Stepping on kittens

This morning the odds interest rates won’t budge on Wednesday sits at 100%.

The Bank of Canada, Mr. Market says, wouldn’t dare touch the cost of money in the middle of a Trumpian tantrum and trade war that may only have begun. Interestingly, traders are forecasting any change in the future will be up, not down. Odds for an increase are now 50% at the December setting.

Some people see that as bizarre.

“We’ll just flatly state that there is zero chance the Bank will be hiking next year if 50% tariffs are applied on autos and parts,” says BMO chief economist Doug Porter. “…there is the very real possibility that conditions deteriorate further in coming weeks. Until we get more clarity on the trade front, it seems more than passing strange that the market clings to multiple BoC rate hikes in the coming year—even if the Fed does move in that direction.”

Yesterday, as Google was changing ‘Lake Ontario’ to ‘Lake America’ on all its US platforms (and briefly, by mistake, here), the rogue president was posting this (when not busy bombing Iran again):

”I don’t want Canadian cars,” he wrote. “I don’t want Canadian parts. I don’t want Canadian anything. They’ve been ripping us off for decades and it’s time to stop.”

Hmmm. This means what?

It may be bluff. Bravado. A negotiating threat. Classic bully tactic. Or he could be crazy enough to mean it, and follow through with an additional 50% tariff on cars, parts and trucks, starting on January 1st. Since the auto business is integrated, and many components cross the border seven or eight times before being completed and installed, this would kill the Canadian sector.

Currently the car companies employ over 125,000 Canadians, while more than 425,000 others rely on them indirectly. Trump says his tariff wall is intended to force them to move south. He spelled that out again this morning. “Our long ago stolen businesses are now coming back to America in order to avoid paying tariffs,” he posted. “They are lining up, just like the rest of the World!!!”

Some automakers could be crushed more than others. Like Honda. Fully 20% of the cars it sells in the US are made in Ontario. Toyota has a similar problem, with 13% of its Anerican customers buying vehicles put together here. Stellantis and GM are lass exposed at one car in 20, while Ford makes no vehicles in Canada that sell in America.

That’s just cars.

Trump is also out to destroy our steel mills, aluminum smelters, logging operations and dairy farms. Meanwhile the new tariffs are crashing honey production in Manitoba and protective fabric mills in Quebec. A University of Calgary prof figures we could loss about 82,000 jobs due to the tariffs that were imposed just last week.

Most sane people think the two countries will de-escalate, start talking again and come up with a truce and a plan to retain the existing trade pact (which Trump is assaulting). After all, bilateral trade is worth $880 billion US a year. We sell America $454 billion. They sell us $426 billion. If you take out all the discounted oil they suck up ($100 billion annually), the US has a trade surplus with Canada of about $63 billion. Yeah. Surplus.

This is precisely the opposite of what Trump has been telling Americans – that Canada rips them off for $60 billion annually.

Of course, Trump is facing midterm elections, a dismal approval rating, a war he can’t win or end and a world order turning negative against his country. He is old, unsteady, capricious, illogical and prone to exaggeration, aggression and untruths. Under his leadership, our old friend is our new enemy. And into this volatile mix strides our prims minister. “American wants to break us,” Carney says, “so they can own us.”

Like Venezuela. Trump announced last week that his country will be effectively looting the South American vassal state whose leader he kidnapped of 65 billion barrels of crude in a 100-year lease agreement. Some people worry we’re next. After all, we already have pipelines snaking south, plus critical metals, potash and – above all – water.

But let’s not get dramatic. Trump could be stripped of some power in November (unless he repudiates the vote results) and out of office in January of 2029 (unless he runs again). What’s to worry about?

Okay, back to rates.

Unless trade talks start again, and work, the next move for the Bank of Canada may well be down, not up. In the meantime – at least until the end of the year – mortgage rates should stay exactly where they are now. The jobs data may suck, however.

Finally, a word from Bay Street’s cowboy economist, Derek Holt. Like us, he is getting so tired of an American president who each day grows more unworthy of his office.

“How does one tell that Trump is stressed as multiple plans go awry? Count the number and nature of umpteen social media posts over the weekend that called people ‘stupid’, attacked Canada multiple times with insults and threats which remain like stepping on kittens, claimed that polls showing his tumbling support are “fake” and threatened the polling agencies and news media outlets etc. It’s a tired act. It’s having no effect on CAD this morning. My map still shows Lake Ontario just as it does for 8+ billion other folks on the planet. Always will.”

About the picture: “Monty and Yuna awaiting the frisbee toss,” writes Kevin. “Yuna (8 yr old Shepherd/Lab mix) behaving like a 4 yr old and Monty (4 yr old Mastiff/BullMastiff/Boxer mix) behaving like an 8 yr old. Yuna loves chasing and catching the disc. Monty just loves chasing Yuna. Life with two dogs is twice as good as with one. Infininately better with them  both in our lives than just a cat. Irreplaceable! P.s. thanks for all the graciously provided financial directions. And all the dogs!!!”

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

Source: https://www.greaterfool.ca/2026/08/31/stepping-on-kittens/