The gamble

OMG. Is Trump winning? With a Friday deadline looming for Big Daddy, what does it mean? Are we toast? Like Europe?

In case you missed it, the EU just caved to Tariff Man. Like, completely. The ‘trade deal’ the US and the Euroweenies agreed to on the weekend is more revealing than a Coldplay Kiss-cam. Trump dominated. He embarrassed. In mere weeks Europe will face a 15% tariff on 70% of its exports to the US (including BMWs and Ozempic) while investing more than a trillion in American enterprises.

The French PM was apoplectic. “It is a dark day when an alliance of free peoples, united to affirm their values and defend their interests, resolves to submission,” he said.

But the EU was worried Trump would impose a 20% or 30% or 50% tax if it did not submit. Or retreat from the American commitment to NATO. Or abandon the fight in Ukraine. This was not just about trade, but USA dominance, defence and security. This is the politics of bullying and many think Trump is the bully king.

And didja catch the presser with Trump and the UK PM? As he sat there beside the looming global emperor in his red-tie glory, Kier Starmer looked (and sounded) insignificant, yielding almost every question in a 75-minute media session to you-know-who. As you know, Britain just signed a lousy trade agreement with Trump, which he dominated. So did Japan.

The world is being reset with these deals, and the ones to come. The US empire and its new monarch have abandoned the concepts of free trade, global expansion and the advancement of democracy through good works. Instead, this is a mercantilism based on wealth. Selling, not giving. Profits above principles. Protectionism through Trumpification.

And, yikes, it’s working. But is it good for anyone outside of the USA?

Source: Scotiabank Economics

You may recall that in early April, when the US president declared ‘Liberation Day’ with an overall global tariff rate of 20% that markets had a cow. The S&P 500 collapsed about 19%, towards bear market territory just as fast as it had when Covid hit.

Well, we’re almost at that level (see the chart above), and not only did the stock market recover, it’s gone on to achieve record highs. Ditto in Canada – despite the fact we’re now in the trade war crosshairs. Bay Street is up 22% from its April slump, and has given investors a whopping 10.4% return for 2025 so far.

By Friday we’ll know if the political victory lap of the MAGA leader will extend to Canada. Will we also choose submission over something worse? If Ottawa is forced to follow Britian, Japan, Vietnam and the 23 states in Europe, what might we expect?

A recession, maybe. Two-thirds of our economy is based on trade, and 80% of that is with one trading partner. While the feds are trying to change things, it will take years to diversify. So a 15% tariff plus sectoral punishment (steel, aluminum, copper, lumber, maybe pharma, plus cars) will whack exports, cost jobs and likely halt economic growth. “It would be a disaster,” says a UofT economics prof. At the same time, Ottawa is committed to spending a lot more to offset the looming hit. So expect a mama of a deficit.

This won’t be quick. Effects of raising the US overall tariff rate from 2% to 20% will take months to ripple through the supply chain. The automakers are early victims. GM and Volkswagen have taken hits of over $1 billion each from tariffs. Stellantis this week said it expects the new regime will cost it $1.7 billion in 2025. And there is a direct line between the bottom line and jobs.

Americans will also be impacted with higher prices. (Countries do not pay tariffs. Importers and consumers do.) Inflation may rise, which is why the Fed is being cautious in not lowering rates. But with a growing GDP, unemployment at just 4% and the new onshoring of manufacturing (through protectionism) the consequences will be far less than here.

So, should Carney accept an EU-style castration if that’s the best we can get? Or do we walk away and turn off the oil and electricity, the maple syrup, the flow of excellent hockey players and take Shania Twain back?

Are you willing to be poorer in order to be prouder?

Trump bets no.

About the picture: “Even though I do not have a dog I still checkout your site every day,” writes Tom, in BC. “Great advice and thoughtful comments on our often confusing world (your comments, not the steerage section so much). This dog and I were in Victoria looking out across the Salish Sea towards Washington State. I wish my thoughts were as uncluttered as his. Carry on and thanks for what you are doing.”

To be in touch or send a picture of your beast, email to ‘garth@garth.ca’.

Source: https://www.greaterfool.ca/2025/07/29/the-gamble-5/