President Trump Wishes “Good Luck” to the Captives of Canada for a Happy Election Day

Sundance reporting for CTH 

If you never followed how President Obama constructed and influenced the rise of Justin Trudeau in Canada, then it might seem perplexing when President Donald Trump stands generally ambivalent to the outcome of today’s election in Canada.

When asked about the election in Canada President Trump previously said, “I don’t care. I think it’s easier to deal, actually, with a liberal and maybe they’re going to win, but I don’t really care.”  The core of President Trump’s position stems from the economic issues that have been present for decades.  Leading candidate Mark Carney, who had not lived in Canada for the past 10-years until his installation, has said he is prepared to guide Canada into an alignment with the European Union.

As Secretary of State Marco Rubio outlined, previous Prime Minister Justin Trudeau traveled to Mar-a-Lago and said if President Trump was to make the Canadian government pay reciprocal tariffs, open the USMCA trade agreements to force reciprocity, and/or balance economic relations on non-tariff issues, then Canada would collapse upon itself economically and cease to exist.

In essence, Canada cannot survive as a free and independent north American nation, without receiving all the one-way benefits from the U.S. economy. To wit, President Trump then said, if Canada cannot survive in a balanced rules environment, including putting together their own military and defenses (which it cannot), then Canada should become the 51st U.S state.

The Canadian Mitt Romney “conservative”, Mark Carney’s closest competitor, Pierre Poilievre, is also very upset at President Trump.

As the majority of Canadians cheer, both Mark Carney and Pierre Poilievre said that Canada, as a free independent and sovereign nation, will now embrace its connections to the United Kingdom and European Union and seek to replace their national dependency on the United States by severing ties in North America and entering a new era of close relations with Great Britain and Europe.

When questioned if Canada would join the European Union, a seemingly natural fit for the ideologically aligned country, Prime Minister Carney said, “nothing is off the table.”   In a rather remarkable end to the confrontation,  Carney says the economic and military ties between the USA and Canada are officially declared severed.

Structurally from an American economic perspective, the lens through which President Trump is primarily focused, it really doesn’t matter which of the leading Canadian politicians wins the election.  The financial dependency on the USA is going to be severed.

President Trump hits Canada with an approximately 50% tariff.  Let’s say an import widget from Canada costs the purchaser/importer $100 CAD + 50% tariff, now $150 CAD.

$1 CAD = 0.70¢ USD

Without U.S. tariff, it costs $70 USD to purchase the $100 CAD widget.

With the U.S tariff it would take $105 USD to purchase $150 Canadian widget

However, due to economic policy, Canada’s dependence on the USA market and the tariff battle, the Canadian currency drops around 30%.  $1 CAD now equals 0.50¢ USD

With currency drop it now costs $50 USD to purchase the original $100 Canadian widget.  $75 USD with tariff.

BEFORE: $70 USD without U.S. tariff, or AFTER: $75 USD with 50% U.S. tariff.  A net change of $5.

But wait, back to Mark Carney’s plan.  As stated in his tariff policy, the prime minister will take income from the Canadian side of the tariff equation (countervailing duties) to subsidize the impacted export sector.  Just like China and the EU did in ’17, ’18 and ’19, the Canadian government plans to offset the difference to the U.S. consumer by subsidizing the exporter with import tariff income.  All of this is done to retain access to USA consumers.

The final outcome, the U.S. purchaser is back to the original price of $70, only now that same outcome is evident with an invisible $50 tariff.

This is what China tried to do. This is what the EU tried to do.  This is what Canada is now planning to do to retain access to the U.S. market while they look for alternatives.

But wait, it gets better….

….. As the Canadian financial sector evaluates the likely drop in the CAD currency, they seek safe harbor investment to retain the value of their money.  The reciprocal tariffs are hitting every currency. The Canadian finance sector purchases dollar and dollar-backed assets to retain their value.  This approach increases the value of the U.S dollar.

Do you really think President Trump gives a hoot about PM Carney’s feelings?   Quite frankly, Trump would not want to be bothered by Canada while he is working on a much, much bigger geopolitical economic dynamic.

Go back and reference the renegotiation of the NAFTA for reference.  President Trump didn’t care if Canada (Trudeau/Freeland) agreed or did not agree with the USMCA. Trump was quite willing, heck he was hoping, to just deal with Canada on a bilateral trade system.