 Welcome to Mind Your Business ! Consider this your weekly guide to understanding what’s happening in the worlds of economics, business and finance. By Peter Armstrong | | |  | Trump has threatened Canada. What does he really want? (Truth Social) | | | I am on my way to Washington.
We are headed into an enormously consequential week. In eight days, Donald Trump will be sworn into office.
Then we'll get to see what's real, what's bluster and what's negotiation.
Roughly $968 billion a year in trade lies in the balance.
Trump's threats of 25 per cent tariffs on all Canadian imports has recently been overshadowed by his notion that Canada should become the 51st state.
But the tariffs will come back into focus after next week. And anything the incoming president has to say will matter more and more the closer he gets to inauguration day.
It's not just the actual hit to the producers of products sent to the U.S. If those industries get slapped with tariffs, there will be a ripple effect on other sectors.
Who would invest in a new fleet or build a new warehouse when they have no idea what the economic climate will be in a week, a month or a year?
In the meantime, just look at the sectors under direct threat. | | |  | | | | | I want to carry around copies of that chart (from an excellent RBC Economics report by Salim Zanzana) while I'm in Washington.
Trump has repeatedly said or posted some version of this argument for weeks now: "The United States can no longer suffer the massive Trade Deficits that Canada needs to stay afloat."
But as Zanzana's chart shows, much of that is driven by oil exports.
Remember that 25 per cent of American refinery throughput is Canadian oil. To the point, more than half of Canada's oil exports to the U.S. go to Midwest refineries in Wisconsin, Ohio and Michigan.
Those refineries depend on Canadian oil.
Indeed, many states depend on Canadian products. And it's not just those around the Great Lakes. |  | | | So, watch what is said this week. As we get closer to the actual start of the next administration, the focus will sharpen. The words will carry more weight.
No one wins a trade war.
And all those U.S. states that depend so much on Canadian imports and Canadian customers for their own products.
Check out this doozie of a stat from the U.S. Trade Representative's website on North Dakota's exports:
"The state’s largest market was Canada. North Dakota exported $5.9 billion USD in goods to Canada in 2023, representing 79 per cent of the state’s total goods exports," wrote the USTR.
What will states like North Dakota or Ohio (which exported $21.4 billion US in goods to Canada in 2023) or Michigan ($27.5 billion US in goods) say about a plan to disrupt their biggest customer?
What do you think will happen?
As always, send me a note.
My email is: peterarmstrong@cbc.ca | | |  | | We'll get some crucial Canadian real estate data this week. Home sales numbers will be released on Wednesday. Housing starts come out on Thursday. | | | | | | On Wednesday we will get a look under the hood at the state of Canadian business. Both manufacturing sales and orders for November and wholesale trade figures are set to be released mid-week. | | | | | | The biggest event of the economic calendar will come when U.S. inflation data is released on Wednesday. Economists expect prices are still rising a touch above three per cent year over year. | | | | | Three things to read, watch and listen to this week | | |  | This Tom Freeman painting shows the burning of the White House when it was set aflame by British soldiers on Aug. 24, 1814, during the War of 1812. (Tom Freeman /White House Historical Association) | | | 1. The last time the U.S. went to war with Canada | | | Donald Trump has threatened to use "economic force" to bring Canada into the fold as the 51st state.
That's... quite a thing to say. John Spark, international correspondent with Sky News, says it "represents the most serious threat to Canadian sovereignty since the War of 1812."
That one ended with soldiers from what is now Canada marching south, capturing Washington and burning the White House.
Yes, I know, it wasn't quite Canada yet, and the soldiers who burned the White House were British, not Canadian. But the war was crucial to the making of what would eventually become Canada.
Not just because many of the men who fought in that war would become Canadian, but because the war forced those who fought to think hard about what they wanted and perhaps, more importantly, what they wanted to become.
The legendary Pierre Berton wrote the book on that war and offered this reflection on its legacy:
"We are Canadians and not Americans because of a foolish war that scarcely anyone wanted or needed, but which, once launched, no one knew how to stop,” wrote Berton in The Invasion of Canada: 1812-1813.
Well, Canada is being forced down a new road of introspection now. There are threats everywhere. Trump and his tariffs and musings about the 51st state, deglobalization and a changing climate should pose real questions about what Canada is, why it's worth defending and its place in the world.
Spark says the key question, then as now, is how much pain Canadians are willing to tolerate.
"They can draw strength from the War of 1812. Small bands of British soldiers, local militia and Indigenous tribes held off the Americans as the two sides battled each other to something of a draw (the White House in Washington and much of Toronto were burnt in the process)," wrote Spark.
Read John Spark's analysis at Sky News here.
Check out Pierre Berton's The Invasion of Canada: 1812-1813. | | | 2. What does Trump really want? | | | Looming over all the threats and bluster and tariffs and whatnot lies one singular question: What does Donald Trump really want?
I interviewed Flavio Volpe, the president of the Automotive Parts Manufacturer's Association, the day after November's election and asked him whether Trump actually understood how tariffs worked.
His answer has stayed with me.
"I don't think he got it on who pays the tariff, but I don't think he cared," Volpe said. "He knew that by making that threat, we'd come to the table with some concessions. That was the important piece."
OK, so what concessions is he looking for?
Stephen Maher published a great piece in GZero Media last week. (GZero is the media wing of the Eurasia Group, the political risk consulting firm founded by Ian Bremmer.)
"I think he is rattling cages so that he can expand the boundary of acceptable outcomes,” said Eurasia Group vice-chairman Gerald Butts, who, as a senior adviser to Prime Minister Justin Trudeau, negotiated with Trump. “Something like, 'Sorry we screwed up your auto industry and dairy market, but at least you still have a country.'”
Maher spoke to another analyst who said Trump is poking around looking for weaknesses.
"He has found it in Ottawa. Trudeau, who announced his resignation on Monday, could not be weaker. For the next few months, most of his best people will be occupied by the race to succeed him, and then whomever they choose will likely lose an election to Conservative Leader Pierre Poilievre," wrote Maher.
Maher says that provides something of an opportunity for Trump as he zeroes in on what specifically he does want and continues to rattle cages.
Check out Stephen Maher's article here. | | | 3. What concessions? | | | These next few weeks will create shiploads of bluster and hot takes and opinions.
They will also create some incredibly fine journalism and think pieces that will shape how we think about the country, trade and how we spend our money.
A piece by Greg Quinn in The Line is a great example.
Quinn is a former British diplomat who has served in various world capitals. He now runs a government relations and crisis management firm called Aodhan Consultancy.
His take is that countries like Canada can't afford to not take Trump seriously.
"Trump has a history on tariffs and actions on the economy which shouldn’t be ignored, and he has made good on economic threats in the past," wrote Quinn.
He says for evidence of what may come after inauguration, look no further than what happened during Trump's first term.
"The changes made to the U.S.-Canada-Mexico trade agreement, which effectively saw Canada and Mexico fold in the face of U.S. threats. Both junior partners made concessions which, incidentally, do not appear to have been reversed by Joe Biden," he wrote.
Quinn says Trump has had a good run of poking Justin Trudeau. But he says the comments and threats are aimed just as firmly at Pierre Poilievre as they are at the current government.
He says whoever forms government needs to be prepared.
"Even if Trump doesn’t really want Canada as the 51st state, what he does want is a Canada that is weak and disunited. That is exactly what he has at the minute, giving him an opportunity to both make mischief and gain concessions," wrote Quinn.
It's a smart, well-written piece.
Check out Greg Quinn's piece on The Line here. | | | How the economy looks beyond Bay Street | | | U.S. trade partners ranked | | | One last thing on Trump and trade before I head to Washington.
It's important not to lose sight of how important the Canadian economy and our exports are to the U.S.
Outside of North America, no one comes even close to the amount of trade conducted with American companies.
You can parse that a bunch of different ways, but I like the way this chart highlights the number of jobs supported by various export countries. | | |  | That's Canada's strength: American companies use our products for their customers. And American jobs are hanging in the balance.
If nothing else, this week should bring us closer to knowing what these next months will look like.
I'll be in D.C. through inauguration and I hope you'll follow along from wherever you are. | | | That's it for this week. | | | Drop me a line anytime.
Send ideas, comments, feedback and notes to peterarmstrong@cbc.ca.
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