Trump, Trudeau, and the 51st State

 By Tim Challies - Posted at @challies:

These are strange days in Canada. The incoming President of the United States has suddenly promised to slap a 25% tariff on cross-border trade—a tariff that has the potential to devastate the Canadian economy. Some suggest it could cost Canada a 3% hit to its economy and the loss of hundreds of thousands of jobs. At the same time, he is openly mocking Canada’s Prime Minister, trolling the country by suggesting it voluntarily become America’s 51st state, and even stating he will deploy economic force to annex the country. As is so often the case with Donald Trump, it’s difficult to know the degree to which he is serious and the degree to which he is merely deploying negotiation tactics and shows of strength.

Either way, his flexes are hitting Canada especially hard right now because our Prime Minister has become so woefully weak and unpopular that he has been forced to announce his resignation. While he is still technically Prime Minister, he is the ultimate lame duck who no longer has the confidence of the people, the parliament, or even his own party. He is hardly in a position to meet strength with strength—a posture Trump tends to value. In fact, to maintain his position for another couple of months, he has suspended parliament so that no legislative processes can take place—a move that is technically legal but widely understood to be contrary to the interests of the country even if it’s consistent with his own. Thus, at a time of turmoil, the government is unable to function effectively at the behest of its Prime Minister. It’s a mess.

What does the immediate future look like? No one is quite sure, but we do know that Parliament is set to resume on March 24 and before this time the Liberal Party will attempt to choose a new leader. Presuming that person is chosen by then, he or she will become Canada’s new Prime Minister—but probably only for a matter of weeks. When Parliament resumes, the other parties have all vowed to express their lack of confidence in that government, meaning it will fall and the country will immediately go to a federal election. In theory, a new government should be in place by May or June. At worst, a new government will come in October when we have a regularly scheduled election.

To understand the background to all of this, you need to know that Canada is experiencing an affordability crisis in which the cost of living has spiked without a commensurate increase in earnings. Hence, the average Canadian is growing relatively poorer rather than wealthier, especially in comparison to our neighbors to the south. Inflation has been one driver, though our inflation rates have been similar to most other countries as we emerged from all the borrowing and spending of the pandemic. The main driver is the cost of housing and this stems from low building and high immigration. A perfect storm of slow and stifling government bureaucracy, poor interest rates, and high labor costs have kept building to a minimum. Meanwhile, the government has opened the doors to unprecedented numbers of immigrants. When high demand meets low supply, housing costs skyrocket, as does homelessness, food insecurity, and a host of related problems. And, of course, it also causes political instability. (That, of course, simplifies matters since the economic problems actually go much deeper and touch matters of taxation, productivity, national debt, and so on.)

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