Always very interesting! As a Canadian following that country's energy and climate debate from here in Japan (where my Japanese wife's an avid Daikin user and baseball fan), it's certainly striking how the Trump challenge has changed elite and layperson sentiment concerning resource projects, especially pipelines and related infrastructure. The 2/27 reelection of the "Canada will never be the 51st state" Progressive Conservatives in Ontario vindicated an aggressive platform of pipelines, nuclear, critical minerals, and other common sense. And nationwide, a 3/7 Nanos poll indicates 75% support for a national energy corridor and pipeline from Alberta to Easter Canada. Even 60% of Quebeckers are in favour: https://www.ctvnews.ca/politics/article/most-canadians-support-building-a-cross-country-pipeline-reject-adopting-us-dollar-nanos-survey/
Dear Arjun, thanks as always for your thoughts. However I also am going to question your defence of the Trump tariffs and the new mercantilist world view.
Far be it from me to dig into the Ricardian analysis of trade, but I would say that the idea of a country as “X first” alone is a mistake. It accepts the idea that a country is equivalent to a company.
Countries of course have to watch out for their own interests but they have a number of other responsibilities. NATO, for instance, is about more than just self interest.
Also, for what it’s worth, imposing tariffs on your neighbours at the drop of a hat is pretty shabby behaviour.
Ed, Always great to hear from you and thank you for your comment. I am going to defer to addressing it to a future post (along with a few others in this comment section!). To be clear on one point though, I am a free trader. So the point of that section wasn't to defend or endorse a tariff trade war. It was an observation that the initial reaction function in Canada and Europe seems to be directionally a positive one. I'd love to see both areas return to being more pro-growth.
I have to respond to this notion that the “trade war” presently directed at Canada could not only be some kind of short term irritant but that by making us more “pro-business” it could even prove to be beneficial.
For my first observation I will quote the following excerpt from the speech that President Kennedy gave to the Canadian Parliament on May 17, 1961.
“Geography has made us neighbors. History has made us friends. Economics has made us partners. And necessity has made us allies.”
May I suggest that the only part of that statement remaining is the “neighbour” part, a part that I currently wish we could dispense with.
My second observation is that the Wall Street Journal has not only called these tariffs “stupid” but it added that the stupidity part might even have been understated. No Arjun, this is not a short term irritant, we are talking about long term permanent damage.
My last observation is that as an American you should be equally worried. Don’t you have something called “Congress” to stop this nonsense or do you think Americans prefer to be ruled by a Putin twin?
Michel, thank you for your comments. And sorry that I am going to copy and paste a reply to Ed above. I am going to defer to addressing your comment more fully to a future post (along with a few others in this comment section!). To be clear on one point though, I am a free trader. So the point of that section wasn't to defend or endorse a tariff trade war. It was an observation that the initial reaction function in Canada and Europe seems to be directionally a positive one. I'd love to see both areas return to being more pro-growth. Super-Spiked is not a foreign policy piece. And I've always said that I take the equity analyst's mindset, which at its best sees the strong passion and wants to go the other way. But I will do try to do a better job in a follow up post to getting at my intentions. Thanks again for taking the time to comment.
Current events keep bringing to mind the trade war that began in the late 1920s and was instrumental in bringing about the Great Depression (though not the only causal factor). My concern is that trade wars can easily get out of control and go off the rails.
Thank you Paul. 100% agree on risk of tariff trade wars, which feeds the oil price concerns noted in first section. I think others have interpreted this post as being "pro tariff or pro trade war". I am not, as I tried but apparently failed to indicate in I have long been in the free-trade-is-best camp but recognize some adjustment is needed.
Arjun, Much appreciative of all your posts . Maybe because of my own biases I found this post a little biased to the downside risks . First your oil demand forecast is lower than Mike Rothman’s . Inventory has been drawn for 5 consecutive years . You mention the war ending but don’t mention Iranian oil that could come out of the market. China could stimulate their economy.
That said of course oil prices could still drop regardless of fundamentals as the trading market and sentiment ebbs and flows .
Thank you MP. Listen, I hope I am being too bearish on near term risks. It is really the trade war stuff that has me more cautious. Arguably that is a consensus view. And I do normally really dislike writing about short-term stuff, so perhaps should stick with my normal long-term views! Which I tried to do (its in the title) but probably didn't succeed as much as I had hoped.
“Our main conclusion regarding the prospects for a tariff trade war is that to the extent it is motivating Europe and Canada to return to supporting pro-business pragmatism, the volatility and uncertainty we are currently experiencing will have been worth it.”
Potentially permanently destroying a trusting multi-decadal trade paradigm composed of almost completely free trade painted as tough love for neighbours is taking bending over backwards for the new regime to the next level, no?
Totally agree… Does not seem at all like Trump’s policies are “motivating Europe and Canada to return to supporting pro-business pragmatism.” The North American free trade system is clearly efficient, helping US automakers reduce cost and remain competitive. Blowing these supply chains up might wins Trump some points with his base, but it is obviously not “pro-business.”
Putting 10% tariffs on Canadian heavy crude is also insane given that the administration is clamping down on VZ oil. The US refinery complex needs a stable supply of heavy oil, the ultra light condensate out of the Eagle Ford and the Permian is pretty useless for producing diesel unless blended.
Appreciate your comment Jason. I going to go with "no" in the manner in which I intended it. This is a good area for me to follow up on in a future FAQ type post. If I am trading tariff volatility here (I mean that longer-term, not day trading), I think Canada and Europe come out stronger on the other end. That to me will (if it happens) be a good outcome.
Some adjustment is clearly needed to the multi-decade trading paradigm. Trump's style/approach is clearly imperfect. But the comment/post was not intended to support/critique what could be a better or different approach. It was merely to observe that I believe Canada and Europe will be stronger economically (and likely militarily) after this is all done. I think this could well outlive Trump himself, since few other politicians are as tariff focused. That second point I think could warrant some pushback, as we shall see.
I know I came in hot but it’s because I’m worried that normalcy bias is obscuring the great damage being done and potentially for the long-term. What do they say about trust? Hard to earn, easy to lose.
And now this same haphazard approach might be extended to other longstanding US-Canadian agreements. It boggles the mind.
Hi Jason, I re-read my post. Super-Spiked is not about foreign policy. So in terms of how to handle long-standing alliances, etc., none of that have I commented on and is really not something I plan on with S-S. S-S is only about the energy sector. I have been against what I have called "climate only" ideology in the U.S., Canada, and Europe. From what I can surmise about the reaction function in Canada and Europe to the Trump tariffs, there seems to be a pro-growth pragmatism you are hearing from leaders that we didn't hear even a few months ago. I am a free trader. And I am a pro-Canada American. But as far as this post goes, I feel pretty optimistic that energy pragmatism is spreading. Trump is an accelerator of that. Now, the early parts of this post that discussed downside commodity risks, that is in part driven by the tariff trade wars. I don't view them as good for oil demand (in all likelihood). I will try to do better in a future post clarifying these views and appreciate your engagement!
Thank you for taking the time to engage on this. Much appreciated. I think I tend a little more towards carbon restrictiveness than you but those debates are part and parcel of functioning liberal democratic civilization. In Canada for example, even pre-Trump, there was a realization that energy policy was in need of a rebalancing towards security and abundance. The security aspect has now taken on a stronger element of diversification which is probably healthy and prudent.
Always very interesting! As a Canadian following that country's energy and climate debate from here in Japan (where my Japanese wife's an avid Daikin user and baseball fan), it's certainly striking how the Trump challenge has changed elite and layperson sentiment concerning resource projects, especially pipelines and related infrastructure. The 2/27 reelection of the "Canada will never be the 51st state" Progressive Conservatives in Ontario vindicated an aggressive platform of pipelines, nuclear, critical minerals, and other common sense. And nationwide, a 3/7 Nanos poll indicates 75% support for a national energy corridor and pipeline from Alberta to Easter Canada. Even 60% of Quebeckers are in favour: https://www.ctvnews.ca/politics/article/most-canadians-support-building-a-cross-country-pipeline-reject-adopting-us-dollar-nanos-survey/
Dear Arjun, thanks as always for your thoughts. However I also am going to question your defence of the Trump tariffs and the new mercantilist world view.
Far be it from me to dig into the Ricardian analysis of trade, but I would say that the idea of a country as “X first” alone is a mistake. It accepts the idea that a country is equivalent to a company.
Countries of course have to watch out for their own interests but they have a number of other responsibilities. NATO, for instance, is about more than just self interest.
Also, for what it’s worth, imposing tariffs on your neighbours at the drop of a hat is pretty shabby behaviour.
Ed, Always great to hear from you and thank you for your comment. I am going to defer to addressing it to a future post (along with a few others in this comment section!). To be clear on one point though, I am a free trader. So the point of that section wasn't to defend or endorse a tariff trade war. It was an observation that the initial reaction function in Canada and Europe seems to be directionally a positive one. I'd love to see both areas return to being more pro-growth.
I have to respond to this notion that the “trade war” presently directed at Canada could not only be some kind of short term irritant but that by making us more “pro-business” it could even prove to be beneficial.
For my first observation I will quote the following excerpt from the speech that President Kennedy gave to the Canadian Parliament on May 17, 1961.
“Geography has made us neighbors. History has made us friends. Economics has made us partners. And necessity has made us allies.”
May I suggest that the only part of that statement remaining is the “neighbour” part, a part that I currently wish we could dispense with.
My second observation is that the Wall Street Journal has not only called these tariffs “stupid” but it added that the stupidity part might even have been understated. No Arjun, this is not a short term irritant, we are talking about long term permanent damage.
My last observation is that as an American you should be equally worried. Don’t you have something called “Congress” to stop this nonsense or do you think Americans prefer to be ruled by a Putin twin?
Michel Lafontaine
Michel, thank you for your comments. And sorry that I am going to copy and paste a reply to Ed above. I am going to defer to addressing your comment more fully to a future post (along with a few others in this comment section!). To be clear on one point though, I am a free trader. So the point of that section wasn't to defend or endorse a tariff trade war. It was an observation that the initial reaction function in Canada and Europe seems to be directionally a positive one. I'd love to see both areas return to being more pro-growth. Super-Spiked is not a foreign policy piece. And I've always said that I take the equity analyst's mindset, which at its best sees the strong passion and wants to go the other way. But I will do try to do a better job in a follow up post to getting at my intentions. Thanks again for taking the time to comment.
Thanks Arjun. Stimulating post.
Current events keep bringing to mind the trade war that began in the late 1920s and was instrumental in bringing about the Great Depression (though not the only causal factor). My concern is that trade wars can easily get out of control and go off the rails.
Thank you Paul. 100% agree on risk of tariff trade wars, which feeds the oil price concerns noted in first section. I think others have interpreted this post as being "pro tariff or pro trade war". I am not, as I tried but apparently failed to indicate in I have long been in the free-trade-is-best camp but recognize some adjustment is needed.
I thought you were clear about your stance, Arjun. I guess I would put it that free trade is a good thing but should not be the only thing.
100%!
Arjun, Much appreciative of all your posts . Maybe because of my own biases I found this post a little biased to the downside risks . First your oil demand forecast is lower than Mike Rothman’s . Inventory has been drawn for 5 consecutive years . You mention the war ending but don’t mention Iranian oil that could come out of the market. China could stimulate their economy.
That said of course oil prices could still drop regardless of fundamentals as the trading market and sentiment ebbs and flows .
Thank you MP. Listen, I hope I am being too bearish on near term risks. It is really the trade war stuff that has me more cautious. Arguably that is a consensus view. And I do normally really dislike writing about short-term stuff, so perhaps should stick with my normal long-term views! Which I tried to do (its in the title) but probably didn't succeed as much as I had hoped.
Great stuff Arjun!
thank you Rob!
“Our main conclusion regarding the prospects for a tariff trade war is that to the extent it is motivating Europe and Canada to return to supporting pro-business pragmatism, the volatility and uncertainty we are currently experiencing will have been worth it.”
Potentially permanently destroying a trusting multi-decadal trade paradigm composed of almost completely free trade painted as tough love for neighbours is taking bending over backwards for the new regime to the next level, no?
Totally agree… Does not seem at all like Trump’s policies are “motivating Europe and Canada to return to supporting pro-business pragmatism.” The North American free trade system is clearly efficient, helping US automakers reduce cost and remain competitive. Blowing these supply chains up might wins Trump some points with his base, but it is obviously not “pro-business.”
Putting 10% tariffs on Canadian heavy crude is also insane given that the administration is clamping down on VZ oil. The US refinery complex needs a stable supply of heavy oil, the ultra light condensate out of the Eagle Ford and the Permian is pretty useless for producing diesel unless blended.
Appreciate your comment Jason. I going to go with "no" in the manner in which I intended it. This is a good area for me to follow up on in a future FAQ type post. If I am trading tariff volatility here (I mean that longer-term, not day trading), I think Canada and Europe come out stronger on the other end. That to me will (if it happens) be a good outcome.
Some adjustment is clearly needed to the multi-decade trading paradigm. Trump's style/approach is clearly imperfect. But the comment/post was not intended to support/critique what could be a better or different approach. It was merely to observe that I believe Canada and Europe will be stronger economically (and likely militarily) after this is all done. I think this could well outlive Trump himself, since few other politicians are as tariff focused. That second point I think could warrant some pushback, as we shall see.
I know I came in hot but it’s because I’m worried that normalcy bias is obscuring the great damage being done and potentially for the long-term. What do they say about trust? Hard to earn, easy to lose.
And now this same haphazard approach might be extended to other longstanding US-Canadian agreements. It boggles the mind.
https://substack.com/@donaldjrobertson/note/c-98952970
Hi Jason, I re-read my post. Super-Spiked is not about foreign policy. So in terms of how to handle long-standing alliances, etc., none of that have I commented on and is really not something I plan on with S-S. S-S is only about the energy sector. I have been against what I have called "climate only" ideology in the U.S., Canada, and Europe. From what I can surmise about the reaction function in Canada and Europe to the Trump tariffs, there seems to be a pro-growth pragmatism you are hearing from leaders that we didn't hear even a few months ago. I am a free trader. And I am a pro-Canada American. But as far as this post goes, I feel pretty optimistic that energy pragmatism is spreading. Trump is an accelerator of that. Now, the early parts of this post that discussed downside commodity risks, that is in part driven by the tariff trade wars. I don't view them as good for oil demand (in all likelihood). I will try to do better in a future post clarifying these views and appreciate your engagement!
Thank you for taking the time to engage on this. Much appreciated. I think I tend a little more towards carbon restrictiveness than you but those debates are part and parcel of functioning liberal democratic civilization. In Canada for example, even pre-Trump, there was a realization that energy policy was in need of a rebalancing towards security and abundance. The security aspect has now taken on a stronger element of diversification which is probably healthy and prudent.