Something some of you may not know. Way back when, before I ever thought about becoming a writer, I was a multi-national banker, working on the tippy-top floor of Royal Bank’s main office in Vancouver. It was a job that required a firm understanding of taxes, tariffs, interest rates, bond yields, and currency fluctuations. Also, I was supposed to know how to golf.
Who pays the Tariffs?
A refresher: Tariffs are taxes paid by the citizens of a country importing the tariffed goods. So Americans will pay tariffs of 10%- 120%, whatever crazy number Trump has imposed on goods coming in from China today. That much we know.
And I’m sure everyone saw how the global markets whipsawed when Trump started and then stalled his global trade war.
Kiss Ass
So a question. Why after claiming countries around the world were lining up to ‘kiss his ass’ (he is such a crass man) did he blink and postpone his beautiful tariffs?
Why did he forgo the billions and billions of dollars that would flow from US citizens into the US government’s/ (his) hands?
Trump is a hammer and believes the rest of the world is a nail. He has deluded himself into thinking that other countries are powerless in the face of his nonsensical tariffs, which he claims to love but does not even understand.
Depts and Tariffs
America is a deeply indebted country, running massive deficits funded by the sale of Treasury securities (T-bills, bonds, etc.).
As of April 2024, foreign countries held $7.9 trillion in US securities. These countries include China, Japan, Canada, and the European nations, which have all recently been threatened with huge tariffs and, in Canada’s case, economic warfare and annexation.
With $7.9 trillion of debt owing, anyone with half a brain would realize it’s not a great time to be pissing off the countries who hold the power to bankrupt you.
When Mark Carney became prime minister, Canada held $350 billion of US Treasuries. It’s believed that he brought this to Trump’s attention during their one and only phone call, after which Trump suddenly referred to Carney as Prime Minister and our beloved country as Canada. Imagine!
Carney has also recently partnered with Japan, the second largest holder of US debt, with the stated intent of stabilizing world markets.
Why did Trump blink?
So, let’s go back to the question of why Trump blinked. In tandem with the stock market crashing, the market for US securities softened. Worried about the stability of the US economy and the country in general, fighting back against bludgeoning tariffs, other countries started dumping their US debt.
The US had to increase interest rates on those bonds to entice buyers. When you’re as deeply indebted as the United States, the last thing you want is to pay more interest on the trillions and trillions you owe.
That’s why Trump has postponed the tariffs. Mark Carney and other world leaders pulled the US Treasury lever, raising interest rates on US debt and thus exerting their own financial power.
We do not live in a world of hammer and nail.
We do not live in a world of hammer and nail. We live in a world of connections, cause and effect, a ripple here, an earthquake there.
We Canadians are not powerless. We are smart and strong. Thanks, Mark Carney! This Canadian is voting for you.