Financial Post TopStories

By Kara Lilly and Michael Kosmalski

It started, as these things often do, with a shift too small to notice. One moment, the gilts market was stable. The next, it wasn’t.

A few months ago, a troubling development unfolded in the United Kingdom that spooked Brits, rattled bond desks globally and was largely ignored by everyone else. While United States President Donald Trump commanded the spotlight with a flurry of policy proposals, the yield on 30-year U.K. government bonds (gilts) surged past five per cent.

Now, by nature, bonds are tedious. Studying them tends to make your eyes glaze over. But these were serious moves: yields climbing to their highest levels since 1998, while the pound sterling fell.

Together, these swings raised a pointed question: were bond vigilantes back?

What are bond vigilantes? The term refers to investors who sell off bonds in response to fiscal policies they see as reckless, driving up yields and borrowing costs to enforce discipline. Economist Ed Yardeni coined the term in the 1980s.

A famous episode followed from late 1993 to 1994, when 10-year U.S. Treasury yields rose to more than eight per cent from 5.2 per cent, spooking the administration and prompting deficit-reducing measures. By 1998, yields had fallen to around four per cent.

Bond markets wield power because they’re a country’s credit lifeline. Without affordable credit, governments struggle to function and economies can’t grow. Few forces have shaped history more than the bond market.

For example, in the 19th century, Italy’s unification was partly enabled by Count Camillo di Cavour, prime minister of Piedmont-Sardinia, who secured funding through international bond markets.

More recently, Argentina’s economy collapsed after years of borrowing and a failed currency peg. Investor confidence evaporated, yields spiked, the country defaulted on US$100 billion, and the president fled amid riots.

And you likely know the story of 18th-century France, if not the bond market’s role in it. France, drowning in debt from decades of war, including its costly American Revolution involvement, tried issuing more bonds. Investors balked. Yields soared. The monarchy couldn’t raise funds.

King Louis XVI was forced to convene the Estates-General in 1789, triggering events that ended in revolution, the infamous phrase “Let them eat cake” and the monarchy literally losing its head.

“I used to think that if there was reincarnation, I wanted to come back as the president or the pope or as a .400 baseball hitter,” James Carville, a political adviser to president Bill Clinton, once quipped. “But now I would like to come back as the bond market. You can intimidate everybody.”

Bond vigilantes bring a loaded weapon when they show up to the duel.

In the first quarter this year, it looked like they were back, protesting what many saw as fiscal carelessness in the U.K. Yields spiked. The pound fell. Within days, Finance Minister Rachel Reeves was reaffirming fiscal discipline and markets calmed.

But a few weeks later, a more muted version played out in Germany after Chancellor Merz proposed big defence and infrastructure spending beyond typical debt limits. Yields ticked up.

Three observations are appropriate to make now.

First, bond vigilantes appear to have finally arisen from their long nap.

Second, despite the profligate manner in which governments worldwide have spent and accrued debt over the last few decades, there remains some upper limit on how much fiscal mess bond investors are willing to bankroll.

Third, it may be time to ponder the question many investors have actively avoided because it is such a headache to consider.

What if bond vigilantes come for the U.S.?

Many investors avoid this question. America, they argue, is America, the world’s strongest economy and issuer of the reserve currency. It won’t be easily dislodged. Besides, if the dollar fell and yields soared, the fallout would be too incomprehensible to imagine.

But low odds aren’t the same as an impossibility, and scenarios being potentially painful is the best reason to confront them. Today, there are three reasons this one deserves attention.

First, America’s fiscal position has long been poor and it’s gotten worse.

Second, many of Trump’s policies — including sweeping tariffs , floating a debt restructuring, and the proposed tax legislation advancing through Congress, which could add US$1 trillion to US$2 trillion to the federal deficit over the next decade — look likely to worsen the fiscal outlook and/or rattle bond investors.

Third, bond markets have been acting odd lately. With all the uncertainty and volatility in stocks, this should be a clear “safe haven” moment. Instead, U.S. Treasuries are selling off.

All this is raising the odds of something unwanted: a bond vigilante showdown.

An American standoff with vigilantes could be either performative or nasty. The consequences — to Americans, to markets, to the world — would depend heavily on which one unfolds.

A nasty clash would resemble the British experience, but with U.S. leadership refusing to back down. This would be the “let them eat cake” moment: yields would spike, the administration would inadequately respond, bondholders would lose even more confidence, yields would spike further, the dollar would fall, thereby spooking everyone now actively paying attention and a full-blown crisis would eventually be on everyone’s hands.

This scenario is a bit like the asteroid that National Aeronautics and Space Administration (NASA) recently detected as being on a low-probability collision course with Earth (for a while there, they were giving this a three per cent chance). Those are low odds, but seriously destructive should it occur.

More likely is a performative standoff, echoing the 1990s’ Clinton era. Vigilantes call the administration’s bluff. The administration, unwilling to play chicken, would back down and implement the fiscal changes needed to restore confidence.

Yes, even Trump would be forced to yield.

Markets would reel — bonds and equities alike — but ultimately stabilize. The world would move on, bruised but intact.

Of course, a standoff could be avoided altogether if politicians prioritized long-term national interests over short-term personal gain. Your guess is as good as anyone’s on how likely this is.

For investors, recent events are a warning that market forces can, and do, exert control when governments push too far with excess. Bond vigilantes appear to be back, or at least, circling on the sidelines.

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As Trump and his administration walk the fiscal tightrope, it may be bond vigilantes — quiet, often overlooked — who decide America’s financial fate. People obsess over stocks. History shows, however, the bond market is the ultimate check on power.

It is the real kingmaker.

Kara Lilly, CFA, is a senior investment strategist at Focus Wealth Management and Michael Kosmalski, CFA, is a managing director and portfolio manager there.

Bonds flashing red forced Donald Trump to U-turn on reciprocal tariffs , but the sector is not out of the woods yet, analysts say.

“Most financial market participants are convinced that turmoil in government bond markets — which suffered neck-snapping volatility from (April 2) through (Wednesday) morning — and recession warnings from corporate executives — like JP Morgan’s Jamie Dimon — were critical in convincing the administration to back off,” Karl Schamotta, chief market strategist at Corpay Currency Research, said in a note.

Prior to Trump’s surprising announcement on Wednesday that he was pausing higher tariffs against many countries, interest rates on United States government bonds of all maturities were on the rise, “ with the long end leading the way higher and exhibiting unusually high volatility,” Royce Mendes, managing director and head of macro strategy at Desjardins Group, said in a note on Wednesday.

He said the yield on the 10-year Treasury rose above 4.5 per cent, while the 30-year yield hit five per cent.

“Liquidity was thin and there were risks that market functioning could begin to deteriorate more meaningfully, which could have proven catastrophic,” he said.

The danger to the financial system was quite real.

Schamotta said it appeared investors earlier in the week were seeking to raise cash by selling bonds, potentially to cover their stock market losses.

“That’s something quite typical of a financial crisis,” he said, as “liquidity gets removed from all global markets simultaneously, then we have a major downturn and other things start to seize up.”

U.S. Treasuries are the global lending market benchmark, so trouble there can spread around world bond markets.

“The risk here was that if we had a rapid rise in yields, then that would trigger distress for participants across the global economy who are reliant on that access to U.S. funding,” Schamotta said, adding that the U.S. Federal Reserve was close to stepping in to add liquidity to keep the bond market functioning.

Stock markets soared Wednesday following Trump’s announcement, recouping trillions of dollars in losses, with the S&P 500 closing up 9.5 per cent, while the S&P/TSX composite index rose 5.4 per cent.

But the euphoria didn’t last long. Markets closed down again on Thursday as investors came to terms with the 10 per cent baseline global reciprocal tariffs and the potential impact on U.S. and global economic activity.

On Thursday, long-term bond yields were on the rise again, though not as precipitously as earlier in the week, with the yield on 30-year Treasuries hitting 4.85 per cent after pulling back. Yields on shorter-term bonds came down.

Economists at National Bank of Canada said they have bond investors in their sights.

“As recent events have emphasized, overseas bond investor attitudes bear close scrutiny,” Taylor Schleich, Warren Lovely and Ethan Currie said in a note.

Schamotta agrees bonds aren’t out of the woods yet.

“The dynamics that we’ve seen even today are worrisome again; firstly, that U.S. yields are rising and the dollar is falling at the same time, indicative of a lot of stress in the financial system,” he said. “And it’s very clear … none of these financial instruments can be relied on to be stable in the coming months.”

 

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The Canadian dollar on Wednesday rose above 71 cents U.S. for the first time since early December, while its American counterpart is being severely weakened by the uncertainty and chaos that Donald Trump’s trade war has unleashed .

The loonie was up 1.4 per cent in early trading Thursday as part of a surge that started Wednesday after Trump announced a 90-day pause on higher reciprocal tariffs, reducing the levy on most countries to a baseline of 10 per cent, but hiking duties on China to 125 per cent.

Read the full story here.

 

 

• Bank of Montreal holds its annual general meeting
• Today’s Data: University of Michigan Consumer Sentiment Index
• Earnings: JPMorgan Chase & Co., Wells Fargo & Co., Morgan Stanley, Blackrock Inc., MTY Food Group Inc., Corus Entertainment Inc.

 

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We have what so many nations wish for: rich, abundant natural resources. It is the one thing that sets apart those in countries suffering energy poverty and the lifestyle and health of the people in nations who enjoy energy prosperity.

A prosperous energy sector means prosperity for all Canadians. We use energy to cook our food, heat our homes, keep the lights on in schools, power our hospitals and drive our kids to activities. The revenue to governments from resource development pays for roads to be built, and health care, education and social programs to be funded.

Energy touches every corner of our lives. But energy has been viewed as a Western issue, not a Canadian one, for far too long.

We are at a crossroads where it isn’t even about energy prosperity; it is now about energy security. It is about whether we can get energy across the country to Canadians who need it. It is about jobs, economic growth and global leadership. It is about Canada stepping up to provide the world with reliable, responsible and affordable energy.

A trade war is raging that puts Canadian jobs at risk. Canada is inextricably tied to the United States, exposing us to the constant changes from Washington that are completely out of our control. Our industry is up to the task of helping Canada be less reliant on our one major trading partner. We have what Canada and the world needs: responsibly developed, abundant Canadian energy.

Since the trade war began, we have heard loud and clear that Canadians want us to build pipelines, to replace foreign energy with our own Canadian-produced energy and to export what we don’t need, prospering from other countries purchasing our products while achieving another collective Canadian goal: helping high-emitting nations decrease their carbon footprint by displacing high-carbon fuels with our cleaner-burning energy.

Developing our resources and building the infrastructure to get them to our ports for export means more Canadian jobs, more revenue to the Canadian economy , a lower global carbon footprint, more Indigenous participation in our national economy and prosperous communities from coast to coast to coast.

But to do all this, we need a federal government to listen to Canadians and prioritize building Canada. We need policies that reflect the reality of energy in this country. Policies that are affordable, sustainable and forward-looking. Policies that support Indigenous partnerships, innovation and economic opportunity. Policies that recognize the value of Canadian energy, responsibly produced, globally respected and urgently needed.

We need the federal government to be thoughtful when managing our trade relationship with the U.S. Enserva has cautioned the federal government that tariffs on inputs to energy production, such as frac sand, oilfield chemicals, steel, precision-machined parts, electronic sensors and industrial equipment, will punish Canadians more than Americans.

Much of our oil and gas production requires sand for pressure pumping. Canada imports about six million tonnes of sand annually from the U.S. because there is no viable domestic alternative at the levels that we need. The Government of Canada’s retaliatory tariff measure will add $240 million a year in additional costs on frac sand alone, significantly impacting drilling operations, creating instability in Canada’s oil and gas sector , and increasing energy costs.

Canada has challenges being competitive in a global market, and counter tariffs have weakened us further, meaning less will be invested and built here. It could result in thousands of job losses and will drive up the cost of living at a time when we are in an affordability crisis.

On behalf of our members, we call on Ottawa to put Canadians first and immediately remove tariffs on all inputs into energy production.

To lessen the detrimental impact tariffs and counter tariffs will have on Canadians, Ottawa needs to strengthen its own hand. The federal government should commit now to repealing policies that impede investment and energy development and immediately expedite approvals of major energy infrastructure that will expand our access to tidewater.

If we want a future where Canada can thrive, then energy must be part of the national conversation. Let’s make sure that when Canadians head to the ballot box, they are thinking about the energy that powers their lives.

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For the prosperity of all Canadians, we need to put energy on the ballot.

Gurpreet Lail is chief executive of Enserva, the industry association that represents the energy services, supply and manufacturing sector in Canada.

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Concerns about Toronto-Dominion Bank’s failure to prevent money laundering in the United States was a key topic at its annual general meeting on Thursday, with some shareholders questioning whether the bank had done enough to address the shortcomings that led to a US$3.1-billion fine by U.S. regulators last year .

This was TD’s first AGM since it became the first bank in U.S. history to plead guilty to conspiracy to commit money laundering last October. Some shareholders wondered whether TD can prevent a similar lapse in Canada and whether further cuts should be made to senior management’s already reduced salaries.

That led TD chair Alan MacGibbon, who will be stepping down by year-end, to apologize to shareholders.

“This really was … the darkest day that we could have imagined it to be, and I apologize (to) all investors for how difficult this was,” he said. “There have been many lessons learned and many practices implemented. And I, just again, apologize for the past.”

TD chief executive Raymond Chun also acknowledged the bank’s failures in its anti-money-laundering (AML) program and said they were “unacceptable.”

Chun, who replaced Bharat Masrani in February, said the bank is undergoing a series of changes as it goes through a “comprehensive plan” it recently developed.

Despite investors’ concerns, most voted in favour of TD’s view when it came to shareholder proposals.

For example, proposals raised to dismiss Masrani as the bank’s adviser and to hire someone from outside the bank to replace Chun as president were voted against by 90 per cent and 99 per cent, respectively, of participating shareholders.

TD has made several changes to rectify its AML program and to regain customers’ trust ever since it was fined and ordered to cap the expansion of its U.S. retail banking in October by the U.S. Department of Justice and other regulators for failing to monitor money-laundering activities at its branches.

The bank has hired several AML experts, reduced the pay of its senior team and changed its CEO, and is now going through a strategic review that will look for ways to reallocate capital, optimize costs, simplify its portfolio and invest in new technology that can support organic growth. The review is expected to be completed by the second half of the year.

As part of its review, TD sold its entire ownership stake in Charles Schwab Corp. to free up about $20 billion. The bank used $8 billion of that to repurchase up to 100 million shares and plans to use some of it to “drive organic growth” and further “deepen” relationships with its 14 million Canadian customers.

The lender also beat analysts’ expectations in its first-quarter results released in February after missing them for two consecutive quarters.

Chun on Thursday said the bank’s response to the AML saga has been decisive.

“We carefully examined the root causes and identified the gaps, behaviours and deficiencies that led to these failures,” he told shareholders. “We are making consistent progress every day, with more work ahead.”

Even so, some shareholders didn’t seem to be too happy with the responses provided by TD’s executives.

One shareholder said he had sent a letter to MacGibbon right after TD was fined in the U.S., asking how the board failed to track the fraudulent activities, but did not receive a response. Chun did not respond and asked for the next question.

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The shareholder returned and said he felt like he had spoken to a “blank wall.” MacGibbon then apologized that no response was given and said that was a mistake.

• Email: nkarim@postmedia.com

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Donning a red-and-white jersey with “Canada Leads” printed on the front, Ontario Premier Doug Ford seemed resolute at a Toronto event on April 7 as he vowed to attract “world-leading scientists” and the “brightest minds” from the United States, many of whom are reportedly concerned about losing their jobs due to President Donald Trump ’s funding cuts.

“We are going to go on many fronts to fight these tariffs,” he said. “But one way to win big time is to get the brightest minds in the United States. I can tell you the president won’t be happy.”

Ford’s statement came days after officials from Manitoba and British Columbia talked about “ rolling out the welcome mat ” for American health-care experts.

Capitalizing on tensions linked to Trump’s policies seems like a good plan, but analysts doubt whether Canada can take advantage of them without implementing crucial changes to its immigration system , especially since some lawyers say the country doesn’t have a specialized program that can successfully attract high-skilled professionals from abroad and it’s also become harder for them to become permanent residents.

“Even if Taylor Swift wanted to immigrate to Canada, she could not,” Stephen Green, a managing partner at Toronto-based Green and Spiegel LLP, said. “We don’t have a program for people with really extraordinary ability … the fabulous artists, the outstanding businesspeople.”

These “extraordinary” foreigners can technically enter Canada with a work permit for a few years, or even get a work permit after studying here, but lawyers say the pathway to becoming a permanent resident from a temporary one has become more difficult in recent years, which would likely discourage them.

Lawyers and consultants hope that whoever forms Canada’s next government can revisit the immigration system and work on its flaws through meaningful discussions with industry, but it’s something that requires urgent attention since Canada’s reputation among economic immigrants has been hit in recent years.

“Canada has lost its brand,” Meti Basiri, co-founder of ApplyBoard Inc., a Canadian digital platform used by students to apply to universities, said. “Any administration that comes in, before getting anything out, needs to stand back and ask, ‘How do we build our reputation?’ Because we are back to where we were 10 to 15 years ago.”

This “damaged” reputation, as Vance Langford, co-president of the Canadian Immigration Lawyers Association, calls it, is a result of unusual trends and changes in the immigration space that have exposed weaknesses in the existing points system used to bring in foreign skilled workers.

Canada has several immigration programs, but most temporary residents and foreigners living outside the country try to come to the country as skilled workers. These programs are managed by an online system called Express Entry, which provides candidates with points for their education level, work experience, English and French language proficiency, age and other factors.

The higher the applicant’s score — out of a total of 1,200 — the higher their chances of becoming permanent residents, which eventually leads to citizenship. The system is designed to attract young, skilled people from around the world.

For example, applicants under 30 receive the highest possible number of points in the age category. Applicants also receive points for Canadian educational degrees and work experience.

The Express Entry system has worked well in the past and allowed a steady flow of skilled newcomers to enter Canada, which relies on immigration for its economic growth. But the number of international students and foreign workers drastically increased after Ottawa looked to fill a record number of job vacancies when the pandemic ended.

Ottawa also introduced a policy in 2023 that allowed it to bypass the points system and set lower cut-off scores for certain groups, such as tradespeople, engineers, health-care workers and French speakers, by conducting separate immigration draws for them.

These two steps meant there were far more temporary residents competing for a smaller number of spots, which vastly increased the cut-off score that general candidates needed to qualify to become permanent residents.

As a result, two million temporary residents are expected to leave the country in 2025 and 2026 as their permits expire, which is also part of the federal government’s plan to reduce Canada’s population growth by 2027 amidst rising unemployment and a housing crisis.

The mass departure could include many temporary residents who have specialized skill sets that could have helped the country’s struggling productivity levels, analysts said, because the points system isn’t always capable of differentiating between highly-skilled newcomers, who are more likely to earn high salaries and boost the economy, and those who barely meet the minimum requirements or are trying to game the system.

For example, a foreign graduate from the Massachusetts Institute of Technology or the University of Waterloo could potentially receive the same number of points as someone with an online university degree in the system’s education segment, Martin Basiri, the other co-founder of ApplyBoard, said in a podcast program called Borderlines on April 1.

He also said Canada’s recent focus on bringing French-speaking newcomers through the category-based draws introduced in 2023 creates an imbalance.

“If you speak French and you have no skills, you are better than if you have a master’s degree in computer science … or (if you) make $150,000,” he said.

Some of Basiri’s employees are currently on a break to sort out their language requirements in order to meet the cut-off scores and become permanent residents, he said.

Until March 21, about 18,500 newcomers were admitted into Canada this year through the French category, which is almost twice as much as the 9,350 admitted through the general draws, according to Steven Meurrens, an immigration lawyer at Larlee Rosenberg Barristers & Solicitors.

Simply put, CILA’s Langford said the category-based draws have made the immigration system “unworkable” for economic immigrants.

“How does Canada expect to attract and retain skilled people with a points system if a candidate in the pool with 510 points does not receive an invitation to apply?” he said. “Category-based draws need to be seriously reduced.”

The leaders of Canada’s two main political parties, Mark Carney and Pierre Poilievre, haven’t talked much about the specific changes to immigration they would make if elected. But both seem keen on keeping a cap on the number of newcomers until there’s enough housing. Immigration hasn’t dominated the campaign trail the way it generally did throughout 2024, with Trump’s tariffs taking up most of the discussion.

But due to various ongoing nuances in the immigration space, Ottawa should be cautious in “pushing too aggressively” to meet its target of bringing down the number of temporary residents to about five per cent of the population by 2027, “especially with a much shorter runway now,” Bank of Nova Scotia economist Rebekah Young said.

That would require what she called an “unrealistic” net reduction of one million people by 2027 that could compel many highly-productive people currently in the workforce to leave.

“It could actually be harmful if they try to stick to those original timelines,” she said. “There should instead be an agenda that really focuses on better integrating and maximizing the potential of those that are in the country.”

Problems, however, also remain at the other end of the spectrum, with some economists expecting many temporary residents to overstay their work permits and not leave the country by either transferring to a visitor permit, applying for asylum or becoming undocumented. This could lead to the government undercounting the population and impact overall economic measures.

CIBC World Markets Inc. economist Benjamin Tal expects Canada’s population to grow by 1.5 per cent in the next two years, which is higher than the government’s prediction of negative growth or a decline.

“Many people who are expected to leave will not leave,” he said. “That’s something that will be the No. 1 challenge facing the new government when it comes to immigration.”

Tal’s prediction already seems to be reflected in the rising number of asylum seekers, many of whom have “unjustly” applied as they have “increasingly fewer hopes to stay in Canada,” former immigration minister Marc Miller said last November.

The number of asylum seekers and related groups increased by about 26,000 in the fourth quarter last year, according to Statistics Canada, marking the 12th consecutive quarterly increase. The total number of asylum seekers was a record 457,285 people as of the end of 2024.

“No government is going to be able to escape having to deal with (rising asylum claimants), Young said. “That’s a very challenging area that is outside the realm of economics. But they’re going to need policies and discussions on how they are going to thoughtfully manage these pressures.”

Another recent change that can discourage high-skilled economic immigrants from coming to Canada is the cancellation of the extra points applicants received upon getting a job offer supported by a Labour Market Impact Assessment (LMIA).

Most employers in Canada looking to hire foreign workers need to receive an LMIA, which is a government document that states they weren’t able to find a worker for a specific position in Canada and had to look for someone abroad.

Foreign workers with LMIA job offers used to get about 50 to 200 additional points, which gave them an edge over others and encouraged them to come to Canada. That was discontinued in March.

Before then, some groups were illegally selling LMIA-approved jobs for thousands of dollars to foreigners — either outside the country or already in Canada — who were desperately looking to boost their points in the Express Entry system and become permanent residents. The more senior the job’s role, the higher the points they received.

But some immigration lawyers believe the government should have taken a more nuanced approach to resolve the problem instead of eliminating all the points in one go.

“They couldn’t deal with the fraud issue, so they didn’t know what to do,” Green said. “They just threw it all in and said, ‘Cancel it.’ There would have been a much better way of doing it.”

Green and Langford both said eliminating the 200 points that the top category of workers used to receive was a mistake since that essentially closes the door for top executives or managerial candidates looking to become permanent residents and these are the kind of people that Canada ideally wants.

“The change makes it impossible for senior executives who are 40 years old or more, working in multinational companies, to immigrate to Canada and, therefore, difficult to attract executives to come here on a work permit,” Green said.

As an example, he said a chef graduating from a Canadian school and with work experience had more chance of becoming an immigrant than a 45-year-old senior executive who runs a multinational company and is responsible for 3,000 people.

Despite these issues, Green still believes Canada has the “best immigration system in the world.” Whoever wins the election just needs to tweak some parts of the system to align them with the government’s aim to boost its economy, he said.

That could mean providing more points to people who study or already work in Canada or to people looking to enter fields where there’s a labour shortage, such as health care or construction.

It could also mean providing additional points to newcomers who earn more than the median salary, such as 25 points for people earning about $60,000 and 50 points for those earning more than $100,000, as Martin Basiri said.

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Whatever those tweaks may be, lawyers say they need to happen quickly; otherwise, Canada may struggle in the next few years to attract the kind of talent it wants, said Meti Basiri, who came to Canada as an international student in 2011 and co-founded ApplyBoard, which is reportedly now valued at $4 billion.

“It’s very important to build the brand and the reputation,” he said. “Or else, we are not going to achieve anything.”

• Email: nkarim@postmedia.com

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The Canadian dollar on Wednesday rose above 71 cents U.S. for the first time since early December, while its American counterpart is being severely weakened by the uncertainty and chaos that Donald Trump’s trade war has unleashed .

The loonie was up 1.4 per cent in early trading Thursday as part of a surge that started Wednesday after Trump announced a 90-day pause on higher reciprocal tariffs, reducing the levy on most countries to a baseline of 10 per cent, but hiking duties on China to 125 per cent.

Canada was exempt from the most recent set of tariffs, but remains subject to a 25 per cent levy on steel, aluminum and automobiles, though that levy can be reduced based on the value of U.S.-made auto parts contained within any vehicle. Canadian exports to the U.S. that are not compliant with the Canada-United States-Mexico Agreement remain subject to a 25 per cent tariff.

“The (U.S.) dollar is weakening once more as the initial optimism sparked by yesterday’s tariff reversal yields to a more measured assessment of the risks still facing the U.S. and world economies,” Karl Schamotta, chief market strategist at Corpay Currency Research, said in a note on Thursday as the dollar index, which measures the greenback’s value against a basket of major currencies including the loonie, continued to tumble.

Following Trump’s latest tariff climbdown, the U.S. dollar index dropped 1.34 per cent. However, it has been on a steady decline since mid-January as economists and analysts warned his plan to punish trading partners for perceived unfair practices could cause significant harm to U.S. businesses, consumers and the economy.

The dollar index is down 7.7 per cent since Jan. 13, the peak of a run-up that began a few months before U.S. election day, when Trump’s prospects for the winning the presidency began to improve. At that time, Wall Street expected markets to benefit from a candidate they perceived as business friendly.

With the U.S. economy looking more vulnerable, the odds of a U.S. Federal Reserve interest rate cut are rising, which helps “tilt interest differentials against the greenback,” Schamotta said in an email.

Investors pumped up the greenback in the chase for yields caused by higher U.S. interest rates as central banks around the world, including the Bank of Canada , reduced their policy rates. For example, the Fed’s policy rate stands at 4.5 per cent at the upper end compared with the Bank of Canada’s 2.75 per cent.

Still, “Canada, Europe, and Japan all stand to benefit as investment flows become more diversified,” Schamotta said.

But he said in his note that the safe-haven Japanese yen and the euro appeared to be benefiting the most from Trump’s latest reversal.

The fallout from U.S. tariffs on Canada hasn’t changed much, but “what’s important is the delay in the reciprocal tariff for the rest of world, as it implies less negative global and U.S. growth spillover to Canada,” Noah Buffam, an analyst with CIBC Capital Markets’s fixed income currency and commodity group, said in a note on Thursday.

He also said he was looking for the Canadian dollar to “underperform” other currencies against the U.S. dollar as the year progresses.

Certainly, there are more headwinds blowing Canada’s way that could pull the loonie down.

Stephen Brown, deputy chief North America economist at Capital Economics Ltd., said they’ve rescinded their call for a recession in Canada, but still think the country’s gross domestic product will “slow to a crawl” and that inflation will rise, leading to three more rate cuts by the Bank of Canada to bring the lending rate to two per cent.

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That will likely play against the loonie, he said in a note Thursday morning.

“We still expect interest rate differentials to move against the loonie as markets come around to our view that the Fed is unlikely to cut this year, which suggests the loonie will drop back below 70 cents U.S. soon, to perhaps $0.69,” Brown said in an email, noting that is an improvement from an earlier forecast for the loonie to fall to 67 cents U.S.

“The outlook has improved a bit now that we have a bit more clarity on U.S. tariff plans,” he said.

• Email: gmvsuhanic@postmedia.com

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Despite all the calls to diversify Canada’s trade, the country will end up more dependent on the United States once tariff negotiations have concluded, according to a well-known economist.

“We are in the midst of a global trade war, and in a global trade war , like in the Cold War, you have to choose sides,” Benjamin Tal, deputy chief economist at CIBC World Markets, said.

On Wednesday, U.S. President Donald Trump turned his global trade war into a faceoff with China after he announced a 90-day reprieve on higher reciprocal tariffs levied against other countries, but raised the rate on the world’s second-largest economy to 125 per cent in a tit-for-tat retaliation.

“The question is, if you have a Cold War trade war between China and the U.S. and you’re Canada, where do you go? There are many issues that (make) the choice clear,” including issues around democracy and human rights,” “but geography is definitely very important,” Tal said.

But there’s more to his forecast.

Tal said Canada has tried to diversify its trade to other countries for decades under various prime ministers, and has inked 15 trade agreements overall, but trade with the U.S. still rose during that time.

“To diversify our export machine away from the U.S., we have the 15 free trade agreements with 51 countries, and our dependence on the U.S.A. went up despite all that,” he said. “It’s very difficult to break.”

Tal believes that during negotiations for a new Canada-United States-Mexico Agreement (CUSMA), the U.S. will demand that Canada increase purchases of American defence products and natural gas, among other things and run contrary to the current national mood.

Canadians are angry with Trump’s attacks on Canada’s sovereignty and economy, with tariffs currently in effect on steel , aluminum and autos. Liberal Leader Mark Carney has tapped into that angst, arguing that Canada can no longer rely on the U.S. and will have to forge new economic ties around the globe.

“The system of global trade anchored by the United States that Canada has relied on since the end of the Second World War … is over. Our old relationship of steadily deepening integration with the United States is over,” Carney said in remarks after Trump announced his reciprocal tariff plan on April 2. “Canada must be looking elsewhere to expand our trade, to build our economy and to protect our sovereignty.”

He said Canada is actively “strengthening” trade relationships with other “reliable” countries.

But Tal thinks the sheer force of geography and the existing interconnectedness between Canada and the U.S. will ultimately override any national aspirations to even weaken existing trade ties, never mind eliminate them.

“When you talk to people in the field, you realize that it’s not so easy to do,” he said, pointing to the proximity, infrastructure and the cost of trying to break away.

He added that Canada will wind up sourcing more from the U.S., not less, after CUSMA is renegotiated.

Tal said if Canada manages to get a new deal on CUSMA, then the final tariff rate won’t be very significant, somewhere in the neighbourhood of five per cent to seven per cent, with some industries, such as energy products, exempted altogether.

“Five years from now we will wake up and realize that our dependence on the U.S. has risen, not fallen,” he said.

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Stocks soared after President Donald Trump said he’d pause some tariffs on dozens of countries for 90 days, signalling a tentative reprieve in trade hostilities that has wiped out trillions from global markets and ignited fears of a United States recession.

The euphoric reaction lifted stocks after four sessions of volatile, high-volume trading pushed the S&P 500 to the brink of a 20 per cent bear-market plunge. The benchmark measure surged as much as 8.3 per cent with almost every company gaining. While bonds eased an earlier selloff, they remained down across maturities for a third day.

“The market cares because 90 days gives you much more significant time to negotiate — that’s all the market wants,” said Art Hogan, chief market strategist at B. Riley Wealth. — Bloomberg

Read the full story here.

 

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What does it mean to be financially independent ? Simply put, it typically means you don’t have to work a regular job to maintain life’s necessities. That might sound like retirement, but it’s a little different. Financial independence offers freedom to align your time closer to your values and passions, which may still involve working. This might be more time with family, pursuing projects or hobbies, engaging in philanthropy or just punching the nine-to-five clock less often. Really, there’s no wrong answer so long as the individual feels financially free to follow their whims. Most importantly, financial independence means Canadians can minimize their most common stressor. In an ever-challenging ecosystem of geopolitics, culture and climate, any stress reduction could be more than welcome. Keep reading here to find out how to achieve it.

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The United States Department of Commerce is set to hike duties on Canadian softwood lumber to 34 per cent this fall, the latest blow in a dispute with Canada that goes back decades.

“We’re going to need some support measures put in place to help us weather this storm,” Kurt Niquidet, president of the BC Lumber Trade Council and chief economist at the BC Council of Forest Industries, said. “There’s going to be some financial liquidity issues for companies, so the federal government needs to step up and provide some loan support to help us get through this.”

Last Friday, the U.S. Department of Commerce announced its decision to more than double countervailing duties on imports of Canadian softwood lumber to 14.38 per cent from 6.74 per cent. This is in addition to its decision in early March to raise the preliminary rate on anti-dumping duties to 20.07 per cent from 7.66 per cent, bringing the total to 34.45 per cent.

“It’s obviously very concerning,” Ian Dunn, chief executive at the Ontario Forest Industries Association, said. “Even under the existing trade environment, with the duties that we’ve seen historically, we’ve seen companies curtail operations, we’ve seen companies close mills, reductions of shifts and layoffs.”

Existing U.S. duties have already had an impact on the Canadian lumber industry. Vancouver-based Canfor Corp. in September announced the closure of its sawmills in Vanderhoof and Fort St. John, British Columbia, citing an increasingly difficult regulatory environment, high operating costs and “punitive” U.S. tariffs. The decision affected 500 workers.

Dunn said the lumber dispute between Canada and the U.S. is now in its fifth iteration. The 2006 Canada-United States Softwood Lumber Agreement was in place until 2015, and the Canadian industry has been subject to duties since 2017.

The U.S. contends the Canadian lumber industry has unfair competitive advantages and is subsidized because most companies operate on land owned by the provinces and the stumpage fees — the fees companies pay to harvest trees — are too low.

Dunn said Canada continues to dispute this argument in cases and panels at the World Trade Organization (WTO) and the Canada-United States-Mexico-Agreement (CUSMA) , but the WTO’s decisions in favour of Canada are not binding and efforts under CUSMA remain unsuccessful.

“We’ve had a long and sustained legal effort contesting and appealing virtually every decision by the Department of Commerce, with little to no effect,” Dunn said. “Because the Department of Commerce’s mandate is essentially to protect the domestic industry, they will find dumping when it doesn’t exist, they will find subsidy when the Americans are doing the exact same practices.”

Mark Warner, principal counsel at MAAW Law, said the dispute with the Americans has been happening since Ronald Reagan’s administration and he sees little possibility of a resolution.

“I don’t think this dispute is capable of being resolved,” he said. “I don’t think you’re ever going to see a situation where American governments are going to accept the stumpage fees.”

U.S. President Donald Trump has launched an investigation into timber and lumber products from several countries based on national security grounds. He has also threatened further tariffs on Canadian lumber and has signed an executive order that calls for an increase of domestic timber production on U.S. federal land.

The National Association of Home Builders (NAHB), one of the largest trade organizations representing the interests of home builders in the U.S., said it is against further tariffs on Canadian lumber.

“NAHB will continue to urge the White House to roll back tariffs on lumber and other building materials and remains focused on improving building material supply chains and easing costs for our members,” it said in a statement issued on Tuesday.

Niquidet said Canadian softwood lumber makes up 24 per cent of the U.S. market share, which will be hard for that country to replace.

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“The U.S. will still need to import lumber from Canada,” he said. “There is just no way that they can replace 24 per cent of the market; it’s going to take them several years.”

Niquidet added the new duties will lead to price increases in the U.S.

• Email: jgowling@postmedia.com

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Analysts are warning investors to watch out for “dead cat bounces” as stock markets are pulled up and down by the ever-shifting tariff plans of the United States.

“Vicious bear market rallies are the order of the day. They are referred to as ‘dead cat bounces,'” David Rosenberg , founder of Rosenberg Research & Associates Inc. , said in a note on Tuesday.

Dead cat bounces occur when a market temporarily reverses course from a consistent decline or a bear market, only to continue on a downtrend — a dynamic that has been fully on display this week.

For example, markets on Wall Street and in Toronto rose on Tuesday, but those gains were completely wiped out by the end of the day, continuing the fall into correction territory on word U.S. President Donald Trump would not back down from imposing reciprocal tariffs on countries around the world.

On Wednesday, the day the tariffs came into force, Trump gave the markets a major boost when he announced a 90-day pause on higher reciprocal tariffs , while raising the levy against China to 125 per cent. Countries, excluding Canada and Mexico , would be taxed at a baseline rate of 10 per cent, he said. However by Thursday, markets sold off steeply again on the realization that a 10 per cent baseline tariff will still hurt economies around the world.

“A 10-per cent tariff still represents a major hit to the global economy and American households, and persistently-elevated uncertainty is likely to drag on growth for a prolonged period of time,” Karl Schamotta, chief market strategist at Corpay Currency Research, said in a note late Wednesday, adding that he thinks the 90-day pause “seems likely to be extended.”

Rosenberg said the trick going forward for investors will be to figure out when markets have hit a “fundamental low” with “a real catalyst behind them.”

“Markets, at the end of the day, don’t like uncertainty. There’s just so much uncertainty right now,” Rebecca Teltscher, a portfolio manager at Newhaven Asset Management Inc., said in an interview with the Financial Post’s Larysa Harapyn.

Teltscher said her company is staying conservative by buying names it already owns, but “we’re not going to try to speculate on a market that is still very uncertain.”

More broadly, J PMorgan Chase & Co. analysts warned that the market’s fate lies with one person “who can unilaterally ease or deepen this shock — the range of outcomes for risk assets globally is abnormally wide and binary.”

As of Tuesday, JPMorgan was calling for the U.S. to fall into a recession in 2025

Given the uncertainty around where tariffs are headed, its analysts laid out three tariff and market scenarios for the S&P 500.

In their bear case, they estimate full tariffs will result in the S&P 500 falling to around 4,000. Thursday, the index was trading around 5,170. Their base case of partial tariffs calls for the S&P 500 to close out the year at 5,200, while their bull case calls for 5,800.

“Looking further out, the range of outcomes remains very wide and highly dependent on trade policy direction ,” the analysts said.

 

 

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Canadian frackers and oilfield service companies are enduring a bruising spring breakup, clobbered by a one-two punch of cost inflation caused by Ottawa’s retaliatory tariffs against the United States and oil prices seemingly in free fall.

Oil prices have sharply fallen in response to U.S. President Donald Trump ‘s tariff policy and in the wake of larger-than-expected output hikes from the Organization of Petroleum Exporting Countries and its allies. — Meghan Potkins, Financial Post

Read the full story here.

 

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This Alberta-based woman has been happily retired for the last three years, but at 69, she wants to make sure her retirement savings will last and potentially fund a retirement home until her death. Keep reading here to find out if she has enough money to make her plan a reality.

Are you worried about having enough for retirement? Do you need to adjust your portfolio? Are you starting out or making a change and wondering how to build wealth? Are you trying to make ends meet? Drop us a line at wealth@postmedia.com with your contact info and the gist of your problem and we’ll find some experts to help you out while writing a Family Finance story about it (we’ll keep your name out of it, of course). McLister on mortgages

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• Posthaste: Americans scramble to stock up before tariffs jack up prices
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Retaliatory Canadian tariffs on U.S. auto imports will go into effect Wednesday at 12:01 a.m. ET, Ottawa has announced.

The measures slap a 25 per cent levy on all non- CUSMA compliant autos imported into Canada from the U.S., plus 25 per cent on the U.S.-made content of CUSMA-compliant vehicles.

Prime Minister Mark Carney had announced the measures on April 3, the same day 25 per cent U.S. tariffs on Canadian vehicles came into effect and a day after U.S. President Donald Trump imposed sweeping “reciprocal” tariffs on America’s trading partners.

The Canadian measures will not hit the Canadian and Mexican made components of completed vehicles, nor will they affect auto parts. A separate U.S. measure targeting Canadian auto parts is due to go into effect on May 3.

“Canada continues to respond forcefully to all unwarranted and unreasonable tariffs imposed by the U.S. on Canadian products,” Finance Minister François-Philippe Champagne said in a media release Tuesday.

“The government is firmly committed to getting these U.S. tariffs removed as soon as possible, and will protect Canada’s workers, businesses, economy and industry.”

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Details of a remission framework to direct proceeds of the tariffs to support the auto industry and affected worker would be forthcoming, the Department of Finance statement said.

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Canada breathed a sigh of relief last week when United States President Donald Trump refrained from imposing further tariffs on our country, but this respite is overshadowed by the broader, more insidious impacts of his trade policies .

The heavy tariffs imposed on the European Union, China and other countries are set to reverberate through the global economy. Canada is far from immune to these ripple effects.

Trump’s tariffs are not just a bilateral issue; they are a catalyst for a potential global economic slowdown . The retaliatory measures from China and other affected nations are likely to exacerbate this downturn, creating a vicious cycle of reduced trade and economic activity like people saw in the 1930s.

The expected economic slowdown is already manifesting itself in oil prices, which dropped well over 10 per cent last week. This decline is particularly detrimental to oil producers in Alberta, whose stock prices plummeted more than 15 per cent in response. Stock prices may well recover somewhat this week, but that doesn’t change the big picture.

One of the most troubling aspects of Trump’s tariffs is that they are arbitrary and lack a clear economic rationale. This ambiguity has sown seeds of uncertainty , as reflected in the largest spike in the VIX index, the fear gauge, since the COVID pandemic. Uncertainty is the enemy of investment. It breeds caution and delays in capital expenditure, stalling economic growth.

The erosion of consumer confidence is perhaps the most damning consequence of Trump’s tariffs. As uncertainty looms and economic indicators falter, consumers are tightening their belts, leading to further downward pressure on global economies.

Even if the tariffs on Canada were lifted tomorrow, the lingering effects of diminished consumer confidence and investment hesitancy would continue to pose significant challenges.

In light of these developments, Canada must brace itself for ongoing economic headwinds.

The indirect impacts of the tariffs underscore the interconnectedness of global trade. Canada as an open economy is not immune to a global economic slowdown. Trust in the international rules-based order has vanished for years to come. The sheer madness of the Trump turmoil will have lasting effects.

There is no easy fix for Canada. Our fundamental problems predate Trump and have been in the making for years. Decreasing reliance on the U.S. market is essential, but diversifying trade to new partners will not help in the short term if potential partners are experiencing recessions.

The best thing we can do is get rid of trade barriers within Canada . All major political parties agree on this.

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The other fixes are much more difficult. We need to reverse the dismal trend in our productivity, but that will take time. We will need to scale up our promising technology startups, but that is easier said than done. Whichever party wins on April 28 will have to be honest with Canadians. Tough times will continue.

Yrjo Koskinen is the BMO Professor of Sustainable and Transition Finance at the Haskayne School of Business, University of Calgary, and specializes in sustainable and climate finance and corporate governance issues.

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Americans are rushing to stock up on everything from soy sauce to Lululemon Athletica Inc yoga gear before the tariffs imposed by President Donald Trump start to jack up prices on the shelves, according to media reports.

The day after Trump’s so-called Liberation Day last Wednesday, billionaire businessman Mark Cuban posted a warning to Americans on social media platform Bluesky.

“It’s not a bad idea to go to the local Walmart or big box retailer and buy lots of consumables now. From toothpaste to soap, anything you can find storage space for, buy before they have to replenish inventory,” Cuban wrote.

“Even if it’s made in the USA, they will jack up the price and blame it on tariffs,” he added.

Clothing industry groups also warned that American consumers should expect to pay more for clothes and shoes, about 97 per cent of which are imported, mainly from Asia.

Most of the clothing sold at Gap Inc., Lululemon and Nike Inc. are made in Asian countries, which face the stiffest tariffs. Under the president’s plan to punish countries for trade imbalances, Vietnam was slapped with an import tax rate of 46 per cent and Bangladesh and Indonesia, 37 per cent and 32 per cent.

With U.S. companies, which use foreign factories to keep labour costs down, and their overseas suppliers unlikely to absorb new costs this high, price hikes look inevitable.

“If these tariffs are allowed to persist, ultimately it’s going to make its way to the consumer,” Steve Lamar, president and CEO of the American Apparel & Footwear Association, told The Associated Press.

Trump’s tariff announcement last Wednesday spurred Americans across the country to hit the stores or load up their “carts” online, reports the Wall Street Journal.

For many people the Rose Garden event flicked the switch from threats to reality, Peter Atwater, an adjunct economics lecturer at William & Mary, told the WSJ.

“Just like Tom Hanks getting COVID was the tipping point five years ago,” he said.

Noel Peguero of Queens told the Journal that between Wednesday night and Thursday morning, he spent about US$3,000 on electronics, car parts, gardening equipment and other household items.

“Now is the time to buy,” he said.

Others stocked up on foreign brands like Lululemon and food — everything from Guinness to soy sauce.

One Reddit user from Illinois told Business Insider that his spending would come to “a complete standstill” for things that aren’t essential. Imports like fruit, avocados, and tea, “are all a luxury now,” he said.

A poll of the Business Insider newsroom revealed that people are snapping up Apple Inc. computers, hair extensions from Asia, a trench digging shovel from China and vanilla from Madagascar. One was planting a garden to replace expensive vegetables.

Mary E. Lovely, a senior fellow at the Peterson Institute for International Economics, questions where the United States will be getting its goods now that tariff rates are “astronomical.”

“Will the new ‘Golden Age’ involve knitting our own knickers as well as snapping together our cellphones?” she told the Associated Press.

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A rush to comply with the Canada-United-States-Mexico Agreement (CUSMA) by Canadian businesses could dramatically reduce America’s effective tariff rate on Canada, said the National Bank of Canada.

According to February U.S. trade data, just 33 per cent of Canadian imports were CUSMA compliant, putting the effective tariff at 15.6 per cent. National economists, however, believe there has been a “rush to compliance” since then that will bring the rate down to 5.7 per cent.

“Sifting through the chaos, it’s clear that USMCA compliance is the name of the tariff game for two of the U.S.’s largest trading partners,” said National economists Stéfane Marion and Ethan Currie.

National expects this rate could come down further as compliance increases, trade composition shifts and special tariffs related to border grievances are potentially removed.

“With rule of trade origin and self-compliance dynamics at play, we expect certain products — such as energy — to become effectively tariff-free, if they aren’t already,” they said.

 

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For many big bank mortgage borrowers, falling rates can be a double-edged sword.

That’s because they trigger break penalties that banks calculate using “interest rate differentials” (IRDs) which cost Canadians billions every year. Mortgage strategist Robert McLister at MortgageLogic.news explains why falling rates spell trouble for anyone needing to break their mortgage contract. Find out more

Are you worried about having enough for retirement? Do you need to adjust your portfolio? Are you starting out or making a change and wondering how to build wealth? Are you trying to make ends meet? Drop us a line at wealth@postmedia.com with your contact info and the gist of your problem and we’ll find some experts to help you out while writing a Family Finance story about it (we’ll keep your name out of it, of course). McLister on mortgages

Want to learn more about mortgages? Mortgage strategist Robert McLister’s Financial Post column can help navigate the complex sector, from the latest trends to financing opportunities you won’t want to miss. Plus check his mortgage rate page for Canada’s lowest national mortgage rates, updated daily.

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Today’s Posthaste was written by Pamela Heaven with additional reporting from Financial Post staff, The Canadian Press and Bloomberg.

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• Investors warned against catching 'a falling knife'
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Unlocking the economic potential of the Canadian Arctic isn’t just about natural resources. While new mines and pipelines hold promise, there are other ways to tap into the region’s wealth. Here are three alternative opportunities that could bring in big returns.

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Brendan Bell knows what it is like to be ignored. It wasn’t so many months ago that the chief executive of West Kitikmeot Resources Corp., an Inuit-owned company proposing to build a road and deepwater ocean port in the Arctic , was spending a chunk of each day waiting for non-Arctic people to return his phone calls about the project.

“This road is not a new idea,” he said. “Roads have a long history in the North.”

Do they ever. Yet that history can be summarized as roads — and major infrastructure projects of all types — may get proposed for the Arctic, but they generally don’t get built for one reason or another. No surprise then that Bell had been contending with an utterly non-urgent vibe from other people in relation to the Grays Bay Road and Port Project. That is until recently, when a lot of those same people started calling him back.

Given that all roads lead to Donald Trump lately, it is no mystery why. In launching a trade war against Canada, the United States is no longer a friendly ally and that is a driving reason behind why the narrative around roads that do not get built in the Arctic has shifted to one that Canada better start building roads, deepwater ports, naval installations, mines, power grids and fibre-optic networks as soon as possible or risk ceding its Arctic sovereignty and a northern treasure house of critical minerals to a foreign power.

Some of that treasure takes the form of gold , which is currently trading at around US$3,000 an ounce. Canadian gold miner Agnico Eagle Mines Ltd. believes its Hope Bay property in the Nunavut could produce as much as 400,000 ounces per year.

The Northwest Territories, meanwhile, is peppered with more than 1,200 active mining claims, while Nunavut is believed to be home to up to 30 per cent of Canada’s petroleum reserves and Yukon is ranked as a top 10 region worldwide in terms of its mineral endowment, according to the Fraser Institute’s 2023 annual survey of mining companies . All told, the conversation around what all the untapped northern bounty could be worth begins in the trillions.

Evidence of this newfound sense of urgency to stop talking about the Arctic and start doing things keeps popping up in Nunavut. Liberal Leader Mark Carney , Conservative Leader Pierre Poilievre and NDP head Jagmeet Singh have all stopped in Iqaluit in recent weeks. Depending upon which party platform you pull from, the politicians have committed to more infrastructure, better collaboration with the Inuit, increased military spending , investing in energy upgrades and adequate housing and boosting Canada’s capability to unleash the North’s economic potential.

“Canadians used to be fond of the old Winston Churchill quote about Americans that they will ultimately do the right thing after trying everything else,” Bell said. “But as it pertains to the Arctic, Canada has literally tried everything else. We have tried ignoring it. We have tried underinvesting in its communities and in its infrastructure. We have tried letting the Americans be responsible for our continental defence. And, at last, we can see now that it just isn’t sustainable. The mood of the country has changed.”

Being ticked off at Trump and expressing your patriotism by buying Canadian products at the grocery store is a much more straightforward and inexpensive way of taking control of your fate than supercharging the economic development of the North. As the old saying goes, you need to start somewhere, but outside of a few mines dotted here and there, developing the North has barely begun at all despite decades of promises to make it happen.

Whether the current generation can drum up the will and the cash to finally dig in and get big, ambitious projects done, ones that drive Arctic and national prosperity while safeguarding Canada from international bullies, could determine the country’s long-term fate.

If that sounds alarmist, it is worth having a brief chat with Rob Huebert, a political scientist at the University of Calgary, about the Northwest Passage. In the days of yore, this shortcut between the Atlantic and Pacific oceans stoked the imagination of explorers, who would set off in search of an ice-free route and often get stuck in the ice.

Nowadays, the passage is navigable for a stretch of time in the summer and fall. The theory holds that as the world warms up and more sea ice melts, the passage will become an increasingly attractive shipping lane, so controlling it is key. Canada’s position is that the Northwest Passage belongs to Canada. The Americans, to paraphrase, have long claimed the passage as international waters.

In practice, the disagreement between neighbours has been a remarkably polite affair. A U.S. ship has never entered the passage without first informing the Canadians what it is up to. Granted, Americans tell rather than ask for permission, but they also typically request a Canadian icebreaker be somewhere nearby in case they run into any problems with the ice.

“The Americans have always understood the Northwest Passage as a security issue, which has meant keeping the Soviets, and now the Russians, away,” Huebert said.

The Americans have also historically done the heavy lifting in terms of keeping the Russians away, allowing Canada to blissfully flake out and, until last year, classify the Arctic as an “area of exceptional” peace, despite Russia having an extensive network of military bases and several nuclear-powered icebreakers at its disposal.

“The Russian threat is clearly understood,” Huebert said. “Now, all of a sudden, you get Trump back and he has shown a willingness to throw his allies under the bus, and he’s also threatening the existence of Canada . We are now in a situation where we are completely exposed in the North.”

Things are bad, but that could be good for West Kitikmeot’s Grays Bay Road and Port Project. The company has received dribs and drabs of federal funding over the years to conduct road feasibility studies and the like, but there are no bulldozers on the immediate horizon.

The proposal to build a 230-kilometre all-weather road in the middle of a mineral-rich area of the central Arctic, one that would tie into ice roads and ultimately connect a proposed deepwater port, featuring a bunch of bells (maintenance sheds) and whistles (an airstrip), to Yellowknife and southern Canada requires some chicken-and-egg-type thinking.

The major mineral deposits — copper , zinc , gold and silver — do not need to be discovered. Mining companies have been aware of their existence for decades. Bell’s contention is that if you build the main road, branch roads leading to new mines will follow as the economics of developing a mine go from, “We know the copper is there, but we just can’t get to it,” to, “We know the copper is there and we now have a way of getting it to market.”

The proposed deepwater port could also serve a dual purpose. After all, the Canadian navy is going to need somewhere to dock given that the Nanisivik Naval Facility, first announced by prime minister Stephen Harper in 2007 and repeatedly scaled back since then in scope and plagued by construction delays, including a sinking wharf and a lead contractor going bankrupt, as well as rife with boneheaded, impractical design elements, such as unheated fuel tanks, still doesn’t have an opening date.

Were the Royal Canadian Navy to commit to a long-term lease agreement with West Kitikmeot, the company could take it as proof of future revenue in order to raise capital from the private sector in an arrangement Bell foresees being split 75-25 between public and private.

On that front, he has been meeting with the Department of National Defence to understand the scope of the navy’s needs. There is progress. Moving forward, a road could include a fibre-optic communications corridor and potentially even a liquefied natural gas pipeline .

“Nobody is going to make an investment privately on speculation that mines in the future will come along; they’re going to need something more concrete than that,” he said. “That’s really the next piece for us to solve.”

Of course, the uncomfortable question is, how much is the road going to cost?

Bell hesitates to give a hard number because the number he is working with is a projection based on a study from 2018, but he figures if you start at $1 billion, and throw in another $400 million or so for the port, then you would be on the right track.

Building anything in the Arctic is going to involve some sticker shock. Also required is a keen understanding that the ground beneath whatever gets built — a road, port, school, town or mine — may melt. Instead of the sort of bedrock structural engineers favour when sinking construction pilings, the Arctic, particularly the western portion, is filled with permafrost, or permanently frozen ground that is now in the process of permanently unfreezing at an alarming rate.

“When we talk about building in the Arctic, foundation designers have to start to consider how much overdesigning we are going to have to do to anticipate what a building will need in 30 years’ time,” Chris Burn, a physical geography professor at Carleton University, said. “If we build things to today’s code, all is going to be well, it’ll be just fine, but then in 15 years there’s going to be a problem.”

Burn is a Brit and attended a series of lectures on permafrost as an undergraduate in the 1970s. Halfway through the second one, he knew what he wanted to do with his life, and the place to do it, at least for an English-speaking scholar, was the Canadian Arctic.

He went on to become president of the International Permafrost Association for a time, and he is somewhat of a legend in Canadian Arctic permafrost research circles. He is also the guy that northerners call to consult with on building projects, including the Inuvik-Tuktoyaktuk Highway.

The 138-kilometre, two-lane, all-weather gravel road tying the community of Tuktoyaktuk on the Arctic coast to the rest of Canada’s road network opened in 2017. The price tag was $300 million and its completion allowed Canada, 150 years post-Confederation, to claim it was connected by road from coast to coast to coast.

But beneath the proudly Canadian optics of tethering the country north to south was the chilling reality of building infrastructure in the permafrost zone.

“The ice in the ground is what holds the permafrost together,” Burn said.

Think of the ice as the glue. A new, hypothetical four-storey building built to serve an equally new, hypothetical Arctic outpost would typically be built on pilings. Current engineering wisdom allows that once pilings are sunk in the permafrost, a building is effectively frozen in place. But as the permafrost thaws, and the glue unsticks, the building could be on the move: sinking, shifting or toppling over altogether.

Roads are even more dicey. Buildings have small footprints, but future Arctic roads will traverse multiple building environments and the amount of ice-glue in the ground will vary depending on the location, Burn said.

In a landscape that is humming with, say, mining projects, the ice-glue will need to support the weight of industrial-scale trucks. As long as the glue sticks, all will be well, but should the glue lose its stickiness due to temperature increases, the road would be in big trouble and need substantial repairs while those who travel upon it could be put at grave risk.

“Knowing the quantity of ice underneath the road is a really critical part of the information needed to design the road because the designers have to decide how they’re going to keep that ice frozen,” Burn said.

One bright idea has been to refrigerate the permafrost. The Shakwak corridor is a critical stretch of the Alaska Highway connecting the state, via Yukon and British Columbia , to the lower 48 states. Canada and the U.S. have long co-operated in maintaining the highway, and a big chunk of that job in recent decades has been figuring out what to do about the thawing permafrost causing gargantuan potholes, bumps and cracks, as well as warping guardrails at the highway’s edge.

The community of Beaver Creek in western Yukon piloted a project involving thermosyphons: picture a white pipe stuck in the ground next to the road that is designed to vent heat from beneath the road while carrying cold back into the permafrost. The gadgets are a relatively low-tech way of addressing thawing permafrost, but low-tech should not be confused with inexpensive.

“Beaver Creek’s thermosyphon project cost $4 million and that was for 400 metres of road, which would work out to about $8 million per kilometre,” Burn said. “We’re not going to be building roads for $8 million a kilometre. We don’t do that in Canada.”

On top of that, road maintenance in areas of thawing permafrost is already six times pricier than maintaining roads in areas where the permafrost “is stable or absent,” according to the Yukon government. Burn said more thawing permafrost is in the cards, so more Arctic architects, road designers, maintenance types and accountants will presumably be puzzling over what to do about it and how to budget for it.

Taken as a whole, a great, imagined Arctic infrastructure build-out might seem a bit daunting, but Canada has not always been afraid of dreaming big. Consider John Diefenbaker’s Northern Vision.

The country’s so-called Prairie populist prime minister uncorked a barnburner of a speech before a packed house at the Winnipeg Civic Auditorium during a 1958 election campaign that his Conservatives went on to win in a blowout. Diefenbaker, whose oratorical chops were substantial, was never finer nor more fiery that day as he spoke of a “new” Canada infused with a sense of national purpose and destiny.

“How many of you here knew the pioneers in Western Canada?” he said. “I saw the early days here, here in Winnipeg in 1909, when the vast movement was taking place into the Western plains — they had imagination. There is a new imagination now. The Arctic.”

This new Canada would be a “Canada of the North,” connected by a network of northern roads, lit up by power grids, airports, mines and hydroelectric projects, you name it, all built to tame — and exploit — the last great Canadian frontier while creating hundreds of thousands of jobs and safeguarding the country’s “independence” from you know who to the south.

It should be noted that the Inuit did not view their home as some wild, untamed frontier, nor were they consulted about Diefenbaker’s grand plan, an oversight that would have been far more egregious had the North he envisioned been built.

In reality, after a short-lived burst of activity, which produced about 100-kilometres worth of road and a railway connecting a lead and zinc mine in the Northwest Territories to a railway junction in northern Alberta that today serves as a recreation trail, Diefenbaker’s vision succumbed to ballooning costs and a chorus of barbs from its critics, including the Liberals, whose quip that he was building roads from “igloo to igloo” resonated with the less enlightened Canada of the age.

Six-plus decades later, the Arctic has re-emerged as a national priority, leaving the Inuit to wonder what took us so long.

“I don’t think any of us have ever shied away, on the Inuit side, from talking about what it is going to take to bring the Inuit into Canada,” Natan Obed, president of the Inuit Tapiriit Kanatami, said. “The costs involved are going to be big.”

He said there are some basic facts about Inuit that southern Canadians need to be aware of. First and foremost, while the Inuit are the “first Canadians,” they view themselves as “Canadians first.” In short, they are just as patriotic, if not more so, than most.

Obed played college hockey in the U.S. He recently bought a new pair of blades for an unprintable sum for his weekly pick-up skates in Ottawa, and he said watching Canada beat the Soviet Union in the final of the 1987 Canada Cup was among the most defining memories of his childhood.

Back then, he was in North West River, a small, predominantly Inuit town in Labrador, and had never been to an NHL game, let alone to Ontario, but cheering for his country connected him to the country beyond his front door, he said. There is a deep and affectionate bond for Canada in the North, and it is one that southern Canadians can at times appear oblivious to, assuming they even bother to think about the Arctic in the first place.

What the Arctic is not, Obed said, is an incomprehensibly vast, unmanageable space. It is home to 51 Inuit communities and its residents figured out how to live there eons ago. They view it not as a northern “wasteland,” but as a homeland with “vast potential” that they are keen to develop.

Simply put, the locals want in on the resource development action, and development begins with being able to access the resources, which requires building infrastructure of the kind Diefenbaker was talking about back in the 1950s.

The Inuit already have modern treaties and a constructive framework in place for resource development with the Canadian government. The bureaucratic heavy lifting has been done. What has been missing, Obed said, is the collective will to roll up our sleeves and get at it.

“As Inuit, we are always invoking the creation of the country, and the imagination of the founders had for building east-west connections,” he said. “At some point, the railway that was built across the country would have been considered a lot like what we’re proposing with building infrastructure that connects north and south. Yes, it is going to cost a lot of money, but it is a nation-building exercise, and if Canada seriously talks about being an Arctic nation state, it’s time that Canada really understands what that means and responds to it.”

For example, imagine you are an Inuit entrepreneur or, better yet, imagine you are Aaju Peter, a 65-year-old, Greenland-born Inuit activist, lawyer, artisan and language preservation teacher in Iqaluit.

When she is not teaching Inuktitut to daycare workers at the local college or doing online coursework for a diploma through the University of Victoria, she makes sealskin garments, everything from men’s ties to sealskin mitts to beaver hats, with fox fur trim, that retail for $495. She said her sewing machine is about the size of a coffeemaker and weighs 50 pounds, but she has to either ship it to Ottawa when it needs servicing, lug it onto a plane and fly it down herself or troubleshoot the problem and fix it.

Her point? There is no suitable repair shop in Iqaluit, and not much else in the way of basic services designed to enhance the scaling-up of a small business , or any business, and that extends to the available means of getting products to market.

There is no road to Montreal or Toronto . For shipping, it is Canada Post or bust, while online sales rely on a costly satellite internet network provider that can have reliability issues. Other challenges are even more immediate, Peter said, such as how do you budget for groceries when a box of macaroni costs 10 times what it does in the south?

The effort to simply get by in the Arctic can be significant.

Peter is in her sixties, so she has experience in handling what life throws at her and can manage a heavy workload. But for a young Arctic striver, trying to figure out how to pay rent, go to school and juggle a job or two can seem overwhelming. She is not advocating for handouts, but some of the basics need to be addressed when people talk about building infrastructure in the North.

“How can you have true sovereignty if you’re not implementing the same standards as in the rest of Canada and if you don’t have proper infrastructure?” she said. “Canada needs to want the Inuit to be Canadian, but to get there, we need to have better opportunities, better living conditions, proper financing and support. If our lives were made a bit easier, we would have a much healthier and better-educated population.”

The knock-on effect would be a northern, homegrown workforce for the imagined roads, schools, daycares, machine repair jobs, government offices, mines and ports of the Canadian Arctic future, and who would also be stakeholders, if not outright owners, of whatever the enterprise happens to be.

The challenge will be figuring out how to pay for it, and not over the course of a single political cycle, but over decades, while keeping an eye on the ultimate prize of building an Arctic that is not an afterthought, but a northern economic engine boosting the country’s overall wealth.

For those wishing to discuss further, Brendan Bell is expecting your call.

• Email: joconnor@postmedia.com

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The fallout from Donald Trump ‘s reciprocal tariff bombshell last week has been massive and it continues to grow. Stock markets are reeling. The S&P/TSX composite index fell into correction territory on Friday following in the S&P 500’s wake, with even further losses on Monday.

Critics of Trump’s plan, which will unleash a barrage of tariffs on April 9 ranging from a baseline of 10 per cent to a high of 50 per cent, argue that it will drag the United States economy into a recession as the levies increase the cost of goods and suppress demand.

Among those questioning the wisdom of the tariffs are major figures in the investing world including Bill Ackman , founder of hedge fund Pershing Square Ltd. and a vocal supporter of the U.S. president.

Even Jerome Powell , chair of the Federal Reserve, weighed in, saying the scope of the tariffs was “much larger” than had been anticipated.

Below is a roundup of what investors, economists and Wall Street titans have said about Trump’s tariffs:

“I strongly believe launching tariffs on April 9 against the entire world — massively in excess of what we are being charged — is a mistake.” — Bill Ackman, founder of Pershing Square, on X.

“Trump’s tariffs are the most expensive and masochistic the U.S. has pursued in decades. A very crude estimate of Trump’s tariffs puts the projected loss at US$20 trillion dollars, or well over US$200,000 per family of four.” — Larry Summers, former U.S. Treasury secretary, on X .

Trump's tariffs are the most expensive and masochistic the US has pursued in decades.

A very crude estimate of Trump's tariffs puts the projected loss at $20 trillion dollars, or well over $200,000 per family of four.

Here is the basis for the calculation:

— Lawrence H. Summers (@LHSummers) April 3, 2025

“We are likely to see inflationary outcomes, not only on imported goods but on domestic prices, as input costs rise and demand increases on domestic products.” — Jamie Dimon, chief executive of JPMorgan Chase & Co. , in the company’s annual shareholder letter .

“The first order consequences of them (tariffs) will be significantly stagflationary in the U.S.” — Ray Dalio, founder of hedge fund Bridgewater Associates LP , referring to the economic bogeyman of rising inflation and slowing growth.

“We now expect real GDP to contract under the weight of the tariffs, and for the full year (4Q/4Q) we now look for real GDP growth of -0.3 per cent, down from 1.3 per cent previously.” — Michael Feroli, chief economist, JPMorgan . A note last week from JPMorgan’s global economic research group lifted the odds of a recession in the U.S. to 60 per cent from 40 per cent, in the wake of the dramatic tariff unveiling.

“While uncertainty remains elevated, it is now becoming clear that the tariff increases will be significantly larger than expected.” — Jerome Powell, chair, Federal Reserve , during a speech at the Society for Advancing Business Editing and Writing annual conference, adding, “the same is likely to be true of the economic effects, which will include higher inflation and slower growth.”

“The world was prepared for ‘reciprocal tariffs.’ Whatever the abomination that was launched at the Rose Garden was, it is a disaster — mostly for the U.S., but also for the global economy.” — Peter Tchir, head of macro strategies at Academy Securities , on Bloomberg.

“Trump’s tariffs are the “biggest policy mistake in 95 years.” — Jeremy Siegel, emeritus professor of finance, University of Pennsylvania, Wharton School of Business , during an interview, on CNBC.

“If he (Trump) has any brain in his head, he will know that he has to de-escalate.” — Nouriel Roubini, economist and professor emeritus at the Stern School of Business, New York University , on Bloomberg.

Tariffs are “the most absurd thing I’ve seen on Wall Street covering stocks for the last 25 years. It’s the worst policy mistake in 100 years. It will go down in history as one of the worst moves to ever come out of D.C.” — Dan Ives, senior equity research analyst, Wedbush Securities, on Bloomberg

“None of this makes a whole lot of sense. But I suppose since last November, we’ve become immune to all this insanity.” — David Rosenberg, Rosenberg Research and Associates Inc. , on BNN/Bloomberg

“The market is giving a big thumbs down to this tariff policy.” — Ed Yardeni, Yardeni Research , on Bloomberg.

“I think that was the dumbest, most economically illiterate speech I have heard in my life, and I’ve heard a lot of bad ones. It was filled with lies and distortions.” — Scott Lucas, professor of American Studies at University College Dublin , on international news network France 24. He backed up his assertion by saying the weighted average of European Union tariffs on the U.S. is one per cent. (Trump claimed the EU has a 39 per cent tariff rate on the U.S.) “What you had was the president of the United States speaking almost absolute nonsense, and the biggest nonsense of all is that tariffs can replace income taxes and that they will lead to economic growth. They won’t.”

“U.S. economic policy from the dark ages including tariffs and broader U.S. policy uncertainty are proving to be the ultimate wealth killers. — Derek Holt, Bank of Nova Scotia , in an investor note. Holt was referring to the last time high tariffs were imposed in the U.S. — in the 1930s — which economists say helped lead to the Great Depression

“The White House claims the assessment was performed by its ‘Council of Economic Advisers,’ but it wouldn’t pass muster in a first-year economics class,” Karl Schamotta, chief market strategist, Corpay Currency Research , in an investor note. The mathematics employed to arrive at the country-by-country tariff rates have been derided by economists. “The formula used to calculate the tariffs, released by the U.S. Trade Representative (USTR), took the U.S.’s trade deficit in goods with each country as a proxy for alleged unfair practices , then divided it by the amount of goods imported into the U.S. from that country,” the Financial Times , wrote. “The resulting tariff equals half the ratio between the two, resulting in countries such as Vietnam and Cambodia — which send large amounts of manufactured goods to the U.S. but import only small quantities from the U.S. — attracting punitive tariffs of 46 and 49 per cent respectively,” the FT said.

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“I talked to 10 CEOs who are all in the (U.S.) business roundtable. These are CEOs of the largest American companies. They think this is a huge mistake, too much, that it will have lasting, negative repercussions for the United States.” — Brad Gertner, Altimeter Capital chief executive, on CNBC.

• Email: gmvsuhanic@postmedia.com

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The head of the Canadian arm of Molson Coors Beverage Co. is hoping consumers and policymakers understand what it means for a drink to be “brewed in Canada” as they make decisions on buying Canadian products during the trade war with the United States.

Chantalle Butler, president of Molson Coors Canada, said not having the right information about which products are Canadian and which are American could have ripple effects across the country and thus undermine the goal of “buying Canadian.”

“In this time of people wanting to make decisions to support Canadians, it’s our responsibility to make sure that … they actually understand what it means to be brewed in Canada,” she said during an event at the Canadian Club Toronto last week.

Molson Breweries, now part of the Canada-U.S. multinational corporation Molson Coors Beverage, is Canada’s second oldest company, behind Hudson’s Bay. The company dates back to 1786, when North America’s oldest beer brewery was founded in Montreal. Molson Canadian, first brewed in 1959, remains one of Canada’s most iconic beer brands.

While Molson Breweries merged with U.S.-based Coors Brewing in 2005, the company remains partially Canadian-owned and is now one of the world’s largest beer makers.

“As we think about our role as being Canadian, (we’re) making sure that we are standing loud and proud about our heritage,” Butler said. “We are a global company started in Canada, 239 years old and still counting for many more centuries.”

Butler, who was promoted to her role exactly a year ago, said recent political and economic events, particularly tariff announcements , have brought to light the importance of articulating what it means to be a Canadian-brewed product and what it means to be a Canadian company.

Last week, the province of Saskatchewan walked back its ban on the sale of 54 types of American-branded beer made in Canada after an outcry by industry groups pointed out the beer is made in facilities across the country by Canadian workers and uses barley grown in Saskatchewan.

The ban, which included a directive for the Saskatchewan Liquor and Gaming Authority (SLGA) to stop purchasing U.S. alcohol, initially came into effect in early March as the province’s response to U.S. President Donald Trump’s 25 per cent tariffs on Canadian goods.

“And so we banded together as an industry — Beer Canada, Restaurants Canada, many of our partners and collective brewers — and made sure that the government of Saskatchewan understood what it means to be brewed in Canada,” said Butler.

Molson Coors employs more than 2,500 workers in Canada and has nine breweries across the country. The company buys barley from Saskatchewan farmers, as well as many other grains supplied by Canadian farmers across the country, she said.

“We employ many, many people in different supply chains and other facets, and so making sure that (the government) understood the decisions they were making, the impact they would have not only on the Saskatchewan economy and population, but (that it could have) a ripple effect across Canada and actually be counterproductive to what they were trying to accomplish,” she added.

She said the Saskatchewan government did work on the feedback and reverse their decision “relatively quickly.”

“It was a good lesson for us as an industry on how important it is. Consumers have good intents and (are) obviously entitled to their own decisions, but trying to make sure they have the right information and the right education to make those decisions and not end up with unintended consequences,” she said.

Before Saskatchewan, a number of Canadian provinces announced similar directives to remove U.S.-made alcohol from provincial liquor stores in retaliation for the tariffs, although implementation wasn’t simple.

As the U.S. formally launched a trade war with Canada and Mexico in the beginning of February, provinces such as Ontario, British Columbia, Quebec, Nova Scotia and Newfoundland and Labrador announced their provincial liquor authorities would stop stocking and selling some or all U.S.-produced alcohol until Trump’s 25 per cent tariffs were dropped.

On Feb. 2, Ontario Premier Doug Ford said that when the U.S. tariffs kicked in on Feb. 4, all American products would disappear from the province’s Liquor Control Board of Ontario (LCBO) shelves. The LCBO is one of the biggest alcohol purchasers in the world.

“Every year, LCBO sells nearly $1 billion worth of American wine, beer, spirits and seltzers. Not anymore,” he wrote on social media .

On March 4, the LCBO officially announced it would stop selling U.S. products in response to the tariffs. At the time, it said more than 3,600 products from 35 U.S. states were listed and that U.S. products would not be purchased by the LCBO until it was directed to resume normal business.

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B.C. Premier David Eby’s promise was similar but much more targeted, directing the provincial liquor board to immediately stop purchasing and selling American liquor from Republican-led “red states.”

Butler said her company is monitoring the ever-changing tariff situation and its impact on business operations. She said 90 per cent of its products are made in Canada, while the other 10 per cent, its Heineken portfolio, comes from Europe.

“As the tariff situation unfolds, we will deal with that,” she said, noting that a large portion of their supplies are locally sourced. “From that perspective, I think it’s great that we support Canadian farmers, and we have a lot of materials that should not be directly impacted by tariffs.”

• Email: dpaglinawan@postmedia.com

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Regulatory requirements on businesses have increased by 15 per cent under the Liberal government, costing firms at least $51 billion annually

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