Hi everyone, did you miss me? It’s OK to day no, even though I know that would be a lie. I missed you guys, especially as I was off doing some stealthy reconnaissance on behalf of my mostly Canadian readers.
Where was I you might ask? Well I was doing some undercover research on behalf of all of us in what we can currently refer to as the demilitarized zone, otherwise known as Phoenix Arizona. USA. Yes dear readers, I did what so many Canadians seem afraid to do. I went into the belly of the beast and am now coming out the other side to report back on what we observed. Note that my first thought was to wrie this from the safe confines of our condo in the desert but someone had told me that communications were being monitored so I figured the best play was to just hold off lest I end up somewhere I wasn’t planning on going. Like Sedona.
Day 1 – Insertion
This of course may have been the most perilous part of our journey. How to get ourselves set up in Phoenix without alerting authorities? We had airfare purchased but did that share credit card information with anyone else? After conferring with my wife we decided to do our best to appear as a “family travelling on Spring Break to a sunny destination”. Part of our cover was to drag an angry sixteen year-old with us, figuring that the withering ennui emanating from an uncooperative teenager might buy us sympathy from the CBSA agents who were sure to grill us.
Thinking ahead, we packed light. Two carry-on bags that could be quickly abandoned and a backpack containing my laptop, an array of charging cords and a couple of years old chocolate bars from our 2022 trip to England. Being extra cautious, we decided to park the car in the domestic parking lot. You can never be too careful.
We arrived at the airport early, fully prepared for a dressing down. We had read stories about how hard it has been to get into some countries so we weren’t sure what would happen. The airport of course was eerily quiet, almost as if it was anticipating something. We quickly cleared the security line and then moved on to the most tense part of the journey. Customs. Eye Scan 1. Eye Scan 2. Eye Scan 3. Walk to the agent who was watching us with a mix of amusement and intimidation. “Where are you going?” “Phoenix” I whispered. “Have fun”.
Wait, what? What does that mean? Had we made it through? Oh good lord.
Off to our plane we scurried, stopping for a glass of wine in the restaurant to bth calm nerves and make sure we weren’t followed.
Our flight ended up being delayed. We got called back to the gate for what the pilot said was a “mechanical issue” but could just as well have been a test to see who reacted and/or panicked.
Arriving in Phoenix we did our best to blend in at the airport and not attract undue attention, hopped in an Uber to our place and breathed a sigh of relief.
One stop along the way for yours truly to grab some take-out Mexican. I sat at the bar waiting for my food and tried to be as non-Canadian as I could, even though I swear I said “eh” at least six times. Nonetheless the first day ended without incident except my wife was attacked at our front door – by a giant moth. Not sure if it was real or one of those spy moths that have mini cameras.
Day 2-7 – Reconnaissance, observation, mingling
We woke fresh and wary the next day and proceeded to divide up the labour for the balance of the week. My wife and I were in charge of the physical aspect of spying while our teenager took on the unenviable task of locking herself in her room and hacking into the online community. First off we (I mean she) cleared the computer of all malware and spyware and she was good to go. Wife and I decided to do split duties in our preliminary investigation into “inflation” in the local area. She did this by ordering groceries online and I did this by catching a ride with a “local” to the nearest Safeway (odd they have the same stores as us) where I did some additional research.
Eggs of course were hard to come by. They were only available in 12 and 18 packs, no 6’s. And the American wine and bourbon, unlike in the wastelands of the Great White North were plentiful on the shelves and quite the bargain for a savvy shopper – 6 bottle discount with my Canadian area coded Safeway Club Card – which was well worth the risk given how much money I saved. I even got a high end Cab for $10 due to a scanning issue.
That said, aside from the happy surprise of cheap booze, the general price level in the US felt a bit out of control. Bags of Doritos that you can get in Canada for $3.49 Canadian were selling for almost $7 US! A 12-can flat of diet coke was priced at $12.49 US which is what? $50 Canadian? At home it’s less than CA$5. To be honest, I think if Americans actually knew how cheap our potato chip and snack products were compared to there, we would be invaded and conquered within a day.
My “local” chauffeur was quite open in discussing the latest local news and happenings and unprmpted offered up that she was actually quite fond of the Canadians and had recently sold a house to a Canadian couple she had known for 10 years. I know, suspicious right?
At this point it’s worth pointing out that we had no car at this point, having brought mine to a mechanic the last time we were there and waiting on work to be done. This of course was intentional so we could move around without the detection associated with police officers checking out fully paid and registered plates.
The afternoon was spent at the community pool reading books, eating expensive chips and talking to locals. We went on two walks and spied into a number of windows.
We ordered wings from our favourite wing place. They were good. It being the Sunday of the tournament I also got to watch my racket go down in flames.
The next day I ventured out (after our daily walk) to see my car and talk to my contact “the mechanic”. Nothing had really changed he said and he needed more time. So he sent me to a drop location to pick up a “rental car” which I’m sure was some way to establish covert information gathering on my movements. Once at the rental place, I tried to talk to his contact “Sandy” about renting the vehicle but was rejected because I did not have my passport. Aha! Discrimination! How long has this been going on I demanded. Five years she said. Dejected I made my way back to the condo.
That afternoon we sat by the pool and compared notes. We weren’t seeing anything weird or untoward. It’s almost as if no one cared that we were Canadian. How could that be?
That evening we went to the same Mexican restaurant, this time to sit at a table and see how differently we were treated as obvious Canadians. Fortunately we escaped full of enchiladas and tacos but otherwise unscathed – or so I thought.
The next day we did pretty much the same thing. Walked the neighbourhood looking for clues about upcoming hostilities against Canada but found nothing. That night we connected with another Canadian sleeper cell and went out in public to a “concert” at a busy venue. Despite doing our best to attract attention to ourselves as overt foreigners, no one gave a second glance and seemed far more interested in the concert than the attendees. So far the biggest damage we had seen was a GI issue I developed (did I mention the Mexican food?).
So the week continued, Uber rides with chatty immigrants, all expressing shock that we were from Canada and were safe.
Our daily trips to the pool kept us on an even keel and chats with the locals revealed exactly nothing. Some had to be reminded where Canada was. A couple mentioned that they felt bad that we were being put through the wringer but that’s as far as it went. Certainly no one was about to take up arms to defend our honour.
To be honest it was all a little discouraging. We had gone there to blend in and see what kind of action we could create behind enemy lines and when that didn’t pan out, we completely blew our cover and threw ourselves on the mercy of the local citizens and they just couldn’t be bothered.
Day 8 – Escape!
Finally the day arrived that we were to make our escape. An early walk in the morning was followed by a final day at the pool. I finished my book. We finished our chips. We pulled our precious passports out of storage in preparation for the trip back home. Arriving at the airport just around dinner time, we went to security, certain that this time it would be it. Nope. No line. TSA officer actually smiled at e and said Canada, eh? And waved us through to the X-rays where we were able to keep our shoes on and computers in our bags.
Finding ourselves now early, we headed to McDonald’s to get supper. Massive lines. No quarter-pounders and while I was there they ran out of first Diet then Regular Coke. The decline of a once great nation, amirite.
We smugly boarded our plane. Mission accomplished. Headed how to report our findings.
Once on the ground in Calgary we noticed the snow (yuck) and the cold (brr). Coming up to Canada Customs we smiled at the familiar scanning machines which… didn’t work. The officer sent us back to try again. So we tried again and they didn’t work. Then we had to wait while the officer completed forms and finally let us on our way. To our car that was stupidly parked at a different terminal’s parking lot.
All that fear and trepidation and the biggest hassle we had was coming home.
Conclusion
Sadly, no one is going to like this. Americans, for the most part, are oblivious to Canada, its needs, its wants, its products, its tariffs and, for the most part, its government and national sport. We are a non-entity. Generally, this serves us very well until we find ourselves in the crosshairs of an administration hell-bent on rewriting global trade.
We can want it to be different, but it won’t be. The US is too big, too diverse and too self-absorbed to care about what we do. Friend or foe it just doesn’t matter. Our policy choices and retaliatory measures need to be informed by these simple truths. I know our political leaders know this but it’s always a good reminder of how tiny we are even if things have an outsized effect on us.
That said, I would be remiss if I didn’t comment on Liberation Day…
What in the Actual F did I just watch?
It was like a reality show reveal on Survivor. Posterboards showing what appeared to be randomly generated tariff numbers that took hours to decipher. The implementation of reciprocal tariffs on everyone the US trades with (you charge us, we’ll charge you).
A jump in trade weighted tariffs from somewhere around 5% to close to 30% – the highest level since the Smoot-Hawley tariffs of the early 1930s which are widely credited with making the Great Depression even Greater and ultimately a contributing factor to World War 2. Yay!
Targeting of countries that have both trade deficits and surpluses with the United States and some truly bizarre outcomes.
Some of the more egregious examples.
Israel now finds itself with a higher tariff on exports to the US than… you guessed it, Iran – a theocracy that the US is currently preparing to go to war with to defend… Israel.
Russia (Putin’s a friend), Belarus (US may need their potash in case Sasky goes nuts), North Korea (they write beautiful letters) and Cuba (Trump’s gonna get that casino he tried for in the 80’s come hell or highwater) were all spared any tariffs.
South Korea, one of a variety of countries with whom the US has a free trade agreement is being slapped with “reciprocal tariffs” of 25%. South Korea’s actual trade-weighted tariffs on US exports? 0.79%. This is reciprocity?
Saint Pierre and Miquelon (which isn’t even a country) was given the highest reciprocal tariff of 50%. In the past five years trade between the US and Saint Pierre was a whopping $3 million and it all happened in one month in 2023.
Not to be outdone, Lesotho, which is one of the poorest countries in the world with a GDP per capita of $916 (for reference US GDP per capita is about $66,000 – for now) was also slapped with the 50% tariff. This because they export diamonds and textiles to the US (i.e. for Jeans) while being too poor to buy much else back. Nothing says global leader like stepping on the smallest guy the hardest.
On top of all this, the way the tariffs are calculated don’t even make sense.
The reciprocal tariffs were calculated by dividing a country’s trade deficit with the United States into the dollar value of exports they sent to the United States. That was then divided in 2 to form the “discounted reciprocal tariff”.
This methodology was consistently applied to evert country. Great. Except the methodology is hot garbage. The average actual tariff charged to US exports globally is less than 3%. These numbers have no grounding in logic.
They also ignore trade in services – where the US has a massive surplus. And any trade barriers the US might have. Crazy.
The formula is based on some bizarre belief that “trade” needs to be a zero-sum game, no one should ever have a deficit or surplus and the way to achieve that balance is through random taxation. It would appear that whoever cooked up this “policy” must have skipped the economics class where they discussed “comparative advantage”.
I don’t know whether combative Pierre Poilievre or Captain Crederntial Mark Carney is better suited to negotiate our way out of this mess, but I am willing to bet that a classically rained economist like Carney’s head is about to explode with this nonsense.
The Trump administration says this tariff plan will raise $600 billion a year and “save America”. Of course, another way to look at it is that the Trump Administration just announced the largest consumer tax increase in US history – the equivalent of $5000 per person, and it’s regressive – it will hit the poorest the hardest.
And this is before any form of retaliation which promises to be swift and severe.
The recession betting odds burst out to 60% from JP Morgan and 50%+ on Polymarket on the news. Well played.
The markets of course took all this news in stride.
NOT!
Markets dumped an average of 5% across the board with the NASDAQ down more than 8% at one point. The S&P 500, the most familiar big basket index was down 4.29%. I read that in the 11,000’ish trading days since January 1, 1980, this is the 29th worst trading day.
The carnage continued on Friday as China retaliated with a pre-arranged package of “upside the head” smacking 34% tariffs and export controls on, you know, important things like rare-earth minerals.
I am told Trump packed up his bags Thursday and headed to Florida to watch a LIV golf tournament and presumably to play golf at Mar-a-Lago. Let them eat cake.
One small silver lining. Canada and Mexico appear to be spared for at least another month while the USTR assesses the USMCA exemptions. But we are still being tagged with steel and aluminum tariffs and tariffs on non-USMCA compliant car parts. The LPC and Mark Carney matched those tariffs Thursday.
And so begins the death spiral for what was, until about 4 PM Wednesday, a fairly robust global economy, led by the once envy of the world Unted States.
The biggest own goal economic policy gaffe and act of economic self-harm in US history. And that’s putting it mildly. The effects of this will be felt for years, if not decades or generations.
Look, I actually understand where Donald Trump is coming from. Every country wants to improve its trade position. And restore some mythic manufacturing sector to communities that have been left behind as the world has changed. And as the biggest dude in the room, you attract the most attention and have the big stick. But there are other ways to achieve these goals short of derailing the train and blowing up the tracks in front of and behind you.
These actions don’t hurt the billionaire class – they are billionaires. But it’s a hit and run on the lower, middle and upper middle class – the ones who vote, most of whom voted for Trump without a clear understanding of what was to come.
Final economic point – these actions have decimated capital markets and among the hardest hit are publicly traded private credit and private equity firms (Blackstone is down 40% from its peak). The private market has got to be reeling as well. Who exactly is going to pay for all this onshoring of T-shirt and oven-mitt manufacturing if private capital is being taken to the woodshed.
Is this the end of Arican economic hegemony? Depends how long it goes on, but alliances are already being rewritten and friendship once betrayed is virtually impossible to put back together.
Tariffs and trade wars are and continue to be Dumb.
Buckle Up.
Miss you mom.
