Canada and Mexico plan precision responses to Trump’s tariffs. What about prices and GDP?
Modeling the Economic Damage
The PIIE says Trump’s threatened tariffs projected to damage economies of US, Canada, Mexico, and China
We examine what President-elect Trump’s threats, if carried through, might mean for the economies of the US, China, Mexico, and Canada using G-Cubed, a multi-country, multi-sector hybrid dynamic stochastic general equilibrium-computable general equilibrium model.
We begin with the threat to impose a 25 percent tariff on all goods from Mexico and Canada.
The [lead image] shows that the imposition of tariffs would slow growth and accelerate inflation in all three countries. For the duration of the second Trump administration, US GDP would be around $200 billion lower than it would have been without the tariffs. Canada would lose $100 billion off a much smaller economy, and at its peak, the tariff would reduce the size of the Mexican economy by 2 percent relative to its baseline forecast.
Higher Inflation
However, these figures likely underestimate the real damage to the three economies, which are highly integrated—but asymmetrically, with Mexico and Canada being much more dependent on trade with the US than the other way around. Intermediate goods—especially in motor vehicles—cross the borders multiple times before final assembly. The imposition of tariffs at each stage of fabrication would be disastrous.
In the case of Mexico, exports account for roughly 40 percent of its GDP, and roughly 80 percent go to the US. Approximately 16 percent of national value-added is sent to the US in the form of exports, the most of any major trading partner. In essence, Mexico ships one-sixth of its annual economic output to the US in the form of exports.
Many of those exports originate in maquiladoras within 30 miles of the border. This economic activity is geared to serve the US market, making Mexico far more vulnerable than say a large industrial country like Germany that operates globally and could more easily reorient its exports. For Mexico, a 25 percent tariff would be catastrophic.
Moreover, the economic decline caused by the tariff could increase the incentives for Mexican immigrants to cross the border illegally into the US—directly contradicting another Trump administration priority.
The PIIE said “But there are reasons to believe that Trump will not carry out his threats.”
That was my position as well. And some cooler heads in the administration tried to talk Trump out of action.
But here we are.
Retaliation from Mexico, Canada, and China
Whereas I was sure of retaliation from Mexico and Canada, the PIIE incorrectly thought otherwise.
Figure 2 [above] shows the damage that an additional 10 percent tariff could inflict on the Chinese and US economies. But unlike Canada and Mexico, for which retaliation would be inconceivable, China has retaliated in the past and would likely do so again. For analytical simplicity, we assume that retaliation is tit-for-tat, though China would obviously have other options. Figure 2 also shows the results of a retaliation scenario (dotted lines).
If the US imposed an additional 10 percent tariff on China and China responded in kind, US GDP would be $55 billion less over the four years of the second Trump administration, and $128 billion less in China. Inflation would increase 20 basis points in the US, and after an initial dip, 30 basis points in China. The initial fall in inflation in China is caused by a temporary tightening of Chinese monetary policy aimed at offsetting the depreciation of the Chinese currency.
The PIIE did not estimate the impact of retaliation from Mexico and Canada, so all of the above numbers are undertated.
Global Pain and Targeted Response
The Wall Street Journal reports Canada, Mexico Want America to Feel the Pain of Tariffs Too
America’s neighbors to the north and south are much smaller economies, with their combined gross domestic product equaling just one-seventh of the U.S.’s $27 trillion. The tariffs risk pushing the U.S.’s top trade partners into recession, as both nations send 80% of their exports to their bigger partner. The Canadian dollar and the Mexican peso are likely to weaken against the U.S. dollar.
“Shooting yourself in the foot!” Mexico’s Economy Minister Marcelo Ebrard wrote on X late Saturday, in response to the U.S. tariffs.
Late Saturday, Canadian Prime Minister Justin Trudeau said his country would impose 25% tariffs on more than $105 billion of U.S. goods. A first wave would hit $20 billion of imports from the U.S., including alcohol, coffee, clothing and shoes, furniture and household appliances. A second wave on another $85 billion of goods would include tariffs on cars and trucks, agricultural products, steel and aluminum and aerospace products.
Trudeau warned Americans that jobs in their auto and manufacturing industries were at risk.
“We’ll always do what’s necessary to defend Canada and Canadians,” he said. “We didn’t ask for this, but we will not back down.”
He said that he spoke with Mexican President Claudia Sheinbaum and that the two leaders agreed to work together to deal with Trump’s actions. Sheinbaum said Mexico’s response will include tariff and non-tariff measures, which aides said would be outlined soon.
Mexico’s government is considering so-called carousel retaliation, which would periodically rotate the U.S. products subject to retaliatory tariffs, one official said. This generates uncertainty in U.S. export sectors and has a political impact when hitting sectors such as agriculture that are likely to lobby Congress.
A senior Canadian government official said Canada felt it had to go big in response to Trump’s maximalist approach. The official noted that U.S. tariffs are in some ways like a 2022 border shutdown when truckers protested government Covid-19 measures by blocking border crossings. U.S. auto factories had to quickly halt production.
“The key to retaliation is that they don’t affect your country’s economy and consumer prices, and that your retaliatory duties have an economic and political impact on the U.S.,” said Kenneth Smith Ramos, a former top Mexican trade official.
“Trump is taking aim at Canada and Mexico, but it’s a direct hit on Michigan, Ohio, Indiana, Tennessee, any state where they make autos,” said Flavio Volpe, president of Canada’s Auto Parts Manufacturers’ Association. “It’s impossible to be profitable tomorrow with tariffs on Canadian and Mexican parts. And the only thing more impossible is to replace them within 18 to 24 months.”
Losing Less Is Not Winning
If you lose your right arm and your neighbor loses his left leg, that is not winning.
But some people seem to think so.
One reader commented “Roughly 75-80% of the things Canada and Mexico make come to the USA. Only 24-28% of the things we import come from Canada/Mexico. Can you say leverage?”
I responded “We lose 25% and they lose 75%. Fools label this winning”.
Will Trump Honor Any Deal He Signs?
Trump bragged that the USMCA trade deal he negotiated with Canada and Mexico was the best trade deal in history.
Poof. Now he says otherwise on preposterous grounds. Thus, there’s no reason to believe Trump will honor any deal that he makes, and every reason to believe he won’t.
And it’s the key reason I was skeptical he would act as foolish as he is.
Losing Respect
Real Clear Politics says Trump’s Big Stick Strategy Will Make America Respected Again
What nonsense. One does not gain respect by breaking treaties and punching neighbors.
Similarly, the playground bully is not respected but is feared. RCP confuses respect with fear.
US Exports and Imports
How Should Canada and Mexico Respond?
If I was Mexico, I would respond by cutting off 100 percent of optical, photo, technical, and medical apparatus.
That’s a mere $22 billion in exports. This is something I know quite a bit about, and it would cripple US medical operations.
Alternatively, Mexico could try halting not all auto trade but rather some key part the US auto companies need.
If Canada shut off oil exports, that would cripple US refining operations. But it would also hit Canada hard. I have a detailed post on energy imports and exports coming up.
Note that imports from Canada are $412 billion and exports to Canada are $351 billion. The US imports $132 billion in energy products from Canada.
So, other than crude, the US actually has a trade surplus with Canada, making this aspect of the trade war all the more idiotic.
What About China?
China’s main imports from the US are agricultural products. Perhaps that is what Trump fears by going lighter on China than Mexico and Canada.
But grains are not China’s big threat.
China can easily halt exports globally of all rare earth elements.
China’s Puts Export Curbs on Minerals US Needs for Weapons and Technology
On November 21, I commented China’s Puts Export Curbs on Minerals US Needs for Weapons and Technology
In a warning shot to the Trump administration, China tightens export controls on some dual-use minerals.
China Halts Rare Exports Used by US Technology Companies and the Military
On December 3, I noted China Halts Rare Exports Used by US Technology Companies and the Military
This is China’s advance salvo at Trump tariffs. It comes one day after the Biden administration expanded curbs on the sale of advanced American technology to China.
Also consider a Critical Materials Risk Assessment by the US Department of Energy
According to the analysis, there are six critical materials in the short term, which include cobalt, dysprosium, gallium, natural graphite, iridium, and neodymium. The uses for these critical materials are spread across rare earth magnets, batteries, LEDs, and hydrogen electrolyzers.
There are nine near-critical materials, which include electrical steel, fluorine, lithium, magnesium, nickel, platinum, praseodymium, silicon carbide (SiC), and uranium.
Finally, there are seven noncritical materials including aluminum, copper, manganese, phosphorous, silicon, tellurium, and titanium.
There are 12 critical, six near-critical, and four noncritical materials in the medium term.
The US Department of Energy has placed some of the rare earth minerals we need for weapons systems, windmills, batteries, and aircraft on a critical materials list.
The US gets around those export curbs by importing rare earth elements from other countries.
However, nothing stops China from a complete shutdown of all rare earth elements, and China controls about 80 percent of global supply.
Related Posts
On January 31, I noted Seven Charts Show Tariffs Would Harm the US Auto Industry
The CATO institute does a great job explaining why tariffs on Canada and Mexico would be a very bad idea.
New Tariffs on Computer Chips and Semiconductors
Also note Trump Announces New Tariffs on Computer Chips and Semiconductors
It’s not like we can get advanced chips anywhere else. Thus, US customers will pay more than anyone else in the world for chips, and computers too.
How exactly is that supposed to help the US?
What PIIE Missed
The PIIE estimates of potential economic damage is best described as stagflationary. PIIE lowers GDP of every country and raises inflation in every country.
It’s worse than described because PIIE made the false assumption Canada and Mexico would not retaliate. Nor did PIIE factor in the impact of higher prices for microchips and computers.
Thus, the economic damage to the US is greater than PIIE assumes.
Importantly, the PIIE did not factor in the possibility that Mexico would shut off delivery of medical supply kits, that China would shut off rare earth exports, or that Canada would shut off supply of crude or lumber.
If any of those things happen, but especially a shutdown of rare earths, we are in the realm of instant global recession.
Finally, I do not know how to calculate, nor does anyone else, the global economic costs when signed deals are meaningless.
But don’t worry, I have it on good authority that “Trade wars are good and easy to win.”
If Trump escalates, he can crash the global economy.
China can do that itself with a total ban on rare earth exports.
None can properly assess what the lost of trust in US trade deals might do.
No one can expect Trump to honor any deal he signs.
That might be the most damaging thing.
Rooting for the US to not honor trade deals is sheer economic madness.
There must be a lot of pain to fix the fake economy. I believe he is letting the air out of asset prices and reducing government spending to force lowrr prices in the long run and to justify further cuts in government. The only way to shrink government is by economic calamity. Deflation coming imo.
Just wondering if you have ever lived in a foreign country?
From your posts I sincerely doubt it.
When the Japanese yen increased in value from around 250 yen per dollar to less than 80, the world never went into recession and trade went on uninterrupted.
Granted that happened over a number of years, but the magnitude was much greater than 25%.
Furthermore, in Japan prices of imported goods from the US never went down to reflect the real change in the exchange rate.
We saw maybe a 15 or at most a 20% reduction in some prices and US made items never flooded the Japanese market either.
What did happen was a flood of money flowing out of Japan to buy all sorts of assets overseas along with a huge increase in Japanese tourists overseas.
I can give other examples from other countries as well.
Even today with all sorts of improvement in shipping, information technology,, and finance, trade and goods don’t see instant changes in prices and flows.
What did we miss during Trumps 1st round of tariffs in his 1st term?
Why wasn’t it all doom and gloom then?
Trump must be BS-ing us with his stated goal being the Fentanyl trade reductions or eliminations. That is more directly solved by performing 100% border crossing full inspections. This Tariff thing ain’t gonna work out.
Read section 2 subsection H of the executive order. He’s removing the de minimis loophole for imports so parcels valued less than $800 will now be subject to customs and duties. That’s a big deal for chinese e commerce and bad news for bad guys who have used the loophole to send fentanyl and precursors into the US.
And avoided. And friendless.
“If you lose your right arm and your neighbor loses his left leg, that is not winning.”
It is if you’re alive.
“Trump bragged that the USMCA trade deal he negotiated with Canada and Mexico was the best trade deal in history.”
Is this a mandatory line in every one of your ant-Trump tariff rants?
“If any of those things happen, but especially a shutdown of rare earths, we are in the realm of instant global recession.”
That’s hyperbole
“Alternatively, Mexico could try halting not all auto trade but rather some key part the US auto companies need.”
This would probably be a good thing. Have you seen any of Car Questions Answered on videos YouTube? He’s been covering for month how lots @ Jeep, Dodge & Ford dealers are bursting at the seams with cars they can’t sell.
Well now, Mexico can always sell their products to BRICS.
Surely China needs more global product sold inside China, after all their over productive capacity is nothing, or maybe they are already drowning in product.
Surely India needs another batch of Global production dumped into their hometowns.
Creating unemployment will go over big with Modi or maybe it won’t..
Canada can sell into Europe, after all Europe needs more global product sold inside its economic zones. Who needs German production anyways.
Maybe that economic powerhouse UK can rise up its’ empire and buy in all the worlds overcapacity.
But yeh it is all Trumps fault. Will venture the notion that without US consumption and running huge trade deficits every other house of mercantilism is on very thin ice. Don’t fall in. Waters cold at this time of year.
Speaking of Trump ignorance. His killing of Biden’s IRA for CRITICAL MINERALS IS ABSOLUTELY IDIOTIC, AND VERY COUNTERPRODUCTIVE.
I was a mining analyst for Critical Minerals in Toronto (even the 1st bull to Initiate the secular case for Lithium way back in 2008). Many of these projects still have not made it to production. (Every time China has rattle the embargo sword eventually, they relented before North American (and N.A. owned) have advanced to funding levels. Well SERIOUS DOE and US Gov project and mine analysis w/in the IRA Act had LOANS – NOT GIFTS TRUMP IDIOTS, LOANS.
In Trump’s idiocracy and spite he KILLED THEM ALL. WTH, we don’t have a priority on domestic Critical Minerals? We sure the F do! But now, AFTER EXTENSIVE ANALYSIS AND MODELING WITH NUMEROUS HIGHLY QUALIFIED GLOBAL EXPERTS – AND THEIR PROJECTS, AND J-O-B-S WITH FUTURE USEFUL EXPERTISE – AND NOW TRUMP IS BLOWING UP ALL OF THE NEEDED PROJECTS AND SERIOUS EXPERTS TOO. When he kicks these projects out from under their knees, AND the Experts who’ve spent decades on them, these Critical Minerals projects will implode. And everyone toasted w/ it will say “f’ this, I’m not even talking about it for 4 years – or perhaps ever again”.
Take for instance Novonix. a LEADING Battery inovator w/ Ops in Aussieland, Canada, and 2 U.S. plants under construction. Even Phillips 66 is a multi-round financer. The lead battery tech guy ran the University (Dahl or such) program and started and ran Tesla’s battery innovation in the formative years. NOW Trump’s going to kick them and the financing they have planned years for to the curb?!? GREAT PEOPLE AND PROJECTS WILL BE LONG FRIGGIN GONE AND KICKING THE TRUMP DIRT OFF THEIR HEELS FOREVER.
And it gets worse: Just like Trump’s old business ways of defaulting on his contractors he has Musk doing it to US contractors –
Musk Says DOGE Halting Treasury Payments to US Contractors
Christ, We can’t even trust the Gov to pay it’s bills thanks to these nut jobs. All these we burn will not forget it. See how this digests.
Wow. Thanks so much for your expertise.
I know that these are all serious matters, but I also know I can do nothing about them but observe the train wreck as it happens
Call me crazy. But what a great show!
The Loonie may fall 25% in value to nullify the Canadian Tariff.
Highly doubt the loonie drops that much. And it won’t help US oil imports anyway.
US Stocks and crypto have already lost $1 trillion in futures market, wait till market opens tomorrow. I suspect “circuit breakers” go off immediately but we’ll see.
Nikkei was down 2% last time I checked.
Post a reply here when US Stocks lose say $5T and then I’ll start paying attention. You’re worried because you’re probably overleveraged with all of the options trading you do. It’s fun on the way up, but it’s a bitch on the way down.
I’ve written dozens of comments about being short this market because republican clowns always crash the market: Bush, Trump I, and now Trump II. It’s easy money.
Got SPY PUTS?
KGB. That is what china did to combat tariffs last time. good point but probably not 25%
If goods don’t cross borders, armies will.
Mish, legitimate question here but why do these sites expect GDP to slump?
From a pure math standpoint if Canada – US trade is lets say 400 billion each way and both countries put 25% tariff on their imported goods from the other then that works out to 500 (400*1.25) billion each way. In other words its a net zero at the country (GDP) level.
Yes, individual consumers (and companies) get less for their money and governments in both countries net more (100 billion more per government) so there are winners and losers on an individual level but shouldn’t be at the GDP level unless governments somehow vaporize that revenue (which you know they won’t do, they will spend it same as consumers would).
In Canada where I live people are looking out to avoid buying made in America products out of anger at the US tariffs. People will pass up the Florida oranges and buy them from South Africa or Peru instead. US businesses exporting to Canada products that can come from other countries can expect to lose millions of Canadian customers starting this week. If the tariffs stay long term Canada will develop trade relationships with other countries.
Tariffs are recessionary.
Think back to smoot Hawley
Geez, the world was quite different when Smoot-Hawley was
enacted and the circumstances today are completely different.
Almost all of the comments here on the subject are 100% ridiculous and divorced from reality.
Did the US enter a recession when Trump’s tariffs were enacted during his first term?
No, I don’t think so.
Yes the world is different
But Trump wants to make tariffs great again as in 1800
Both you and Trump need to figure out how stupid that is
Bastiat’s principle of TWISATWINS applies. Humans don’t respond like linear models. The DSGE models are absolute garbage, not applicable to systems where humans modify their behavior in response to complex changes. This is gonna get messy.
That said, the impact on fuel prices will generally be negligible since the U.S. is fundamentally self-sufficient in energy resources.
The issue of border security is bigger – the new U.S. government was elected with a mandate to shut down not just illegal immigration but also the fentanyl crisis. The whole drug crisis has become a leading cause of death, and is the largest cause of preventable death. If I believe what I’m hearing, the chemicals are coming from Asia, including China, and entering the U.S. via Mexico and Canada. I don’t expect China to change their behavior (they want blood payback for what the Brits did to them with opium), but if either Canada or Mexico is not on board with our need to protect our citizens from a leading cause of death, then they aren’t being true allies.
“That said, the impact on fuel prices will generally be negligible since the U.S. is fundamentally self-sufficient in energy resources.”
Totally incorrect
I have a report on that tomorrow.
I read your followup and it’s estimate of a 4% impact on prices. That increase is not allowing for any TWISATWINS market adjustments. The actual impact will therefore be smaller than 4%. For instance, demand is likely to continue falling as older, less efficient vehicles are replaced, especially with immigration slowing dramatically.. Even a 2% change in gas prices is in the noise historically. So I stand behind the conclusion that “impact on fuel prices will generally be negligible” for the U.S.
PIIE fears the worst after “using G-Cubed, a multi-country, multi-sector hybrid dynamic stochastic general equilibrium-computable general equilibrium model.” Wow! Am I impressed. Yet I get better answers just using Lotus-1-2-3. But what do I know?!
PIIE probably used 17 economists. I used 2 stray cats – legal immigrants, but stray ne’ertheless. Lets re-visit in 6 months. Wait until the Dems have stopped screaming from the 200 EOs and firings the Tangerine Tornado squeaked through in his first 2 weeks. “Where’s Joe Biden when we need him”? (Laughter follows). No illegals are coming in anymore – must be something in the air.
” must be something in the air.”
yeah winter.
Dow futures down 600 points on open this evening. Paging Midnight…paging Midnight… Anyone know where Midnight is these days? I want to ask him how he likes them futures apples.
https://www.cnbc.com/2025/02/02/stock-market-today-live-updates.html
Can’t wait for Asian markets to open. I am gonna make a killing. The money train is here, all aboard!
Everyone in a Berwyn bungalow will be jumping out their basement windows just like in 1929.
I’ve been looking at the impact of these tariffs on me. I keep hearing food but I’ve been getting almost everything from local farmers for over a decade so food isn’t a concern. Fuel, I barely drive. New purchases, I have an arsenal of tools so most things I fix or look for things that need minor repairs. Investments, I’m mainly in real estate these days. Almost no exposure to the markets. I got into real estate because of the markets. I had some assets seized that were in emerging markets (Russia).
I get that I’m not most people, just pointing out that some people the impact is next to nothing. The only thing that comes to mind is Harbor Freight but that stuff is already dirt cheap. Sometimes I feel guilty because it is so cheap.
You think if the price of vegetables go up 100% your local farmers will be content to accept half the price they could get?
Thats cute
Lots of people here can’t think beyond one dimension, A few manage to work their way up to binary thinkers. And just a fraction get to three dimensions.
I pay an annual flat rate. I just paid it so I have another year to address it so no. They won’t be raising them on me. This includes beef and poultry. You should look into in your area. It’s not cheap so you likely can’t afford it though.
I thought the USMCA was the greatest deal in the history of deals? Were we being taken advantage of when that deal was struck or just now? What has changed?
4 years under Biden. did anything change?
So what about the USMCA did Biden change?
Canada will respond with a conservative Prime Minister that will make a DEAL with Trump.
Mexico, on the other hand, will have no such luck.
I hate to say it but at the rate we’re going Trump may help elect another Liberal government in Canada. The Trump and (now USA) hate runs deep in this country.
I read all of these comments on other Forums like Fox News, ZeroHedge etc. with comments that say F*CK Canada, we don’t need anything from them etc etc. I’m not sure that Americans realize the unbelievable damage that could potentially be done not only to American Exporters but to our Relationship as Trusting neighbors who have called each other friends for over a Century. Never in my life has the thought even remotely crossed my mind to stop buying anything American until now, I never even dreamed we would ever get to this point?
I was taking stock of the large items I own and it surprises me just how much we really don’t need any American consumer staples. My vehicles, Audi and Toyota, my TVs, Sony and Hisense, Samsung phone and Tablet, LG Washer and Dryer, Samsung Fridge, Breville Microwave and Convection Oven, my Laptops, MSI and ASUS the only large items that would be American are a new Frigidaire dishwasher I bought a year ago (I could have bought Bosch or LG or Samsung etc) to replace an 11 year old LG and a leather recliner bought 2 years ago from Costco so probably US made.
At the grocery store this weekend for the first time ever I took notice of labels, almost everything is either from Canada with a mix of a smaller amount of US, EU etc items but it just duplicates the product. The vegetables, lots from Mexico, Central and South America. The only thing that seemed predominantly US was lettuce whole and the pre-cut packages. Oranges were from the US but also from South Africa and Madagascar. Potatoes, onions, apples were a mix of US and Canadian, some Mexico. All of these items in Summer become mostly Canadian from our local farmers.
Other miscellaneous items for example a few years ago I bought a Milwaukee Compound Mitre Saw and a Dewalt table saw but why do I need to buy US Milwaukee or Dewalt tools when I can buy the exact same tools from Bosch and Makita for the exact same price? Everything the US makes so does the EU, Asia etc and our stores carry them all. But it’s never crossed my mind to not consider US made? The only exclusive US items I can think of from a Consumer perspective are computer parts, my Desktop MB is ASRock (Taiwan) but the CPU is Intel and the GPU Nvidia obviously both American.
I’m sure there are lots of miscellaneous US made items that I use, that are in my house construction etc but again many of these items are interchangeable with other brands that are not American and can be substituted.
My point in saying all of this is because of what Trump is doing he is focusing the attention of Millions and Millions of Canadian and Mexican Customers to maybe purposely start buying non US made alternatives. He’s done this now for Canada and Mexico and pissed us off to unbelievable levels, wait until he starts pulling this crap on the EU, the BRICS etc. The US will be an Island on its own.
Again, I don’t want to be in the position of not buying American because of Trumps actions because I know when Millions of us do this it’s going to hit and hurt millions of Americans that had no say in the matter and strongly disagree with his action but if this stretches out and damages our economy substantially than there’s no question I will stop buying everything and anything American and I’m sure at that point our Nation will start looking overseas. A Couple of Years ago Germany approached Canada hat in hand offering to pay Billions and Billions for an Energy agreement, that’s where Canada will start looking.
It’s sad we are at this point now, Trump could have sat down with Canada and said this is what needs to be done Border Security etc but a week ago nobody even knew if he was serious. And instead of Diplomatically working this out with Canada and Mexico he immediately comes out with a club!
“…but a week ago nobody even knew if he was serious.”
Now that we got your attention, why don’t you be a good little neighbor and tend your border.
You are wrong, we do not control over people leaving Canada. That is your problem, always has been. Tha Canada checkpoint doesn’t even exist for people leaving at any border crossing. Just as I can leave USA without any checkpoint. You have your orgainized crime to fight, admittedly so do we.
So we should send five million illegal immigrants over the border to Canada. It would be a lot cheaper for us. Since you don’t care about our border we don’t care about yours either.
The border has security on both sides;
The Canada Border Services Agency (CBSA) is responsible for what comes into Canada, and U.S. Customs and Border Protection (CBP) is responsible for what comes into the United States.
Sounds like it’s the US security that’s the problem.
Canada’s problem is Trudeau just like our problem was Brandon.
We fixed out problem. Now, it’s Canada’s turn.
Trudeau should have already stepped down.
Lol! He already did step down. The Liberal party is now running a leadership race to replace him. And he would have disappeared from public view if Trump hadn’t decided to break the “greatest trade deal ever” and start a trade war. Too funny.
I am really enjoying this show!
He doesn’t leave office until 3/24, so he’s technically still in charge to some extent.
So you are for Canada exporting fentanyl and immigrants to the US? It’s a good money-maker for some Canadians. What it does is to put you into the same category as Mexico. Congratulations.
The issue isn’t Canadian controls on the U.S.-Canada border. The issue is Canadian controls at its own ports of entry to the rest of the world.
That is – how did so many people transit thru Canada illegally, on their way to the United States?
To your point, a couple of years ago I crossed from Detroit to Windsor for a business meeting in Toronto. The Canadian authorities had me go into an office to prove that I wasn’t there to take anyone’s job, who I was going to meet, business cards, emails, itineraries. Took over an hour, not kidding. On the way back crossing from Sarina, Ontario to Huron, MI, the U.S. guy was concerned about what I may be smuggling. I showed him an empty M&M peanut candy wrapper in my shirt pocket.
Taking someone’s job?
Smuggling what?
When you’re politely asked to stop the illegal flow of your people into the US and you chose to do nothing, that’s the same thing as condoning it.
Condoning your people to illegally enter the US can be considered an invasion, an act of war. What kind of “ally” are you really? Be thankful the US is only imposing tariffs.
F-ing ignorant Canuck
I apologize for that last comment. It’s not you. It’s your govt. I have family in Canada and they want illegal immigration and drug trafficking stopped too. I would hazard to guess the far majority of Canadians are in agreement.
Not only condoning the invasion, but the dealing of deadly drugs too.
You are delusional. Why are we here? You mention the tariffs but don’t address illegal immigrants and drugs crossing the border. If you took care of business instead of shitting on America then there would be no tariffs. Can’t wait to see your next post when Trump escalates, which I hope he does.
Moi made a very good point. I agree with him perhaps somewhere between 40-80% of the time. I don’t have a tally other than I know I sometimes disagree.
If Trump escalates, he can crash the global economy.
China can do that itself with a total ban on rare earth exports.
Finally, none can properly assess what the lost of trust in US trade deals might do.
No one can expect Trump to honor any deal he signs.
That might be the most damaging thing.
Rooting for the US to not honor trade deals is sheer economic madness.
What drugs & aliens? Is the net flow from Canada to the US larger than the other way around? Do any countries control their borders for outflows?
No. Countries check what comes in, and apparently the US is not up to its job and thinks the Canadian Border Patrol should be working for the US?
You are the delusional one.
The tariffs have to consequences. First, the central bank clown already preventively cut interest rates, so the Canadian dollar crashes, and items you buy from Asia are prices in US dollars.
The second part is counter-tariffs to spite the US on products Canada doesn’t even make.
The estate sales where the Millennials are practically giving away Boomer stuff they have no idea about to the Xers are the best deals for hand and power tools.
Yes, Trump wants to make the best trade deal in history even better. Four years of Biden made some forget that is what all presidents should do. Reminds me of a UFC fighter who packs on ten pounds to contend for another championship belt.
Let’s give our Champ Champ Donald Trump credit for going to battle for the American people.
I will join you in celebrating that. There is no question you did what you needed to do. It’s just that Trump is so angry this time… Wasn’t expecting that, but I suppose given what he was put thru along with the country in general, it is understandable.
Nobody knows the impact so leave it to “economic experts” to pretend that they know. Consumer behavior will change, currencies will change and Trump will change his stance once China, Mexico and Canada fall in line.
We will not.
““But when they say that Ukraine, during the war, received 200 billion to support the army, etc., this is not true. I don’t know where all this money is,” Zelensky said.”
Anyone check in Schumer’s sock draw?
Now that DOGE has the U.S. Treasury payment records, they should be able to Follow the Money.
The Trump/Vance regime will rule the US in the next 10Y/12Y. What Trump is doing now will improve our lives in the next decade under Vance.
Tariffs will have no impact on CPI. The statistink bureau and the central banks have devised clever magic to make inflation disappear.
You might want to research the history of tariffs and their impact on the global economy.
Why is Trump so concerned with the Fentanyl trade? If people want to risk killing themselves for a high, why not let them?
He didn’t seem concerned in 2016 but everyone knows it’s a cover to break the greatest trade agreement ever done. He’ll come up with all sorts of fanciful reasons to break agreements with all nations from around the world.
It all comes back to the passivity of the drooling fan base. We’ll see how far these frogs will allow themselves to be boiled.
“Conservatives” used to applaud something called “individual responsibility.” Also we created this system to rein in a king. Now it is, let the strongman sort it out, as long as the consequences fall elsewhere. Well, I will let grocery prices speak an answer.
It’s a leading cause of death, a major source of political corruption, and a major political issue on which the U.S. populace gave the incoming administration a huge mandate.
He doesn’t care about fentanyl. It’s just the excuse he needs to declare an emergency, break a trade agreement, and impose tariffs, because he thinks a trade wars is good and easy to win.
Nonsense. There is a deeper purpose. It may not be obvious, but it’s there.
Lol! When you keep repeating it over and over again, you eventually convince yourself that its true. Well done.
I wouldn’t take a chance on a Chuck Schumer grilled cheeseburger, either.
Good article here:
From the NY Times which is total garbage.
Just visiting from FOX? I realize you are probably only high school educated but let me offer you a guideline: Criticize the CONTENT, not the delivery medium or the messenger.
2024 Border Patrol apprehended 23,721 people coming across the Canadian Border or 1.5% of total apprehensions. They sized 43 pounds of fentanyl at the same border. BFD
Mexican border 2024 – 1.5 million apprehensions and 21,148 pounds of fentanyl.
Fentanyl and illegal immigration from Mexico an issue, possibly. Canada, obviously no.
This is all cover for what is really going on.
This is all about stopping Chinese and other investment into non US North American countries. Period, full stop.
Panama – Greenland, same. Beef up US interest in the western hemisphere and block or curtail foreign interest or investment. UNLESS that investment comes to the US. Or serves US economic interest. I.E. control the Panama Canal to protect US shipping.
This is simple, look at the facts and macro long view.
I see no one reporting the facts and putting all the pieces of the puzzle together coherently in any media sphere.
But this is the entire reason for tariffs, geographical expansion talk and stoking the the Christo/ nationalist movement.
Deal was also cut with the tech bros to get in line, the spoils of which will become apparent in the future.
Same arrangement Yeltsin made with the Russian oligarchs in the 90’s.
I’m not taking a side politically, emotionally or economically. I’m just trying to see the forest through the trees so as the better position myself financially as both an American and a self interested capitalist.
> This is all about stopping Chinese and other investment into non US North American countries. Period, full stop.
Won’t this have the opposite effect?
It certainly could. Its not hard to believe Mexico or Canada might react by building stronger ties with China, and the belt and road stuff is all about investing in foreign countries.
His rationale is possible, but if so its an arrogant strategy that shakes an awful lot up with very little certainty on whether it blows up in their face.
The idea that this would increase that non-US investment is at least plausible.
If you invest in the US, your market, the US consumer, pays 25% less. If you invest in Canada or Mexico your market, the US consumer pays 25% more. Anti globalist pro nationalist trade policy.
Border security on the US-Canadian border is even worse than at the US-Mexican border. The lack of apprehensions shows only failure to apprehend – not lack of a problem. For a long time the U.S. and Canada agreed about securing external ports of entry (seaports and airports), so that the shared border could be left much more open. The current Canadian policy is making people down here justifiably angry about it.
Lol!
The border has security on both sides;
The Canada Border Services Agency (CBSA) is responsible for what comes into Canada, and U.S. Customs and Border Protection (CBP) is responsible for what comes into the United States.
Sounds like its the US security that’s the problem.
Back in the day, say 2011 or so, one could travel from the U.S. to Canada with only a U.S. driver’s license – no passport required, no significant border hassles – and be treated about as well as a Canadian citizen. This was because both nations had comparable controls at their international ports of entry to the rest of the world, such that the U.S. could trust that Canadians weren’t aiding and abetting drug smuggling or human trafficking, and vice versa. This is no longer the case.
Lol! US Customs and Border patrol consistently state that Canada is responsible for less than 1% of drugs and less than 1% of illegal immigrants coming to the US. The biggest problem at the northern border is the flow of drugs and guns from the US to Canada. We are the problem, not them.
Not good..
https://finance.yahoo.com/news/exclusive-secs-republican-led-commission-120322478.html
Zuckerberg and Musk are looking to relocate to “friendly” (some, not me, might say corrupt?) jurisdictions of incorporation, to escape the shackles of accountability under well-settled corporate law, for pulling fancy moves with public corporations. (Delaware surprised me slightly with its sticking to principle.) The SEC apparently will be their handmaidens too. I suspect they will do take-private deals with their buddies soon, once they can get enough bargaining power this way, to make low-ball offers to the public. Biggest rug-pull in history.
“The PIIE said “But there are reasons to believe that Trump will not carry out his threats.”
Ah, news flash. His threats HAVE materialized. It’s a REAL trade war going on right NOW. Don’t try to deny that. Tariffs have been declared by all sides and have already been implemented by the US who fired the first shot. The bluffs are over. The chips are all on the table. All that remains to be seen is everyone hands. We don’t need to hear any more partisan theories about the coming end of the world.
I believe I covered that in my article, even pointing out they were wrong and so was I.
So there is no “news flash”
In addition, I also changed my tune in advance, something I did not point out.
January 22 “After dismissing such threats as bluffs, I now wonder if Trump might be stupid enough to do what he says.”
https://mishtalk.com/economics/trump-renews-threat-of-25-percent-tariffs-on-canada-and-mexico/
And he was
Detroit won’t be manufacturing cars in Canada or Mexico. That’s what it’s all about.
here is the data List of products from the United States subject to 25 per cent tariffs effective February 4, 2025https://www.canada.ca/en/department-finance/news/2025/02/list-of-products-from-the-united-states-subject-to-25-per-cent-tariffs-effective-february-4-2025.html
Thanks for the link. Basically meat, dairy and fruits and veggies. Essentially meat cost will now go through the roof along with other food staples.
If U.S. food exports to Canada are reduced by the trade war, that will tend to lower food prices in the U.S.
Yeah, I was referring to Canada, their costs would go through the roof but then again they can switch to Moose meat. But that also means farmers, ranchers, etc go bankrupt in the US which lowers the overall food availability over the long term.
In order for capitalism to function, it needs constant growth. I’ve covered this topic a few times here.
No idea why you got all these down votes when you are 100% correct.
Canadians are going to feel the pain immediately and that’s going to cause a lot of political unrest. Trudeaus government was already toast but it could wipe out the party for decades if it goes on very long. I expect many Canadians will be ready to capitulate to Trumps demands very quickly.
Meanwhile the things coming into the US from Canada (other than oil) can likely be substituted or simply won’t matter in the short term (ie can draw down existing supplies of the item before needing more from Canada).
The other thing Mish has mentioned but no ones picked up on is that this tariff war is going to wreak havoc on the Canadian dollar. So not only will imports from the US cost even more from tariffs they will be double whammy from the falling dollar which means everyone else they trade with will also have their goods increased (ie stuff from China will cost more too for Canadians).
Meat from Australia and Argentina.
Nice comment Mish on Trump’s breaking of promises in the US-Mexico-Canada Free trade agreement THAT HE SIGNED and bragged about. The clear message I get now is that you really can’t trust any agreement with Trump’s name on it. Sad but true. Probably the same holds true for US debt securities. Buyer beware aye? BTW, I was always a huge fan of Ronald Reagan….now there was an inspiring President
When Trump overbuilt multiple self-competing casinos in Atlantic City, and predictably went bankrupt, he had signed personal guarantees on many obligations, to vendors and so on. His future pal (and future Commerce secretary) Wilbur Ross very cleverly helped him figure a way to squiggle out of that. Why, I wonder, would anyone be surprised now? A terrific article from 2019, but prescient: search ” Art of the Power Deal: The Four Negotiation Roles of Donald J. Trump”, leading to MIT’s Negotiation Journal.
Even Mondale laughed at his corny jokes in the 1984 debates.
I read somewhere that Mexico will tariff U.S. corn. This is vitally important because that means US corn prices could collapse thus providing us the opportunity to stock up on low cost popcorn to watch the circus sh!t show for the next four years. Added bonus, US farmers that supported trump in Iowa go broke.
For every cloud there is a silver lining and you reap what you sow.
The farmers are prob expecting Trump to subsidize them.
But Musk may advise him not to.
I don’t have to advise anyone. I control the payment system now. Didn’t need to fire a shot.
This is how a genius ascends.
Well? Are you going to subsidize the farmers? They are expecting it. They dutifully cast their votes for you guys.
They already get subsidies. Corn has not been planted yet. They will plant something else.
US President Donald Trump hints at removing income tax and replacing it with tariffs.
President Trump appears to call for the end of federal income tax, says it’s time America returns to the “system that made us richer.”
“It’s time for the United States to return to the system that made us richer and more powerful than ever before.” “Instead of taxing our citizens to enrich foreign nations, we should be taxing foreign nations to enrich our citizens.”
Totally – Idiotic
Tariffs are a tax on the citizens of the nation that imposes them.
Sometimes there are mitigating factors such as tariff avoidance or rising currency. But the US$ is not going to appreciate enough to make up for this.
But why are Canada and Mexico saying they will also have tariffs?
Ive always agreed that the best trade policy can be written on a single sheet of paper and would resemble trade between the US states but I don’t get why – if tariffs are always bad – Mexico and Canada would immediately do the same thing?
The US is China, Canada and Mexico biggest customer. We get no respect. The spread: China Import minus export is $300B/Y. Tariffs on China will shake Xi out. Tariffs on Canada and Mexico is a feint. Within two years the GDP 7 components:
1) Consumption: up. 2) Inventory change: up. 3) Import: up ( less import is positive). 4) Residential fix investments: up. 5) Commercial fix investment: down. 6) Gov: down.7) Export: don’t matter. Gov debt: $30T. GDP: $40T. China deflates. Our relationship with Putin: up. With MBS: up. With Iran: up. With India: up. Foreign and US investors will pour in. The risk: Hakeem the regime change might rip us apart: Blue vs Red.
You buy from who you want and at the lowest price, unless I’m mistaken. How could Wall St have it any other way? Therefore, you are cutting established contracts with this ridiculous measure. What respect you feel is deserved?
PS strange how the swarm of down-voters has not arrived. Must not be on line yet. Looking to see how many I can garner this evening, should be quite a lot.
“Vote Early and Often!”
– Richard J. Daley
Some think tariffs really will not have much effect on GDP. You move the loss of consumer consumption over to the increase in local production. The tariffs will be a big meh just like last time.
All that because Canada and Mexico don’t want to stop facilitating the transfer of fentanyl and illegal immigrants into the US. Some people think still that these are little problems but they are not. They have grown to be existential problems that have overcome the purely economic reasonings. Ten years ago I would have said this is ridiculous but after studying the extent of the problem I would say that we do not have time to pussyfoot around anymore.
The US has a demand for Fentanyl.
Trump is telling Mexico to control our demand.
Please tell me when any war on dugs has ever been won.
In 2024 enough Fentanyl come through the Canadian border to kill 10 million people. That was only the amount intercepted. How much got through? Enough to kill 50 or a hundred million? This is not local consumption. This is something more sinister. Time to recognize it.
And you can see that from France ?????
Of course. Just look.
My thought exactly!
Blaming “demand” for addictions is faulty logic. Demand for addictive substances is self-generated by cheap “free trial” supply, and the inevitability of temptation.
Blaming “U.S. Demand” for fentanyl is like blaming the Chinese for getting addicted to the cheap opium supplied by the Brits in the 1800s.
China sorted out their opium problem eventually. The West has gotten tobacco nearly under control. It is time to sort out opioids including fentanyl.
P.S. Do you have any idea how deep the Chinese antipathy is to the West, as a result of that opium business? This sort of thing doesn’t end with one generation of damage.
The Chinese were forced to accept payment in opium instead of silver.
Gunboat diplomacy enforced through military means.
So if a baggie of that nasty s- was scattered inside the soup bowl next week then they were all addicts?
Do you suggest that US Customs, Border Patrol, and Immigration should fall under Canadian authority instead?
This is going to take a lot longer than people think and be a lot more painful.
Where were you? Haven’t seen comments for a long time. Welcome back
I was banned but I keep finding ways back in.
You mean sanctions don’t work because people find a work around? Where have I heard that before?
If you behave – you can stay
Welcome back. We need your intelligent brain here giving us some wisdom.
Is there any limit on Social Security increases? We could see the biggest bump ever next year. Thanks Donald!
DOGE chief is gonna gut it, you reap what you sow.
Musk & DOGE will be history in 3-6 months.
Not if we shut down the federal payment system we now control. Martial law, here we come!
Probably along with the rest of the Cabinet, if anything like his first term.
We are going to suffer a little, like any divorce. But it is a relief not to have to fake love for the USA. And thanks, we have been nicely united in a new cause as a result. We will move on.
I have lived happier than ever, post-divorce, for 23 years. But I did not fire or try to intimidate all my associates and partners in life. In this economy, an individual with the right emotional makeup can do fine without a family, because money talks (until I get too disabled and needy, then I will be toast).
But with all my self-sufficiency, I am not an economy within this global economy, where nobody can survive reasonably without trade. We (the USA) are now testing the ability of every other nation to find alternatives, and for no sufficient reason. 30 pounds of fentanyl from Canada? Don’t make me laugh. This is all to feed the self-referential tough-guy fantasies of one guy.
Correct. It’s idiotic.
Like any divorce. Except the next new partner of the ex may easily be China.
Everything in Cuba is made in China except the babies. Maybe Trump will force the same out come in Canada. God Bless America
Battered Wife Syndrome is the hallmark of my followers. Rationalize for me babe… gets me so hot!