Carney has a huge card, two if he chooses to play them.
The US Is Not Energy Independent
The US is a net exporter of energy (barely), but US refiners are dependent on imports of sour grade crude, mostly from Canada.
In terms of overall trade, the US has a trade surplus with Canada excluding oil which Canada sell the US at great prices.
Trump on the Keystone Pipeline
Back from the Dead
Bridger Pipeline
Trump on the Keystone Pipeline
Truth Social: I have paused the 50% Tariffs against Canada, that were scheduled to kick in tomorrow morning for a three day period, based on the fact that Canada and the U.S.A., subject to the finalization of documents, have a DEAL! The great Keystone XL Pipeline, long ago killed by Sleepy Joe Biden, may be awoken from the grave! Thank you for your attention to this matter. President DONALD J. TRUMP
Aug 18, 2026, 8:15 PM
Canada Has Something Trump Wants and the US Needs
Canada has two things the US wants and needs, oil and auto parts.
Those are enormous cards. Yet, we see the same silly focus and analysis that we had regarding China and Iran.
Historical Incorrect Analysis
- On China, recall the nonsense that Trump held all the tariff cards because the US imported billions more from China and vice versa.
- China responded by shutting off rare earth elements and Trump backed down in a week, called in advance by me.
- Regarding Iran, Trump has declared victory over 40 times. His blockade was supposed to drive them into submission in days, then weeks.
- Now, the blockade is for as long as it takes with the price of diesel skyrocketing.
We see the same reasoning now. But the setup is more like the setup with China, than Iran.
AI models mistakenly look to failed answers that went wrong before, namely how much bigger the US is.
The correct model involves how much pain can TACO Trump take.
Hey Grok
That answer by Grok is flat out ridiculous. Of course there are scenarios. The question is how likely are they.
A Three-Day TACO
Spot Diesel Prices
Spot/futures diesel in the Midwest would spike within hours to 1 day on a full Canadian cutoff, driven by tight distillate stocks (~28 days cover regionally) and 70%+ heavy crude reliance. Retail lags 3-7 days as stations adjust. Refinery runs hold via commercial stocks for ~2-3 weeks before cuts, though diesel yields fall earlier. SPR grade/location limits help. Canada still takes the larger relative hit first.
Again note Grok’s repetitive thinking.
“Canada still takes the larger relative hit first.”
Is a relative hit what matters? Carney has the option to go on Canadian National TV and explain what happened, why he is doing what he is doing and the ridiculous last moment US demands.
Trump faces the ire of every farmer, every trucker, and every auto worker when Canada shuts off diesel and auto parts.
Yet, Grok insists there is no way for Canada to win.
Reflections on AI
“Sometimes you have to push Grok to remember key articles or elements of an argument to get it to see that its ‘factual’ response is off the mark. I have done that both with Claude and Grok and gotten better responses. You have to keep feeding the machine the data until the machine realizes that something being argued is not correct. Never accept anything at face value. It also helps you to gather the data you need to get a logical answer and then continue to press those points.”
Critical Dependencies Not Percentages
There is an obvious risk to my proposed strategy.
But I stick with my assessment, Trump would TACO quickly when faced with an immediate spike in diesel prices to a record.
Don’t Be Stupid
Carney on What Happened
“They made changes [to the deal] including threats on the French language, the Quebec culture and Canadian culture. That is not acceptable.”
The US also demanded a say in Canada’s deals with other countries.
No nation would ever accept that.
A Lose-Lose Proposition
Trade wars are a lose-lose proposition.
I have many times stated that the correct response to tariffs is to lower them to zero no matter what other nations do.
I now wonder if that applies when dealing with an economic madman who does not honor any deal he makes, and always wants more.
The question is moot however, because politically speaking it is impossible to not retaliate.
In this case, only 18 percent of Canadians don’t want Carney to respond.
How Should Carney Handle This?
- Address the nation.
- Announce a cut off in energy supplies to the US.
- Threaten to cut off auto parts delivery if Trump retaliates.
I believe that combo would quickly restart negotiations.
Is it risk-free? No, of course not. But caving in to Trump’s escalating demands is not risk free either.
Piecemeal retaliation is what team Trump is depending on. On a piecemeal approach, Canada suffers much more pain than the US.
This is why Canada needs to respond with massive leverage quickly, figuratively smashing Trump’s face with a brick, and reserving one key card (auto parts) as a threat.
Key question
Q: Does Canada even need to do this, or is a threat on national TV sufficient?
A: I suspect a credible threat would do it.
A Rancher’s Perspective
True Words
Fact Check on Trump’s Claim “Canada Ripped Us Off”
Please see Fact Check on Trump’s Claim “Canada Ripped Us Off”. What’s the Real Story?
For 2025, the total balance with Canada was – 53 billion. But the oil balance was -84 billion. Excluding oil, the US has a goods trade surplus with Canada of 31 billion.
Q: Why exclude oil?
A: Because the US needs Canadian oil and gets it at bargain prices too!
Related Posts
Canada at War with US Says Carney, Why the Trade Negotiations Broke Down
Canadian Prime Minister Mark Carney explains what happened.
Lunatic Talk
Also see Trump Threatens to Use the Military on the US Bond Market. What!?
Trump responds to a reporter’s question with an answer that makes no sense.
This is beyond stupidity. It will NEVER happen.
Carney has already said this option is off the table, as he doesn’t want to risk Canada not being seen as a “reliable” trading partner. To whom, the Chinese??
Which of course is nonsense, as the real reason is because Canada has nowhere else to go with the oil. That’s why the US gets a preferred price. We have nowhere else to go with it. Can’t even move it east-west in any real volume.
This immediately destroys the economy west of Ontario, Alberta moves quickly to separate, which then spurs Quebec separatists to resurrect their campaign, with good reason. Ontario goes into deep recession, auto plants leave, and the Liberals never see power for 12-15 years.
Canadians would soon be begging to be the 51st state if it meant pumping the oil and making car parts again. Mish has no idea what he’s talking about here.
Wow, such over reactions to common trade negotiations. Canada walked away from the trade deal. I am sure they are still talking and will work something out without the hysterics some are proposing.
Actually the Ag Deisel YoY % change component is even more dramatic (as it removed the unchanged tax component). Already “up 99% YoY”!! According to Ag Consultancy Aura Trade:
“Farm diesel hit a record $5.41/gal in USDA AMS Illinois reporting for the week ending May 1, up 95% from $2.77 a year earlier. The Joint Economic Committee minority staff estimated planting-season diesel costs rose 63.2% nationwide, roughly $1.4 billion, with Illinois ($163.2m), Iowa ($151.1m) and Minnesota ($101.7m) taking the largest absolute increases. Anhydrous [amonia – key fertilizer] is still 27% above year-ago. Mid-August diesel is at its highest in a decade heading into the most fuel-intensive stretch of the calendar, so the same shock bills twice in one crop year, once at planting, once at harvest.
…Grain is trying to be repriced upward. The shock is landing almost entirely on the cost side….
What would happen?
The Trump Cult would suddenly pretend to care very much about how bad diesel is for the environment.
The sad part is that even if Canada shut off the oil to get a good deal from Trump, Trump would break that deal in short order, just like he breaks every deal he makes.
Carney was right when he assumed office. The world has changed. Canada can no longer trust the US (just like the rest of the world can no longer trust us). Our partnership has ended. Which is why Carney has spent the last 18 months eliminating inter-provincial trade barriers and signing trade agreements with over 20 countries all around the world. It’s a painstaking, arduous, and necessary task to alter the direction of the Canadian economy and reduce it’s dependence on the US. It will take time.
In the meantime, Carney wants to strengthen the Canadian economy; not weaken it. Whatever retaliation he takes will be carefully considered to exert maximum pressure, with minimum costs.
I doubt he will cut off oil or auto parts. But we will see.
If markets tank this week, Carney won’t have to do much at all because Trump will taco.
Trump tried to screw em at the last minute.
https://deanblundell.substack.com/p/breaking-trump-tried-to-slip-a-snapback
Wasn’t Alberta recently talking about seceding from Canada?
Perhaps they would like to become our 51st state and enjoy protection from the Canadian meenies? They can even keep their name!
Bring in The Duke & Duchess Of Sussex.
So is the first step a pipeline from Alberta directly into the US and the second step fostering unrest and then treating Alberta like our Donbas region?
LOL
Art of the Deal
Don’t forget the US dependency on Canada for Northern Bleached Softwood Kraft (NBSK) Pulp though. You can’t make useable toilet paper without it. It’s our equivalent to China’s rare-earth dominance. We could hit you guys almost literally right in the ass!😂
What companies make bidet’s?
Someone said that yesterday, too, so it must be a thing.
Or someone is trying to make it a thing.
Just as a point of order Mish, you do realize that Grok is the child porn robot getting sued right? I wouldn’t take its word about the sky being blue so the nonsense response on tariffs tracks quite well.
Does Canada want to be invaded by the US? 😊
Given our ‘success’ in Iran, I’d love to see general Hegseth give that one his best shot. Does Canada end up with just Ohio in the settlement or does Michigan go with?
Eh?
Acquiring a Strait appears to be customary based on recent precedent. But maybe a Great Lake counts as a Strait?
The USA failed in Vietnam, Afghanistan, Irak and now Iran. Canada is feeling quite comfortable I’m sure, since they let themselves be guided by reality. A novel concept to the American administration.
What happened on June 19, 2022?
I have no idea.
Remember the South Park episode where they sang “Bomb Canada”? Wouldn’t that be surreal.
Thank you once again taco for showing your stupidity when it relates to any area of importance to the American consumer.
If he has to throw us under the bus to get what he wants then say hello to permanent tread marks across your face.
“Trump responds to a reporter’s question with an answer that makes no sense”
An opinion from Dean Blundell
BREAKING: Trump Tried To Slip A “Snapback” Provision Into Canada Deal. Carney Caught It. Told Trump To F*** Off. Now Trump Is Threatening Military Force.
In April 2025, days after Trump’s “Liberation Day” tariffs, the US bond market did something it’s not supposed to do. Stocks fell, and instead of money running into Treasuries for safety, it ran out. Bonds sold off with stocks. Yields spiked. Within a week Trump folded and paused the tariffs, and he said the quiet part himself: people were getting “a little queasy” about the bond market.
I wrote then that Mark Carney, a man who ran two G7 central banks and steered Canada through 2008, understood exactly which lever had just moved, and that Canada and its allies were positioning around it. Snopes came after me. Canadian Press ran a fact check. The Financial Press rolled its eyes at the idea that a country like Canada could matter to the US bond market.
Eighteen months later, here’s the Treasury’s own data, released this week.
Canada: fifth-largest foreign holder of US debt on Earth. $459.6 billion as of June. More than France. More than Switzerland. More than Saudi Arabia and South Korea combined. In January 2025, when I started writing about this, Canada held $350 billion. Canadian money has been piling into the position ever since, which is exactly what you do if you want a seat at the table when the selling starts.
And the selling has started. Not from Canada, yet. From everyone else. So, Trump did what Trump does yesterday: promised to bomb the shit out of any country that sells US debt.