve never really had the intellect for such things anyway.
You might not be able to save the country, but you can save your legacy. So you decide to stir up national pride by placing retaliatory tariffs on your neighbor, knowing full well your own economists and national bank have warned such actions will lead to a recession and trade war you can’t win. But that’s someone else’s problem. All you need to do is ride the wave of jingoistic nonsense until the end of your term, thus securing your legacy as a champion of the people.
If you haven’t figured it out by now, this is pretty much what Canadian Prime Minister Justin Trudeau is doing.
To recap, President Donald Trump announced on Friday he was placing a 25 percent tariff on Canadian imports effective immediately. In response, Trudeau announced retaliatory tariffs on American goods — and in so doing, pushed his country even closer to a recession. But Trudeau won’t be the one holding the bag should the Canadian economy collapse. Oh no. He will be long gone by that point, having announced he will be leaving office in just a couple months.
But should Trudeau continue down the tit-for-tat tariff fight, he will have mortgaged the Canadian economy to secure his legacy. Allow me to explain:
If you’re a Canadian reader, its safe to say based on current polling you probably don’t like Trudeau. If you’re not, just know the Canadian PM has managed to upset just about everyone in Ottawa, ranging from fellow liberals to the Conservatives. This is why he announced he will be leaving office in March. Until around 48 hours ago, he was poised to leave the office on a low note. Now, he’s trying to leave a hero riding a wave of anti-American sentiment. And it just might work unless Canadians get wise to his act.
Here’s the reality: Canada can’t win a tariff fight with the United States. The math simply doesn’t add up. As I explained in this piece following Trudeau’s resignation announcement, the Canadian economy is much more reliant on the American economy than vice versa. More than 75 percent of Canadian exports go to the U.S. market, while more than half of Canadian imports originate in the states.
By placing retaliatory tariffs on American goods, Trudeau has effectively poured gasoline on a fire. While Trump’s tariffs are sure to harm Canadian manufacturers, Trudeau’s tariffs are going to make the many American goods Canadians rely on more expensive. The result will be a shrinking economy plus increased prices, otherwise known as the perfect recipe for a recession.
The Canadian government knows this. And if you don’t want to take my word for it, take the word of the Bank of Canada, who recently published a report analyzing the effects of tariffs on the Canadian economy.
“On the whole, Canada’s trade balance worsens. Together, lower net export volumes and weaker terms of trade lead to a depreciation of the Canadian dollar,” said the report.
Will American consumers feel the bite too? Maybe, but not nearly to the extent Canadians will. The reality is Canadians are all but guaranteed to enter a recession should Ottawa continue down the tariff fight. If the two countries shared a similar GDP, perhaps Canada could hold out, but that’s just not the case.
Here’s the thing, I understand Canadians are pissed off about this whole situation. As a former Canadian turned American, I’m in a unique position to understand both sides. I get it, Uncle Sam has stuck his finger in your eye and you want to fight back. But do not let your wounded pride cloud your better judgment. You are picking a fight you can’t win with an opponent that has the ability to outlast any damage you can inflict and return it back ten fold. You might be riding high on this new found nationalism, but banning Kentucky bourbon and Bud Light from your liquor stores isn’t going to seem so bad ass six months from now when your economy is in full recession with no end in sight.
I’ll end with some advice: If some guy with a Substack and the ability to Google Bank of Canada reports knows you can’t win, I assure you your leaders do, too. They are taking advantage of you to hide the fact they had a pretty big hand in getting you into this whole mess to begin with. Do not jeopardize the future of your economy for years so your has-been prime minister can salvage his legacy.