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Marco Rubio speaks after he is sworn in as Secretary of State by U.S. Vice President JD Vance at the Eisenhower Executive Office Building in Washington, on Jan. 21, 2025.
Tough talk on Taiwan
US Secretary of State Marco Rubio clashed with Chinese Foreign Minister Wang Yi in their first phone call on Friday over the independence of Taiwan, according to State Department spokesperson Tammy Bruce. During the conversation, Wang reaffirmed China’s position that the island nation is part of China and reportedly told Rubio “I hope you will act accordingly,” a Chinese phrase usually employed by a superior warning a student or employee to behave and act responsibly. Rubio has previously called Beijing the top US threat and was twice sanctioned by China in 2020.
And Rubio may have more wars of words with Wang in the future. China is reportedly ramping up efforts to encourage the independence movement on the Japanese island of Okinawa, which hosts 70% of US bases in the region – and is a mere 466 miles from Taiwan.
Chinese state media frequently highlights US military crimes in Okinawa, and Chinese social media propaganda claims most Okinawans favor independence. A poll published in May 2022 showed that only 3% of residents favored full independence, although 48% supported greater autonomy through a federal arrangement with Tokyo.
Reports suggest Beijing also tried but failed to establish an underground police station in Okinawa and plans to establish a Ryukyu Research Centre to remind locals of the island’s status as a former independent empire until it was annexed by Japan in 1609. Beijing has also been conducting a “charm offensive,” stressing Okinawa’s cultural ties to China – and strengthening its claim to the island.President Donald Trump attends a bilateral meeting with Chinese President Xi Jinping during a G20 leaders summit in Osaka, Japan, in 2019.
Trump creates a power vacuum in the world.
During his first week in office, Donald Trump took steps to withdraw the US from two major international commitments: the Paris Climate Agreement and the World Health Organization.
Trump’s reasoning on both was, broadly speaking, the same: Like many American conservatives, he sees international obligations as needless constraints on US power and sovereignty. But that may create opportunities for other global powers, not least China.
Dragon in the room? With one of the world’s two largest economies (and polluters) out of Paris, the other, China, has an opportunity to shape global norms in its favor. China emits more greenhouse gasses than anyone but is also a world leader in clean energy technology and financing.
Could China look to boost its influence at the WHO as well? Beijing supplies less than 1% of the organization’s annual budget right now, compared to more than 15% (about $1 billion) from the US. China’s relationship with the WHO has been complicated – Beijing, for example, went to great lengths to stymie the organization’s probe into the origin of COVID-19.
The bigger picture: “America First” will entail scaling back from a range of international commitments. But while Trump may abhorobligations, power abhors a vacuum. As the US withdraws, who will fill the gap? In a GZERO world, can anyone?
President Donald Trump makes a special address remotely during the 55th annual World Economic Forum meeting in Davos, Switzerland, on Jan. 23, 2025.
The Big Tar-iffs: Will he or won’t he start a trade war?
The big Trump tar-“iff” now has a when: Feb. 1.
That’s when the busy new US president has promised to slap 25% tariffs on both Canada and Mexico. In his virtual address to the folks attending the World Economic Forum in Davos, Switzerland, on Thursday, President Donald Trump again singled out Canada for harsh treatment. “We have a tremendous deficit with Canada,” he said, reiterating his usual inaccurate tariff mantra. Trump claims the trade deficit is between US$200 and US$250 billion a year when it is significantly less than half of that, mainly due to energy exports.
Trump then followed up with his favorite new expansionist taunt. “You can always become a state,” he said to Canadians. “If you’re a state, we won’t have a deficit. We won’t have to tariff you.”
But what he said next was more dire because it was aimed directly at the industries that are core to the Canadian economy. “We don’t need them to make our cars,” President Trump said. “We don’t need their lumber, because we have our own forests. We don’t need their oil and gas. We have more than anybody.” In other words, we don’t need Canada at all.
Cue the economic peril clutching.
Let’s slow-walk through all this.
Will President Donald Trump really follow through with tariffs, or is it a negotiating tactic?
Yes, tariffs are coming the way cold comes in winter. Why so certain? Our general rule is to take the president of the United States both seriously and literally. As Trump said in his inaugural address, tariffs are now his primary source of government revenue, not just a tool for negotiation.
“Instead of taxing our citizens to enrich other countries, we will tariff and tax foreign countries to enrich our citizens,” he announced. “It will be massive amounts of money pouring into our treasury coming from foreign sources.” He even floated the idea of an “External Revenue Service,” so tariffs are the flywheel in the engine that Trump promises will drive a golden age.
In his Davos speech on Thursday, the president emphasized the warning. “If you don’t make your product in America,” he said to a large group of CEOs, “then, very simply, you will have to pay a tariff, differing amounts, but a tariff which will direct hundreds of billions of dollars, even trillions of dollars, into our treasury to strengthen our economy and pay down debt.”
Is he right that high tariffs will really work for the US?
Not as promised. This is where the Trump math breaks down and politics and economics collide. Trump’s tariff threats will drive some businesses to keep factories in the US instead of, say, Canada. For example, this week Stellantis announced it was going to build the new Dodge Durango in Detroit and not move it to Canada as initially thought. It will also reopen a previously closed plant in Illinois to build another vehicle. So, expect some short-term “wins” from the America-first, protectionist agenda.
After all, in his first term, Trump used tariffs on goods like steel, aluminum, and products from China to more than double the amount the government collected from duties to about $111 billion.
Sounds like a lot, but it’s not. In 2023, the US government took in over $4.2 trillion in income and payroll tax. Even with 10% tariffs on all goods from China and 25% tariffs on Canadian and Mexican goods, the US government would take in only another $140 billion in 2025, according to the Committee for a Responsible Budget.
That’s not nearly enough to finance new tax cuts. For example, Trump has promised to extend his 2017 tax cuts in 2026. The Congressional Budget Office estimates doing so will cost about $4.7 trillion in lost revenue between now and 2035. That leaves a Grand Canyon-size hole that revenue from tariffs and savings from government cuts can never fill. Deficits will explode.
So will tariffs really be 25% across the board on Canada and Mexico, or will President Trump come down to a more manageable level on a few select goods?
That remains very unclear. The president didn’t slap these tariffs on week one, revealing they may have dropped as a symbolic priority for him. That opens up some room to maneuver to negotiate until the Feb. 1 deadline, and now there is even further hope for exceptions. The president has also asked for a report on trade and unfair practices to be delivered to him by April 1, which offers yet another potential delay in the tariff war. There will be lobbying, networking, and a full-bore strategy to give Canada some kind of carveout.
Still, neither date removes the possibility of the promised tariffs happening at some level. The president needs revenue, and tariffs are his preferred tool, despite the math.
Will Canada retaliate dollar for dollar?
Yes. The same strategy Canada deployed in Trump 1.0 during the steel and aluminum tariffs will be deployed again, and the list amounting to CA$37 billion worth of goods — including things like Florida Orange juice — is already made and ready to be deployed. After all, if Trump goes through with the tariffs, Canada could get pushed into a recession, with up to 5% of its GDP hit. While goods and services in both countries will get more expensive for citizens, it will hurt Canada much more for one reason: Canada sends almost three-quarters of its exports to the US, compared to just a little more than 17% of US exports crossing the other way.
If there are 25% tariffs across the board, will Canada use the nuclear option and try to cut off energy exports to the US, risking a full national unity crisis?
Very unclear. All the premiers and territory leaders met this week with Justin Trudeau to align their retaliation strategy, which includes energy … except for Alberta Premier Danielle Smith, for whom any inclusion of fossil fuel exports in a trade war is strictly off-limits. This is the lifeblood of the Alberta economy, after all, and she is protective of her province. However, her position deeply hampers a united Canadian response and allows the new US administration to deploy a divide-and-conquer strategy, knowing they can absorb any trade shocks better than Canada, especially if they do not include energy.
Is Trump still serious about taking over Canada by economic force?
Unclear. That view has certainly created a surge of patriotism in Canada and escalated tough trade talk as politicians jockey to wear the “Captain Canada” label. But if there is a desire to have an integrated North American economy — newsflash! — we already have one.
Energy alone is the best example. The US imports 24% of its crude oil from Canada, and that is very hard to replace because US refineries are retooled to process Canadian heavy crude oil, not the kind of oil the US extracts from fracking. Not only that, when looking at all energy products that flow across the border, like natural gas, there is a combined network of pipelines in North America that is over 281,000 miles long! With the free trade agreement, integrated fossil fuel pipelines, and hydroelectric systems in the East supplying electricity to the Northeastern states, it would be hard to find two more interconnected economies anywhere in the world.
In other words, on Feb. 1, the US and Canada are headed for a trade war they don’t need over a prize they both already have.
Graphic Truth: Which major economy has the lowest tariffs?
The Biden administration scaled back the EU tariffs but built on the China tariffs with additional measures. The tariffed share of US imports is now the highest it has been in decades, and Trump has threatened to boost tariffs even more.
But he’s starting from what is still, despite all that, a low base. The US has the second-lowest tariff barriers among the G20, the group of the world’s largest economies.In 2023, the trade-weighted average US tariff rate – a measure that takes into account the mix of goods a country actually imports – was just 2.2%. Only Japan’s was lower. Canada’s, by comparison, was 3.4%. The EU’s was 2.7%. And India’s was a whopping 12%. Here’s a look at how all 20 economies stack up when it comes to levies at the border.President Donald Trump signs executive orders in the White House.
Trump uses uncertainty on tariffs for leverage
In November, Trump said he would impose those tariffs on Day One, which was Jan. 20, but the document he was signing when he made his remarks calls for a comprehensive report on trade to be delivered to him by April 1, setting out his options.
That process will allow American trade and national security officials to have input “in a formal way, rather than the kind of monarchical court that was going on at Mar-a-Lago,” says Eurasia Group analyst Graeme Thompson.
That means that Canada and Mexico will likely have the opportunity to make their case for continued trade before Trump acts, but he is going to be pushing hard for concessions.
The fresh tariff threats should be thought of as “a negotiating tactic,” says Thompson, but that doesn’t mean there won’t be tariffs. “The bottom line is, whether they come today, tomorrow, next week, or next month, Canada is going to have to live with the specter of US tariffs hanging over its head on any issue at any time for the next four years.”
Trump will reportedly use the threats to force Canada and Mexico to renegotiate the USMCA in an attempt to shift auto manufacturing from those countries to the United States.
Canada and Mexico can both be expected to push back hard to protect jobs in their countries but may be forced to make difficult tradeoffs to avoid broader tariff pain.
An aerial view of the Pasadena Refining System, Inc., in Pasadena, Texas, from 2017.
Why does the US Import oil despite producing enough for its needs?
The United States is one of the world’s largest oil producers, producing enough crude oil for domestic consumption and exporting millions of barrels daily. In 2023, it exported just over 10 million barrels per day, or b/d, of petroleum to 173 countries and three US territories.
Yet, the US also imports roughly 8 million b/d, mostly heavy crude,60% of which comes from Canada, up from 33% in 2013. US oil refining capacity stood at 18.4 million barrels per day (b/d) as of Jan. 1, 2024. This may seem counterintuitive, but there are several reasons why the US still relies on imports.
Oil quality differences. Crude oil comes in different grades, generally categorized by density (light vs. heavy) and sulfur content (sweet vs. sour). The US primarily produces light, sweet crude, ideal for gasoline. But many US refineries, especially those along the Gulf Coast, are geared up to process sour, heavy crude – the kind produced in countries like Canada and Venezuela. Heavy crude oil is cheaper, and its chemical composition allows it to be used in a greater variety of products, such as diesel, jet fuel, and petrochemicals.
Geographic logistics and costs. US oil fields are concentrated in Texas and North Dakota, making it cost-effective for other regions to import oil from Canada, whose pipeline infrastructure can directly supply US refineries in the Midwest and Gulf Coast. Canada also supplies oil by rail, as its supply exceeds pipeline capacity. Its oil is also sold at a discount, as high as $20 a barrel in the last two years, due to its limited pipeline infrastructure to coastal ports that makes the US its chief customer, as well as competition from increased production of Mexican crude that has saturated the market.
Economics and trade. US producers sell their light crude to international markets, where they can fetch higher prices than domestically. From 1975 to 2015, it was illegal for the US to export crude oil. President Barack Obama lifted the ban as other sources of oil including hydraulic fracking became available, increasing domestic supply. The US Energy Information Administration forecasts that US crude oil production will continue to rise, reaching an average of 13.5 million b/d in 2025, up from a record 13.2 million b/d in 2024.
Energy security strategy. The US has long maintained a policy of diversifying oil sources to ensure energy security, particularly since the 1973 oil embargo by OPEC countries during the Arab-Israeli war, preferring imports from more stable trading partners like Canada. President Donald Trump’s declaration of a national energy emergency on Monday, however, is designed to boost US oil and gas production by expediting drilling permits and removing restrictions on exploration, including offshore and in Alaska. This might make it less necessary to import Canadian oil – an issue of concern to Alberta, whose economy relies heavily on exports to the US. Tariffs on Canadian oil would also make the product more expensive and encourage greater production of US oil, which could also reduce reliance on Canada in the long term.
Graphic Truth: National pride takes a slide
Recent polls on patriotism show that fewer people can relate to the lyrics “I’m proud to be an American” — or “Canadian” — anymore. Yes, Lee Greenwood has a version of his patriotic anthem for both sides of the border.
The percentages of Canadians and Americans with strong patriotic feelings are at a three-decade low. In Canada, only 49% said they had a deep attachment to their country in 2024, down from 62% in 2016. In the US, that number has plummeted from 52% eight years ago to 43% today.
The decline is attributed to division and discord running rampant since the pandemic, with many expressing dismay at growing polarization and a lack of a “middle” option politically. In the US, the growing toxicity between the two parties, in particular, has also soured many Americans’ attitudes — especially when their side loses an election.
The McGill University campus.
HARD NUMBERS: Foreign no-shows in Canadian schools, Ontario makes a big call to doctors, Dastardly dye dies in US, Gringo companies send toxic waste south
100: Meanwhile, the government of Ontario is looking to have 100 foreign-trained doctors licensed to practice in high-need communities such as Sudbury, Goderich, and Huntsville. This comes after the province missed its initial target of 50 by the end of 2024. The program aims to address shortages in primary care physicians as older doctors retire and population growth continues.
3: This isn’t only a hard number, it’s a red number. Red 3, to be precise, is a food coloring that is being banned in the US, food safety regulators announced Wednesday. The bright red petroleum-based dye — used in candies, soft drinks, pills, baked goods, and, famously, maraschino cherries — has been found to cause cancer in lab animals. The move is a victory for consumer protection groups that have sought the dye’s death for decades. Food producers have two years to replace it in their products, and pharma companies get an extra year beyond that.
200,000: US companies sent some 200,000 tons of toxic waste to a single processing plant in Monterrey, Mexico, in 2022. Researchers recently found extremely high levels of neurotoxins in the soil surrounding the Zinc Nacional plant, which treats the dust generated from recycling metal junk — such as cars, electronics, and appliances — and turns it into fertilizers and other products. Lead contamination levels alone in homes near the plant were found to be more than 60 times higher than what the US considers safe.