You Ask We Answer

Written by Paul Siluch • April 24, 2025

This week’s letter takes a different format. It has been a busy month, and we’ve had a lot of questions. I will expand on the most asked ones.

 

Why is President Trump Picking on Canada?

 

Not knowing what goes on inside a certain person’s head, there are a number of theories.

 

1. Canada is easy to pick on. In the NHL hockey playoffs, the quest for the Stanley Cup starts with the strongest team playing the weakest team. Big battles gain momentum with an easy win at the beginning.
2. A demonstration of power and intent. If this is how America treats its friends, imagine what it will do to its enemies?
3. President Trump genuinely believes Canada is not carrying its weight.
4. President Trump wants to take what we have by force.

 

The rhetoric towards Canada has died off in recent weeks, as bigger fish – China, Japan, Europe - are now frying.

Once Canada’s election is concluded, expect our new prime minister to visit Washington quickly. Both sides want to strike a deal, and so they will. President Trump needs a win. We do too.

 

Is he playing 4D chess or checkers?

 

Donald Trump began his rise to real estate fame and fortune using a strategy called door in the face. This is where one side of a negotiation makes an outrageous demand which is seen as excessive and often ludicrous. Describing Canada as the 51^st state, for example. Whatever they ask for after that sounds reasonable.

 

However, countries are not contracts and borders are not buildings. This may work in New York real estate, but between nations? Considering there are so many unintended consequences, such as Canadian tourism to the U.S. plummeting by up to 70%, that door-in-the-face bargaining may fail.

 

There is a plan. It just may not be a plan that works.

 

What Should Canada Do?

 

Ask us on April 29!

 

Whoever leads Canada must strike a deal that preserves Canada’s economy and independence, while keeping cross-border trade open. The U.S. may not be our best friend anymore, but they will always be our closest neighbour. We need trade. So do they.

 

Why is Gold Going Up?

 

Someone with a very big appetite has been accumulating at a furious pace.

 

Is America Doomed?

 

America has an amazing ability to pull itself back to the middle, no matter who is in power. Congress, the Senate, the Supreme Court, the press, and even financial markets wield great influence over the president, even one that sometimes looks like he has gone rogue.

 

President Trump used emergency powers to enact his tariffs. There are now lawsuits in the works that challenge his use of the National Emergencies Act, so the courts may ultimately rein the White House in through this statute.

 

And don’t downplay the power of markets.

 

 

Vigilantes also had a role in the financial world in the 1970s and 1980s. The United States was experiencing record deficits due to the Vietnam war and new social programs, and inflation was out of control. Disgusted bondholders dumped their bonds, forcing interest rates higher. Governments choked on the rising interest rates and found it almost impossible to sell new bonds.

 

This pushed the government to slow its spending.

 

These renegade sellers came to be known as “bond vigilantes” because of how they forced the government to do what it should have done on its own: reduce its deficit.

2025: The bond vigilantes are back.

 

When the White House imposed 10% tariffs on all imports and higher tariffs on 57 nations on April 2 (The Economist), bond yields spiked from 3.90% to over 4.50% - a jump of over 15%.

 

The rise in yields pushed mortgage rates up, and home sales suddenly dropped. Ordinarily, such turmoil would cause interest rates to drop.  

 

Except this time.

 

The bond vigilantes said “enough!” and forced President Trump’s hand.

Source: Trading Economics

 

 

How Does This End?

 

The most likely scenario is a 10% tariff on all goods coming into the United States. There will likely be higher tariffs enacted against China, but a flat global ‘solution’ has the highest odds.

 

0% would be better than 10%, but 10% is certainly better than 25%. Or 145%.

 

 

When Will Markets Calm Down?

 

They already are.

 

• New lows in the stock market are declining.
• Insider buying is increasing.
• The White House is moderating its demands. Whenever the market drops too far, President Trump backs off.

 

Most investors, and professional fund managers, have become deeply pessimistic on U.S. stocks. Only 5% of fund managers expect American stocks to be the best-performing asset class of 2025 (Bank of America Fund Manager survey).

 

This is good news. When the crowd is too bearish, stocks are already near their lows.

 

That said, corporate managers are frozen with uncertainty. They are delaying investment and new hiring. As a result, stocks are likely to trade back and forth in a range, until there is clarity around the level of tariffs and the outcome.

 

Why Is This Happening?

 

This part is my opinion only, so take it for what it is worth.

 

Countries don’t die like humans do, but they do suffer from two other Ds: debt and defeat. I think what the U.S. is doing today – confronting its massive deficits and its new adversary, China – was going to happen in the next decade, regardless of who was in power.

 

Look at a few numbers (sources: Statista, EurAsian Times, and CEIC Global Economics).

China now produces:

 

• 32% of the world’s cars compared to 11% for the U.S. This is over 30 million cars per year, which is up from almost none in the 1990s.
• 52% of global shipbuilding output. “China’s largest state-owned shipyard, the China State Shipbuilding Corporation (CSSC), built more commercial vessels by tonnage in 2024 than the entire U.S. shipbuilding industry had since World War II.” China could have more aircraft carriers than the U.S. by 2035.
• 54% of the world’s steel
• 50% of the world’s cement
• 59% of global aluminum
• 80% of global solar panels
• 70-80% of global consumer electronics (e.g., smartphones, TVs)
• 60% of semiconductor components. The U.S. makes 5%.
• 70–90% of the world’s commercial drones, with estimates of 20,000 consumer-style drones per day (7.3 million annually).

 

China today is America in WWII – dominant in the production of almost everything.

 

The largest technology battle is happening right now, in the quest for supremacy in artificial intelligence. If the U.S. can maintain its lead, it can use robots to manufacture everything it needs, here at home, even with a declining workforce. If not, it will be China’s century ahead.

 

In ancient Greece, dominant power Sparta was threatened by the upstart Athenians. It resulted in a 27-year war that Sparta eventually won. History is full of empires that were challenged. Some survived, others reinvented themselves, and some were defeated. There is no set pattern for the lifespan of any great empire.

 

To answer the original question: Why is this happening?

 

It is because America has awoken to its weakened state and is lashing out to stop its decline. The struggle will last years, not months.