Trade War Revival: Trump, Canada, and Tariffs

US and Canada Flags overlaid and flat | Licensed by Envato Elements

Crippling one of the world’s most deeply integrated manufacturing systems probably isn’t a great idea, but here we are again.

Trump has ensured that the trade war between Canada and the U.S. is alive and well, following the announcement of another series of tariffs. The U.S. isn’t just shooting itself in the foot; it’s shooting all of its closest friends’ feet in the process…

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Transcript

Hey, all. Peter Zeihan here, coming to you from Colorado. And the news is that between the 21st and the 22nd, at midnight, the United States kicked in 50% tariffs on a suite of Canadian goods, basically ensuring that the trade war between the Trump administration and Canada is alive and well. What this is what this isn’t first. What this isn’t. 

These weren’t NAFTA talks. Bilateral talks with Canadians on NAFTA, much less tri-level talks with the Mexicans have yet to begin. So the world’s deepest economic integration, the most successful supply chains humanity has ever put together are still in limbo. And now with the United States throwing a 50% tariff on top of that and saying flat out there are no plans for future negotiations. This really is getting into a no man’s land when it comes to the future of North American manufacturing. Keep in mind that the United States needs to at least double the size of its industrial plant simply to have access to the products it’s going to lose as the global really kicks in, especially in China. And doing that without our North American partners means we actually have to increase our industrial plant by the volume of theirs as well. 

At the same time, the Trump administration keeps changing policies. We’ve now had over 8500 tariff changes. This new batch adds a couple more hundred to that. And so no one who wants to invest in North American, and especially U.S. manufacturing, is going to do so because the rules of the game keep changing and they don’t even know who they can approach for partners. 

So one of the things that we’ve seen during the Trump administration is that industrial construction spending has dropped every single month of this administration, but one where there was a slight uptick, I think earlier in this year. This is certainly going to exacerbate that plan, because we’re now at the point where the business communities trust in the Trump administration has basically evaporated completely, and they will not start investing in new plant until such time as they know what the real rules of the game are. That will be on the other side of negotiations with Canada, on the other side of negotiations on whatever the next NAFTA is. And at this point, none of that has even started yet. So, if you were looking for the realization of the United States under the Trump administration, we now have 18 months of data indicating that we’ve gone screaming in the opposite direction. And we’re actually farther away from clarity now than we were in January of 2025. This is unambiguously horrible news for the U.S. economy long term, because it’s raising the very real possibility that not only will we not have the replacement product supply chains in place when the globalization really hits hard in the next couple of years, but we won’t even be able to be functional with where we were two years ago. And the industries that are hit hardest by that by far are agriculture, because their primary customers are Canada and Mexico, and automotive manufacturing because the average part that is in an American crafted vehicle crosses the border 5 or 6 times overall in in its manufacture going to Mexico and Canada. And anything going to Canada is now facing potentially compounding tariffs. And if you happen to be headquartered in Detroit and producing cars in Michigan or the northern tier of the Midwest, you’re talking about parts crossing maybe seven times. This is this is bad. Anyway. You look at it. 

One more thing. I’m going backpacking in Yosemite for the next few weeks and the next phase of this. I will not be here to talk with you about. In September, the Canadians have already promised that they’re going to announce reciprocal tariffs designed to pressure the Trump administration specifically. It is unclear what those tariffs will be on. In the past, when countries try to target political decision making, they go after things that are politically sensitive, specifically in areas that really matter to the political policymaker. I don’t know what that’s going to look like at present, but I have a real big doubt that it’s going to work. Trump has made it very clear over the last year that it doesn’t matter who he thinks his constituents are. He’s willing to do whatever he thinks his version of math supports. So, for example, the beef industry has been absolutely screaming for the last few weeks as Trump has been opening up their market to foreign imports and or an attempt to lower prices. So actually suppressing long term supply in the United States in order to give him a short term boost in preparation for the midterms. And none other than, say, the National Cattlemen’s Association has just been screaming bloody murder about how damaging that is for them in the country midterm. You’re seeing this across almost every economic sector. So the idea that that strategy is going to work is very unlikely. Second thing is the Canadians, if they do decide to target things like the manufacturing sector, that would really reverberate in places like Michigan and swing states. Two things to keep in mind. Number one. Trump’s a lame duck already. He doesn’t care about presidential elections, so that’s unlikely to work. And then second, three quarters of Canada’s exports come to the United States. Anything that they do that is real, that will cause structural damage in the United States is actually going to hurt them more.

A Canadian Pipe(line) Dream

Flag of Canada waving in the wind

The Canadians are fed up with being dependent on U.S. markets for their oil exports. So, they’re looking to diversify their export options.

The Canadian government has backed a pipeline project that would allow Alberta’s oil to reach overseas markets. With global demand rising, this project makes a lot of sense, but there are a few problems. No export terminal has been selected since all the potential sites face significant logistical challenges, and even on the most optimistic timelines, construction wouldn’t be completed until 2034.

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Transcript

Hey everybody. Peter Zeihan here, coming to you from Colorado. And today we’re going to talk about energy in Canada. Most of the energy production in Canada comes from the province of Alberta. And most of that is heavy, sour crude that has a limited market in the wider world. At the moment, most of it is transported by a combination of pipe and rail to the United States, specifically to refineries in the American mid-continent and down into Texas that were designed to run on heavy sludge. 

Most advanced refineries in the world, some of the worst crude in the world. However, Canada has always been frustrated. Alberta has always been frustrated with the price that they get because when you sell primarily via pipeline into a closed market, you’re kind of a price taker. And so there have been a number of times where while Burton Crude has sold it not just a discount, but sometimes like $25 a barrel. 

That’s before we have the diplomatic falling out between the Canadians and the Trump administration. And now Canadian-American relationships are at the worst since the arguably the War of 1812. So the Canadians are desperate to find any other outlet. The problem is, is that Alberta is landlocked, and not anybody else really wants Albertan crude, because they would have to retool the refineries. 

But there’s there’s a definitely beggars can’t be choosers situation going on in the world right now because with the Persian Gulf still majority offline and Russian crude and danger in Venezuelan crude questionable, any fresh crude source, no matter what it is or where it is, we’ll find a buyer if you can get the crude to them. So. Just last week, Prime Minister Kearney of Canada has dusted off a plan and says that there is now state backing for a 35 to $45 billion pipeline that will export crude from Alberta to the west coast of Canada in British Columbia, and then allow it to be sold wherever it happens to be. 

Now, there is already one of those pipelines in place, the Trans Mountain. It’s less than a million barrels a day. This new one is intended to be even bigger. But aspirations do not make policy, even though it has been announced by the Prime Minister. At the moment there is not a route. They have tried six different ports where this might technically be done. 

None of them worked out, so they just have a placeholder of a place called Delta, which is just to the south southeast of Vancouver. So if you were to export the Delta, you’d have to actually run the pipeline through the most densely populated part of British Columbia, including Vancouver proper, which is not exactly a conservative bastion. All that to get to a port that is not deep enough to handle a fully loaded supertanker. 

So at the moment they don’t have a port, they don’t have a destination. What they do have a state backing. And since you’ve got a prime minister who used to be a central bank chief who’s pretty good at the math, this is going to move a lot faster than previous projects, but they still have to worry about all the niggling details about how to get it to wherever they’re going to get it. 

This is still early stages. Best case scenario, they hope to begin construction in 2027. Best case scenario, they hope to finish construction by 2034. So if everything goes perfectly, this is an issue for the middle of next decade. Until then, Albertan crude stays mostly trapped within North America with all the negatives that come from that. And now I think you might be seeing why the Albertans keep talking about independence, because if they can get a different relationship with the United States, then all of a sudden a lot of that mechanical stuff just disappears. 

Anyway, that’s it for now. Take care.

Should Alberta Secede from Canada?

Cityscape of Alberta, Canada

Apologies for the wind on this video, one of the downfalls of recording with a view…

Enough signatures have been gathered to force an independence referendum and vote in Alberta. Just a reminder that secession is legally possible in Canada following a successful referendum.

The economic case for independence centers on Alberta’s youth and energy sector. With stronger demographics and a booming oil industry, some Albertans feel they disproportionately contribute without the respective influence in government decisions.

While some of this is true, an independent Alberta would still face major economic problems. We’re talking rapid inflation and labor shortages, necessitating a trade agreement with Canada or integration with the U.S. Bottom line is that the grass ain’t always greener on the other side.

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Transcript

Hey everybody. Peter Zeihan here coming to you from Rocca Calascio which was in Ladyhawke. If you haven’t seen it, add it to your list. The news today is that we are going to have a referendum on independence in Alberta. They, the people who are in favor of independence, got the 10% of the provincial citizenry to sign the petition. 

So later this year, probably at the end of the summer, we’re going to have the vote. The premier that’s kind of the governor of Alberta has already signed off on it, and away we are for the races. I’m not going to predict how it’s going to go. It is up to the people of Alberta and no one else. 

But I want to outline three things. Number one, the Supreme Court of Canada ruled decades ago in the case that if there is a plebiscite and they vote for a referendum, you’ve got to let them go. So this this is legal by Canadian law. Technically, something like this would not be legal in the case of the United States. The Constitution forbids secession. We fought a little war over it. But Canada is different. So that’s piece 1. Piece 2. The economic argument for independence is basically the idea that Canada is aging very, very rapidly and Alberta is not. And Alberta has a dynamic energy sector that has been growing for some time. And as the rest of Canada gets older and Alberta does not. The financial transfers from Alberta to Canada have been getting bigger and bigger and bigger, and the Canadians don’t really give the Albertans much say in how that money is spent, so you can see why they’re a little agro’d. I want to point out a couple of things that have changed in the relationship, though. Over the last 20 years, Canada has really brought in a surge of migrants that have partially addressed some of the demographic issues. So the financial transfer issue is not as horrible in relative terms as it used to be. In fact, at this moment, in relevant terms, Alberta is actually in decent position financially versus the rest of Canada. It’s still by far in net providers the richest province by far. But the imbalance is not as bad as it looked like it was going to be when I first started talking about this issue 15 years ago. 

And then finally, should this pass and Alberta become independent, it would be screwed. Alberta is landlocked and their primary exports are oil and grain, and those are US dollar denominated commodities. And so if you have an independent Alberta exporting for hard currency, you have a very inflationary environment very, very, very quickly. That it would be difficult to survive in a country that now has a very, very limited labor pool. So the cost of an independent Alberta would be immense, which means that independent Alberta would need to do one of two things. Number one, negotiate some sort of extensive free trade pact with Canada that would be worse for Alberta than provincehood is right now. It’s kind of like the situation that Brits are dealing with as they talk about going back on Brexit and reentering the EU. 

Or number two, apply for US statehood and join the United States, in which case Alberta is still the richest province, would still be a net donator to the national budget, but it wouldn’t be nearly the same. The stretch, the delta between an Alberta state in the United States would not be nearly as large. Anyway, these are the decisions in front of them. How they play out? That’s entirely up to them. The campaign this summer is going to be wild.

I’ve Got This Bridge to Sell You…

The Gordie Howe Bridge under construction | Photo courtesy of Wikimedia Commons

The Canadians built and financed a new bridge connecting Detroit and Ontario, but now Trump wants his 50%.

The bridge in question is the Gordie Howe Bridge. It will strengthen the supply chains in North America’s core auto industry hub and act as an alternative to the Ambassador Bridge.

Canada’s geopolitical reality is that the U.S. will always hold more leverage, because the Canadian economy is so deeply integrated with the American economy. This relationship typical manifests as the U.S. securing more favorable terms in infrastructure projects with Canada, and this is no different. Just your standard case of biggest kid on the playground.

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Transcript

Hey, everybody. Peter Zeihan here. Coming to you from Colorado. Today we’re talking about trade with Canada specifically. There is a new bridge, the Gordie Howe, that is supposed to connect, Detroit to the Canadian province of Ontario. It’s been under construction for about the last decade, and it’s supposed to begin operations this year. But Donald Trump has said that he’s not going to allow that to happen unless at least half of the ownership is transferred to the US federal government. 

The Canadians paid for the whole thing. The idea is it’ll be a toll bridge. once its construction is paid off the income will be split 5050 between, Canadian investors and the state of Michigan. Trump of course, because of this is an international connection, has the ability to end it in a heartbeat. 

And that’s what he’s doing right now. The backdrop, Gordie Howe is a desperately needed transport connection right now. All of the road traffic and rail traffic that goes between Michigan, which is one of the big U.S. industrial states, and Ontario, which is Canada’s primary industrial state, goes through a single bridge called the Ambassador Bridge. And it is the single most cross bridge for commercial purposes in the world and is the backbone of the relationship for the US auto industry. 

Keep in mind that pretty much everything that happens in Ontario, from an industrial point of view, is integrated into the United States in some way. And this is the primary conduit. So adding another conduit would be a huge boost to, the American economy from a manufacturing point of view, not to mention good for Canada as well. 

The proximate issue is that the commerce secretary of the United States, guy by the name of Howard Lutnick, is buddies with a guy by the name of Matt Maroon. Literally. That’s how his name is pronounced, who owns the ambassadorial bridge and has been campaigning against anything that would build another link ever since the idea was first floated back in, I want to say 2012, because it would be competition for his project. 

Right now he has a monopoly, and I have never met anyone on Wall Street who has ever described Howard. Let me, because anything other than desperate to be corrupted. And so apparently he had a conversation with maroon and then had a conversation with Trump. And now Trump is campaigning against the bridge. Let me go, by the way, is the guy on the cabinet who showed up the most in the Epstein files, if you’re into that sort of scandalous details. 

Anyway, the bottom line here is not that this is a corruption thing or a trade thing. The bottom line is this is a geopolitical thing. Whenever you’re dealing with trans border transport links between the United States and Canada, the United States is always, always, always, always going to have the upper hand. Canada only has about 35 million people. 

They’re scattered across the entirety of the southern border of the country. And even where they are in dense concentrations like, say, Toronto and Quebec, they don’t like each other very much and try to limit their infrastructure. So every single Canadian province but one trades more with the United States than they do with one another. And any infrastructure on the border that is designed to facilitate links is always going to be done. 

The U.S way. So if you remember back to the 5060s, we had something called the Intracoastal Waterway system, which uses the Saint Lawrence River, which empties up through eastern Canada. But comes down and connects to the Great Lakes. Great lakes have things like Niagara Falls. There’s a lot of natural obstacles. And so there was an effort in Canada back in the early 50s to build out this massive infrastructure that would connect everything together. 

But that also meant connecting to the United States. And so the United States basically did some version of what they’re doing right now with Donald Trump said, you pay for pretty much all of it, in this case, about 75%, and we get full access. Some version of that will undoubtedly manifest with this new bridge, regardless of what is right versus wrong and what has been agreed to before. 

Donald Trump actually agreed enthusiastically to the creation of this bridge when he was president the first time around. But the first time around, his commerce secretary wasn’t nearly as desiring of being corrupted. So here we are, for Canada, this is just part of doing business with the United States. There is no other option. And so just like with the intercoastal, Canada gets to pay for it all. 

The United States gets the majority of the benefits. The alternative is to not build or use the bridge in which candidate remains fractured and loses access to the world’s largest investment and commercial market. And for Canada, that’s basically a choice between a first world country and being something less. Is it fair? Nope. Is it new? Also? Nope.

Canada’s China Option

Flags of Canada and China

Canada’s prime minister, Mark Carney, recently visited Beijing. This trip sparked rumors that Canada was ditching the US and buddying up with China instead. Let’s pump the brakes a bit.

On paper, all that came from this meeting was China lifting punitive tariffs on Canadian canola and Canada easing restrictions on Chinese EVs. Canada knows that it can’t replace the US with a distant partner like China, but it could be stacking chips for the upcoming NAFTA renegotiations.

With Trump signaling indifference to NAFTA’s future and possibly favoring bilateral deals instead, it’s smart for the Canadians to have some bargaining chips when the time comes. Especially with how messy these negotiations might be.

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Transcript

Hey all. Peter Zeihan here. Coming to you from Colorado. Today we’re talking about our northern neighbors, the Canadians. Prime Minister Kearney recently completed a trip to Beijing. And in the aftermath of the Trump administration, going off the rails a little bit when it comes to trade in the alliance and threatened to invade Greenland, which is a territory of an allied, nation. 

A lot of the talk out there is about Canada finding alternatives, and a lot of people are talking about Kearney’s trip to China. In that light, and they’re not completely off base. But we need to keep a sense of perspective here. While there were lots and lots and lots of documents and memorandums, signed, on everything from agriculture and manufacturing detect IP. 

Really, there are only two takeaways from the entire trip. The first one is that Beijing will stop charging exorbitant, punishing tariffs on Canadian canola exports. Canada is by far the world’s largest exporter of that sort of thing. China has always been the single largest consumer. And so in the past, when Canada has done things like help out the Americans with sanctions regimes or, say, arrest somebody who’s violating Iran sanctions, the Canadians have been punished by Beijing as an arm of the United States. 

So at least that one piece now is undone. Second, if you remember, back during the Biden administration, the entire world put massive tariffs on Chinese electric vehicles because the Chinese were subsidizing their production and then dumping up on the market with the intent of bankrupting everybody else’s, production. That has now been scaled back. The Canadians will allow, instead of having 100% tariff on all Chinese vehicles, will allow about 50,000 in, this coming year, at a much lower tariff rate, something like 6%, and then ramping that over five years to 70,000. 

Not a huge opening, but for the Chinese who have basically have oversupply across the market, getting every little bit out helps and that’s it. And you know, I hate to break it to you, if you’re looking for me to make a mountain out of a molehill here, but the future of Canadian canola and Chinese EVs, when they’re already banned in most countries isn’t what an alliance or an economic relationship is going to turn upon. 

But there is an angle of to this that is, of course, Trump, because we’ve now had a year of all Trump all the time. And it’s really pretty straight forward, this calendar year 2026, the Americans, the Mexicans and the Canadians renegotiate the NAFTA two treaty. If you remember, NAFTA started back in the late 80s, was ratified and implemented in the 90s under Clinton and then was renegotiated under Trump, won. 

Now it’s time for the five year review where everything’s up in the air again and nations are starting to lay out their opening positions. Overall, the NAFTA accords of all variations have been very, very good for the United States and most of the growth we’ve seen in manufacturing over the course of the last 30 years has been because of NAFTA. 

And it integrates Canada, Mexico and the United States into a single manufacturing space, especially for automotive. In fact, you would really not be able to make any vehicles in the United States right now without that integration. Basically, think of Canada as a partner to Michigan and Auto Alley, where parts are going back and forth across the border all the time. 

Anyway, the Trump administration. Let me rephrase that. Donald Trump personally has said that he doesn’t care about the future of NAFTA, although the Canadians, of course, want it. He might just want a bilateral deal with Mexico or a separate bilateral deal with Canada. That is a potential form that this could all take. But the bottom line is that countries are starting to get their chips in order for the talks. 

And you should look at Carney’s trip to China in that light. It’s not that Canada has really any other options for a big trading partner like the United States. There isn’t one all provinces, but two in Canada trade more with the United States than they do with one another. 

And the two exceptions. One of them is Prince Edwards Island, which is basically a retirement community that lives on government handouts from Ottawa and the other one is British Columbia, where its primary trade partner isn’t the rest of Canada. It’s the East Asian rim, and they serve as the import point for everything that flows into the rest of the country. 

So there isn’t an option here for Canada to go anywhere else. It’s the tyranny of geography writ large. But the same is true for the United States. Right now, the United States gets access to the workforce in Canada and the infrastructure in Canada without having to pay for any of it, which is about as good of a deal and a trade deal as you can get. 

I mean, it’s pretty awesome. They pay for all that weird socialism they have up there. We get all the manufacturing benefits. It’s great. But that doesn’t mean that is how the American administration sees it. So Carney is trying to find some things that he can trade away. And at the end of the day, with the Chinese facing demographic mortality, in a way that is historically unprecedented, combined with the general anti-Chinese position of Washington, it makes sense that you get some Chinese chips that you can trade away because you don’t care about them. 

And it’s a reasonable strategy whether it’ll work or not, of course. Depends upon how the negotiations actually go. On both sides of both borders. The big problem we’re going to have here in the United States is that the US Trade Representative Office still hasn’t been staffed out to carry out normal operations, much less the 200 plus trade agreements that the Trump administration is trying to simultaneously negotiate. 

Hopefully, NAFTA will rise to the very top of that to do list when the time comes. But at the moment there is a very real bandwidth problem. All right. That’s it for now. See you next time.

No Immigrants & Negative Growth = Canada’s Economic Tipping Point

Man holding a small canadian flag against a misty background

Canada sharply restricted immigration and scored itself a 0.2% population decline. This flips the script on a long-running strategy of lax immigration to offset low birth rates and prevent pension/workforce collapse.

Slamming the door shut quickly has triggered demographic decline; should the door remain shut for too long, they risk restarting a long-term economic hollowing-out. However, the severe housing shortages, affordability crises, social backlash, and rise of nationalist politics make a good case for curbing inflows.

Canada is facing a rough economic outlook in the coming decades, unless it can figure out the people problem or negotiate more favorable trade integration with the US.

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Transcript

Hey, all Peterson here coming to you from not Canada, but Colorado. But we’re gonna talk about Canada anyway because, you know, it’s snowing. Okay, so the big news in Canada is that they have had population drop this year, 8.2%, their first drop in cheese quite sometime. So a few decades at least. What does this mean for them? 

Why did it happen? Where is it going to take them? So if you dial back to 15 to 20 years ago. Canada was in a population bomb situation that is very similar to what’s going on in Germany and Italy. They basically the birth rate had dropped, for decades, and they hadn’t had, rising birth rates since really almost World War two. 

And it was really starting to cause some problems for them. They knew that in the next ten years, which would bring us to, you know, five years ago, that they would be facing pension collapses, more people in their 70s and 60s and 50s and 40s and 30s and so on. And there was really no hope. 

Very little hope, anyway, that they would ever have a domestic regeneration of their population structure because there just weren’t enough people under 30 to have kids in the first place. So under the previous, previous, previous, Prime Minister Stephen Harper, who was a conservative from the province of Alberta, which is basically the Texas of Canada, started opening the doors to immigration. 

Now, Canada had always had a relatively egalitarian view towards immigration compared to everybody else in the world. But it was always, an issue of a race. The problem is, is when the migrants come to the United States back in the pioneer days, they could go out and become small, hold farmers and be exporting grain to the wider world in a matter of months. 

And the wealth came really easy in Canada. Not so much. The prairie provinces did have that option, but they were drier and they were colder and they were less reliable. And if you start going into interior, say, Quebec and, Ontario, you’re on a chunk of geography called the Canadian Shield, which is a bunch of uplift that had been scraped, cleared by the, glaciers. 

And so there just wasn’t much soil to work with. And the soil was very poor. And of course, it gets a little cold for most of the year. So they never had the pioneer experience that the United States had. And that took Canada in a different direction, and means that most of the population isn’t just massed on the southern border for warmth, but clustered into cities for warmth. 

About 85% of the population of Canada lives in the major cities. It’s a very different dynamic economically and socially than what we have in the United States. Socially. It makes it really easy to bring in other groups because it’s already a polyglot. Economically it means and unless you keep that cycle of people coming in, you start to age out really quickly. 

And that’s what happened back in the 1990s. So Harper opens the doors, immigration doubles, triples, quadruples, and they bring in enough people who are in the age bloc of roughly 30 to 45 that they can pay into the system enough in taxes, before they retire, that it doesn’t break the bank. The downside of that plan is that once you start that policy, you can never stop, because if you bring in someone who’s 40, ten years later, they’re 50, ten years later, they’re 60, and all of a sudden they’re, retiring. 

So where is the United States? People can walk here from the South. And so we tend to get migrants that are under 25 in Canada, they typically have to fly there. And so they tend to get migrants that are over 40. So once you open the door, you have to leave it open and you bring in hundreds of thousands of people every single year. 

You do that for 20 years, and you start to change the political and the ethnic makeup of the country. Now, in large parts of Canada, that’s not a problem. I mean, if you’re in Toronto, it’s a polyglot. If you’re in Montreal, as long as the people are coming in are French, it’s fine. And, you know, a lot of French ethnics from France came to Montreal in the aftermath of the European financial crisis and never left. 

But they were close enough ethnic mix that it wasn’t too much of an integration. I mean, people from Montreal eventually discovered that the French can be kind of pricks. But, you know, that’s a French inter French problem for the rest of Canada. 

It was a much more diverse crowd, a lot of South Asians, but really people from everywhere and eventually it reached the point that Canadians who had been born in Canada, regardless of their ethnic affiliation, were starting to lose connection with the place that they were consider themselves to be from. So there’s a cultural issue, but the bigger one was much more economic. 

Everybody has to have a place to live and so when you bring in a half a million or more people a year into a country that only has about 30 million people, you start changing the dynamics of the housing market very, very, very quickly. And many cities in Canada, most notably Vancouver and Toronto and Montréal, but also the secondary cities like Regina, and Saskatoon, suddenly became unaffordable for people who had lived there all their lives. 

And I’m not talking like the bottom 10% on the socio dynamics. I’m talking like 80% of the population. It hit a break point two years ago in calendar year 2023. Back then, Justin Trudeau was still premier, and he realized that it was shifting the entire country, not necessarily on the left or right spectrum economically, but on the left right spectrum socially and the far right. If we were in the United States, we would call them MAGA. 

Started to rise up and agitate and became very politically potent. And so he realized that unless his great centrist liberal experience was going to be threatened, that he needed to dial it back. And in the course of about 12 months, the TRO government basically shut almost all possibilities for illegal migration to Canada. And since the borders between Canada and the rest of the world, aren’t really the walkable type. 

That pretty much it was it. And so this last calendar year calendar 2025, we actually had a population decline. Now, under normal circumstances, that wouldn’t have been enough. And under normal circumstances, Justin Trudeau’s Liberals would have lost horribly in the general election that they had last year. But enter Donald Trump, who started agitating against all things Canadian, started calling Canadians nasty. 

And we got this big nationalist upwelling for whatever candidate it looked like Trump was not supporting. And so the liberals were able to eke by with a new government once Trudeau resigned. 

Where does that leave us now? Well, Canada has now closed the door, and with that door closed, the demographic time bomb starts ticking again. And if they leave it closed for any more than five years, we’re going to be looking at a hollowing out of the entire economic fabric of what’s left of the country. 

What I wrote 15 years ago when this was just starting up was that without a massive change in demographic structures, we were within just ten years of the country going to a position where Alberta was basically paying for everything, because that’s where the oil is. We’re back in that situation again. The difference this time is that globalization has failed, and is now basically going through the process of dying and Canada, luckily, was never really globalized. 

They basically traded with the United States and very few other places, over 80% of their trade. If I remember correctly. Gum South, that hasn’t changed. What has changed is that today there is an impulse in North America for a massive re industrialization program to build up the manufacturing plant that we need here to replace what we used to depend on from the Eastern Hemisphere. 

There is definitely a role for Canada play in that. Now they have aging infrastructure, they have an aging workforce. They’re heavy regulators. nowhere near going to benefit as much as Mexico has and will. But via the existing connections between Auto Alley and Detroit and the province of Ontario. They’re far more integrated into American automotive manufacturing, the really other part of the world, except for the possibility of Mexico versus Texas. So there’s plenty to work from. 

There’s plenty to work with. And since we’re only talking about a country here of 35 million people, of whom like a third are already retired, you don’t have to have a lot of breakthroughs for Canada to really benefit on the aggregate, but it does require a very different approach to policymaking, not just in Ottawa, but also in Washington. 

And we’re probably not going to get that in the next three years. Now, NAFTA negotiations renegotiations happen in calendar year 2026. How those talks go will determine what is possible for Canada for the next 15 to 20 years. And if they’re not going to allow large scale immigration, that is really the only game in town. So it’s going to be very interesting to see how the Canadians come to terms with higher nationalism versus the Trump administration, versus the need to just suck it down and put up with the Trump administration in order to get what they need on trade, because they can only do one of the two. 

Whoops. I said that backwards. They have to do one of the two.

What’s the Deal in Canada?

Canadian flag flying over Parliament

While we Americans were carving up our turkeys last week, the Canadians had a political breakthrough. The Prime Minister and the Alberta Premier made a compromise to advance a new pipeline route for Alberta’s heavy crude.

This pipeline would extend through northern British Columbia, requiring the repeal of federal bans on pipelines and tanker loadings in the region. In return, Alberta will adopt a national carbon-pricing framework. This marks a dramatic shift following Trudeau’s 15 years of hostile relations.

Carney’s restoration of a political middle seems more feasible following this compromise. While there is still plenty of uncertainty about what this next chapter looks like, I’m cautiously optimistic.

Prefer to read the transcript? Click here

Transcript

Hey everybody. Peter Zeihan here coming to you from a chilly Colorado. It’s only about ten degrees right now, which is like -12 Celsius y Celsius. Well, we’re going to talk about Canada today, specifically on America’s Thanksgiving Day. We had a breakthrough political agreement between the prime minister of Canada, a guy by the name Carney, and the premier, which is kind of like a governor of Alberta, Miss Smith, very, very short version. 

It was a civil conversation that ended in a compromise that will probably benefit almost all parties. It’s like wild, exclusively dealt with energy. Basically, the Canadian government at the federal level has agreed to now push a Bitterman pipeline. That’s that heavy, thick crude that Alberta produces by basically electrifying the ground crazy technology. Anyway, it comes up thick. 

It comes up dirty, requires a lot of specialized processing and handling. And so Alberta has always sold its crude into the American market, because the United States is the only that really process it at scale. But it’s always sold it into a big discount, because it’s a captive market and the United States is an oil exporter itself. 

Now, the federal government has committed to a pipeline across British Columbia, to the northern part of the province. Right now, there’s a federal ban on oil pipelines and tanker loadings, in northern BC. So that will have to change in exchange, Alberta has agreed to a carbon pricing regime with the goal of getting Canada as a whole down to zero emissions by 2050. 

Now we can discuss the pros and cons of that at a later time. But the bottom line is that Alberta has always vociferously avoided any sort of carbon pricing or emissions trading because it is an oil economy, whereas, Canada tends to be relatively green. And even though Alberta is a single largest source of income for the federal government, the fact that it’s all based on the back of oil, has never really gone over well in Ottawa or many other other provincial capitals. 

Now, there are many, many, many, many, many details that remain to be worked out. But a couple things to keep in mind. Number one, we have had the federal government and the Alberta and provincial government screaming at one another. For the best part of the past 15 years. The reason is the no longer in power government of Justin Trudeau was basically had a collective IQ wattage of about four, and couldn’t even pretend to have an adult conversation about any of the topics at hand. 

Does not mean for a second that the Albertans were flexible. But if the federal government really wasn’t willing to entertain discussing real issues with Alberta, of course nothing was going to happen. Now it seems that that is changing. Which brings us to number two. The political middle in Canada has been this vacant parking lot for over a decade. 

The Trudeau government could only rule, even as a minority government, by catering to lots and lots and lots of special interests, of which Greens were one. And that made it very difficult to get anything done at the national level. Even before you consider the Alberta question, Carney, campaigned on returning to the political middle. And if he can lead Canada’s Liberals, which are not a great comparison of the kind of like America’s Democrats, if he can lead Canada’s Liberal Party into the political middle, he’ll dominate a lot of things for a long time. 

But third, like I said, lots of fine print, lots of things that remain to be done at the moment. Canada’s First Nations are not part of this deal. They have facto veto power over many decisions. Number two, British Columbia, which is the province that the pipeline has to go through, is not part of this deal. 

And in the past, they’ve screamed bloody murder to basically scrap anything that Alberta has ever wanted to do. Basically, think of this as the clash between Texas and California just in Canadian politics. And then third, Canada has yet to set up that pricing regime. And until we know what the number is, one of the other components of this deal, which is a carbon capture program, we don’t know how that’s going to work. 

Carbon capture is the idea is that as a side effect of an industrial process, you produce carbon dioxide, and then you inject it into the ground rather than letting it go into the atmosphere. From a cost benefit point of view, it’s a really bad idea. From an environmental point of view, it’s probably a broadly good idea because it gets the carbon work, can’t get in the atmosphere, but it’s not free. 

And until they figure out how much carbon credits cost, no one knows how much you will benefit from this sort of market by putting the stuff in the ground. So lots and lots and lots and lots and lots of details to get into. But the fact that, Carney and Smith were all smiles and had such a broad arrangement of compromises and agreements, we have not seen this in Canadian politics for really the better part of a generation now. 

I’m hopeful, but they’ve got a lot of work ahead of them.

Why Trump’s Stance on Canada Makes Sense

Canadian flag flying over Parliament

The Trump administration’s tough stance on Canada isn’t as novel (or as arbitrary) as it may seem.

The US has always been cautious with neighbors on the northern border, from Britain in the past to modern Canada. This view follows the long-standing US strategic view that an independent power on the northern border could pose a security risk.

That caution is wise and should be applied to any potential economic integration as well. Merging the US and Canada might sound nice, but when you lift the hood…not so much. The US would be stuck with the financial burden of caring for Canada’s rapidly aging population.

Prefer to read the transcript? Click here

Transcript

Hey everybody. Hello. From Rock Island Pass at the border between the Hoover Wilderness and Yosemite National Park. Today we’re taking a question from the Patreon crowd as we’re doing this whole trip. What what what what why? Why is the Trump administration hit Canada so much? Is there anything to it or or should we just whinge? That’s actually the specific text of the question. 

Let’s start by saying that there is is something to it and it goes beyond her. The Canadians burning our Capitol, back in the War of 1812. And you Canadians, you cannot pledge innocence from this. You know you did it. Yes. The Brits drove the car pool, but it was Ontarian Abrines that brought the torches to the party and actually burned the white House down. 

Now bigger picture. The United States is a large country that basically has the best parts of the continent. But that doesn’t mean that the United States is alone on the continent. Obviously, Canada is the entire northern frontier and throughout American history. If you go back to before reconstruction, the United States was always concerned that an extra hemispheric power would establish a beachhead somewhere in the vicinity of the North American continent and potentially use it to interrupt American power or maybe even launch an invasion. 

And of course, most recently and from the beginning, actually, Great Britain was the power of concern. Now, I don’t mean to suggest that there was a British invasion imminent or anything like that. Don’t put words in my mouth. I’m going to piss off enough people with this video as it is. But the idea that you can have an independent power right on America’s borders that doesn’t bear some degree of security risk is just silly. 

That doesn’t mean that I think that there’s a war around the corner, that it’s even inevitable. Certainly not imminent, but it’s not a blind policy decision to decide that you actually want all of the continent under a single flag. And both it for those of you to the south of us in Mexico, this applies to you as well. 

Now, that said, I think that the borders between the United States and its neighbors are fine. I’m not worried about an invasion. There’s good buffers, whether it’s, lakes and force in the north or deserts and mountains in the south. The population density of Canada certainly couldn’t do it by itself. Mexico maybe a little bit better. But northern Mexico is such a logistical snarl because of a lack of infrastructure. 

That too, I’m not concerned about. But the bottom line is, is that this didn’t come out of nowhere. This has been part of the American strategic view for 200 years, and to pretend otherwise is being a little bit windy. Now. That said, do I think we should do it? I think candidate even if they ask. No, because it’s bad math. 

When industrialization really got going roughly a century ago, people started moving from the farms and into the cities and they started having fewer kids. And that process was much more intense in Canada than it was in the United States, because I don’t know if you knew this, but can it gets cold in the winter. And so the Canadians basically huddled together in their cities for warmth, and there’s a much higher dense urbanization rate. 

Oh, got a message dense urbanization rate for Canadians than there is for Americans, which means that the Canadians of age are much slower. They’ve also probably played the immigration card as hard as they can. It’s starting to generate social disruption. And so the old Trudeau government and the new government have cracked down on immigration. Quite a bit, basically slowed it to a trickle. 

Oh, Mr. Popular, all of a sudden, which means that Canada is aging much, much, much quicker than the United States. And remember, in the United States, the baby boomers are already two thirds retired. So we know we face an explosion in social welfare payments over the next decade. Canada is ahead of us, and Canada lacks a millennial generation of size comparable to what we have south of the border. 

Which means if we were to do a merger of the Canadian provinces and the American states, it would be up to the United States to pay for the retirement of most Canadian citizens, most notably in Ontario, Quebec, and in the maritime provinces where the demographic decline is most advanced. So from a purely financial point of view, merging the two countries would be economic suicide for the United States. 

Let Canada pay for this. And if that means Canada pays for other things too, great.

Smokey Bear’s Best Friend: fire.airnow.gov

Wildfires with smoke and a car in the background

We’re talking about every hiker’s worst nightmare. No, not the feeling of slipping into wet boots that didn’t dry out overnight. We’re talking about smoke!

There’s a growing wildfire smoke problem across North America and there are three main drivers. The Western Rockies had an unusually dry year, causing large fires that could smolder well into the winter. Canada’s muskeg region is vast and swampy, but long-lasting and hard-to-control fires break out as the region dries out, sending waves of smoke across the US. And of course, Pineapple Express (no, not that kind of smoke); the atmospheric rivers that leave the PNW parched and fire prone. Surprisingly, the West Coast has fared much better than most years thanks to heavier rains.

The smoke situation is a recurring and hard-to-predict, but using FIRE.AIRNOW.GOV can help you track air quality and plan ahead.

Prefer to read the transcript? Click here

Transcript

Hello, Peter Zeihan here coming from Colorado. And today we’re going to talk about smoke. This is a topic that is very near and dear to my heart as a backpacker. As you may have noticed, whether you’re living in Minneapolis or Chicago or Des Moines or Kansas City, we’ve had some crazy smoke outbreaks already this year. So I thought it’d be worth showing a tool to you, as well as talking through the three biggest things that shape the smoke forecast for the United States. 

First of all, the tool fire.airnow.gov tracks a several thousand air quality sensors scattered across the country and maps out the smoke plume. So you know what to anticipate. Also gives you an idea of the danger level based on the particulate matter in the air, so you can judge your day accordingly. A tool that I use every day, all summer long. Use it to plan my trips, because I don’t want to be in the middle of that smoke choke, when I’m backpacking. Anyway, that’s the tool. Let’s talk about the three big things. Number one, moisture conditions in the Rockies, specifically the Western Rockies. As you move up elevation, the land becomes more arid because the air density is lower, so it can hold less moisture. 

What that tends to mean is that as you move up, you get into a more and more arid environment where conditions can change very, very quickly from maybe adequate moisture to completely inadequate. And you introduce a spark weather through, some asshole with a cigarette or a lightning strike, and you can get a big forest fire very, very quickly. 

Now, this year, the Western Rockies did not get as much moisture as they normally do. So they started out the season pretty dry. And already in western Colorado, we have a series of fires that collectively are about 200,000 acres and going. And most of the air quality issues we’ve had in the Denver area so far this year are because of those fires. 

About the only good point I can say about these fires is because of the nature of the topography. Mountainous. Sometimes it’s difficult for the fires to jump from one valley to another, and they tend kind of, sort of to be somewhat self-contained. However, these are rugged areas. There’s low population density. It’s very difficult to fight fires in these areas. 

And so if a fire does start up, they tend to burn until winter. And sometimes they’re not completely out until after Christmas. So these are kind of a chronic issue that kind of needles air quality throughout the Rockies. That’s number one. Number two Canada. Okay. So Canada is a very weird place, topographically speaking, is a huge country with lots and lots of climate zones. 

But the one to watch the most is an area called the muskeg, which is a zone in northern Saskatchewan, in Manitoba, going over into the Canadian Shield, into western Ontario. These are areas that are almost completely unpopulated. And in the wet months they’re basically swamps. But if you have several months of low rainfall, the swamps start to dry out. 

And as soon as that happens, all it takes is a spark and you can basically get some sort of surface peat fire almost that can burn, burn, burn and burn. At the time that I’m recording this in the middle of what is this August, there are over 200 fires burning in this section of Canada. In many ways, it’s more dangerous and more problematic than what we have in the Rockies, because these zones are not mountainous. 

And so if you have an area that has become parched, it can just burn and burn and burning, burning, burn. And if you remember back in July when we had really poor air quality as far south as Kansas City and as far east as New York, almost all of that was because of these Canadian fires and because it’s swamp part of the year, and because it’s basically frozen tundra part of the year. 

These are not things where any sort of mitigation can really help. In the Rockies, you can go through foot by foot, acre by acre, clear out the Deadwood cut down the dead trees, haul it all off, put it into piles or whatever. That’s something I’ve done on my property for sure, because I live in a fire zone. You can’t do that. 

And the great untouched barrens of northern Canada, you just have to suffer through the fires and it’s going to be a bad fire. You’re up there. So for those of you in the Upper Midwest and the northeast part of the United States, expect more and more waves of smoke. All right. What’s the third one? Pineapple express? There are things called atmospheric rivers where you basically get channels of high altitude winds that suck moisture out of the oceans, and they just push them across the planet. 

And when these channels hit a mountain range, they rise and they drop a lot of moisture. So what we see in California, Oregon, Washington and British Columbia is the atmospheric river whips around like a fire hose at the firemen has lost control of, and it will spray the area with massive amounts of rain in some years or in other years, it’ll miss you completely and you’ll just kind of get the suction effect. 

And as the wind goes down the other side of the mountains, you get a compression effect, which actually increases air density and temperatures and makes you more prone to fires. So you get these two extremes. You get sprayed down by the atmospheric river hose, or it avoids you completely and just sucks the moisture along in its wake. Drying you out this year is absolutely a hose year, and so we’ve seen almost no fires up and down the Pacific Northwest. 

But if you remember back to say, the year 2000, when it seemed the world was going to end, that time we actually saw the Amos River avoid this region completely desiccated. And we had some of the worst forest fires in recorded history. So for me personally, going to Yosemite and a couple of days, this is perfect because while there are fires in Canada, I’m not going that direction. 

There are fires in western Colorado. I’m leaving that area. I’m going to California, which has now experienced some of its best moisture conditions in several years. The chances of fire are minimal for the rest of you, fire air now.gov and keep ahead of it.

Trump Trade Talks: NAFTA Deals Stall

A USA-marked shipping container on a truck, illustrating American international trade from Envato Elements: https://elements.envato.com/a-usa-marked-shipping-container-on-a-truck-illustr-HMKHD83

To nobody’s surprise, trade talks with Mexico and Canada have stalled. Reminder that these are America’s top two trading partners and export markets, so securing a favorable deal isn’t just a nice-to-have, it’s a necessity.

With US manufacturing on the line (and severe economic damage), I suspect a deal isn’t far off. North American production is growing in importance as China declines. Mexico offers a nice growth opportunity and some potential for political wins as the fentanyl trade is disrupted. To the north, deal progress has been slowed by some unrelated speed bumps.

If there was ever a trade relationship that needed to get hammered out ASAP, it’s NAFTA. Since Trump has already stamped his name on NAFTA 2 during his first term, I’m hopeful we’ll see some progress here soon.

Prefer to read the transcript? Click here

Transcript

Hey all, Peter Zeihan here coming to you from Colorado. We’re going to continue with our open ended series on the nature of the trade relationship that the United States is building with the rest of the world under Donald Trump. And today we’re going to talk about trade deals that have not yet happened. And that’s Canada and Mexico. According to the Trump administration, both of these countries are going to require significant additional time to negotiate at least 90 days with Mexico and a kind of an indefinite hold on everything with Canada. 

These two matter more, I would argue, than all of the other deals put together. Mexico is our top trading partner. Canada is number two. Both of them, a few years ago surpassed China and are not looking back. Both are also our number one and our number two export markets. 

So unlike China or Europe where the trade imbalance is pretty significant here, while there is a trade imbalance, it’s not nearly as large because we send them lots of stuff. Basically these are integrated economic spaces. And if we sever our relations with either Mexico, Canada, it would be like severing our relationship with California or Texas. What that means in real terms is roughly 14 million jobs in the United States are directly, dependent upon trade with our immediate neighbors. 

That’s about 10% of the total labor force. So if we can’t get a deal that favors Canada, Mexico versus the rest of the world, we’re going to not just see a significant drop off in local economic exchange. We’re going to see a significant hit to U.S. employment in manufacturing in general, unlike products that come from Europe or East Asia, which are largely completed when they hit U.S stores, products that come from Canada and Mexico are part of an integrated manufacturing system, with different pieces of the end product being made in different parts. 

Of the three country union that is NAFTA. And if you cut that out, then the American manufacturing model fails from the inside. And all that’s left is to import things from further abroad. Now the smart money remains on a meaningful deal for a couple of reasons. Number one, the economic catastrophe that would hit the United States if there wasn’t a deal would be horrendous. 

And Trump will definitely go down in history as the worst negotiator we’ve ever had on trade. Number two, the Chinese are dying. And if we can’t build out manufacturing in North America, then we just won’t have product. So we really are on the clock here. And every day that passes that we don’t have clarity in the Mexican, Canadian and American tri relationship is a day that we fall a little bit further behind and basically set up China to succeed in the short run. 

But us to fail in the long run. The third issue, of course, is employment. We will build this very, very quickly. And the fourth is growth markets. Canada has a very similar economic and demographic to us where we’re steadily aging. And so consumption is probably approaching peak levels. Mexico is not in that category. It already has $1 trillion consumption market, and it has a population bulge for people aged roughly 5 to 35, which is exactly where you want it. 

If you want people buy in more and more and more and more. So of all of the consumption led economies in the world outside of the United States, Mexico is the one that has the strongest growth trajectory, not just for employment and stability, but for product consumption, which is something that in a world that is rapidly aging, is something you want to get Ahold of. 

Another big reason to think that this is probably going to go somewhere is when Trump made his 90 day delay on the Mexico announcement, he specifically mentioned that there’s a fentanyl tariff in place. Well, fentanyl imports into the United States have been dropping for the last couple of years. Thank God for a mix of reasons. It has very little to do with policy. 

But Trump has inadvertently adopted a tariff policy that’s actually going to speed that process along and give Trump the opportunity to call a win. And that has to do with something called the de minimis exception. So when you purchase something on line that is less than $800 and is sourced from another country, it comes into the country without basically customs declaration or taxes. 

That is now over under the Trump administration. We now have a really steep tax. So everything that used to get from China say, is basically over. And that is how most of the precursor materials that are used in fentanyl made it to North America. They’re shipped via de minimis to the United States, and they’re repackaged and trucks to Mexico be to be turned into fentanyl. 

Anything that interrupts that process, anything that puts friction in that process, is going to raise the relative cost of fentanyl. It’s still wildly profitable, but, you know, every little bit helps. There is one complication in all of this, and that is ironically, Gaza. Oh my God. So there are a number of countries that include France and Britain and Australia and Canada that are talking about imminent recognition of the Palestinian state. 

As a formal country. Now, there’s a number of reasons why I think this is silly. We have a video we did on that relatively recently in case you want to review. But Trump has singled out one of those countries as this being a problem for trade relations. And that’s Canada. So there’s supposedly a deal with the European Union. 

There’s supposedly a deal with the United Kingdom, a supposedly one with Australia is coming in. Trump doesn’t seem to care about any of those, but Trump really has a bee in his bonnet when it comes to Canada about pretty much everything. And so he’s chosen to make the Palestinian recognition issue a subject that falls now under trade talks. 

And that has basically put relations with Canada on hold again. It’s very arbitrary, which means it could be going away arbitrarily tomorrow. But for the moment, it’s another issue that Trump has picked up on that has stalled relations that in the past is something that U.S administrations wouldn’t even blink out because they really don’t matter anyway. 

That’s the bottom line here. The two relationships that we need most for now, for the future, for American growth, for North American stability to beat down the drug war, to ensure high levels of American employment, to prepare for a post China world, they are still in limbo. One other reason to think that it might work out NAFTA two was negotiated by the first Trump administration. 

So it really wouldn’t take much for Trump to say I’m putting my name on something because he already has.