“Economic Security is National Security” ~ President Trump

In the Conservative Treehouse, Sundance reports,

Elections have consequences. On the same day the U.S. economy reports astoundingly successful jobs growth of 226,000 jobs and a drop in the unemployment rate to 3.5 percent; the Canadian state economic minister reports surprisingly terrible jobs losses of 72,200 jobs and a jump in unemployment from 5.5 to 5.9 percent.

The Canadian economy is roughly one-tenth the size of the U.S. So in equivalent terms the results from Canada reflect a comparative loss of 720,000 jobs on the same day the U.S. revises all figures upward to over 300,000 gains. A stunning economic contrast:

it was obvious in July of this year that Speaker Nancy Pelosi and Justin Trudeau entered into an agreement of mutual benefit. Trudeau would hold back submission of the USMCA for parliamentary ratification, and left-wing political ideologues in the U.S. would help Trudeau win re-election.

At the time CTH forewarned of what this type of political arrangement really meant.

In essence Prime Minister Justin Trudeau was willing to compromise the health of his own economy for stunningly political reasons. There was a perfect storm of negative economic dynamics clearly visible on the horizon…. but few were paying attention.

In combination with leftist economic policies on energy development that strangles economic growth through excessive regulation, the leftist government of Trudeau has dismantled the natural underpinnings of a market-based economy. The manufacturing base of Canada is compromised, perhaps to the point of no return.

For two decades liberal (left-wing) Canadian policy essentially transformed their economic model from manufacturing to “assembly." The goods-based production within the Canadian economy was structured to take advantage of the NAFTA loophole.

Goods production in Canada was reduced from full manufacturing to a process of assembling parts brought in from overseas and then selling them into the U.S. market. This process exploited the NAFTA loophole allowing foreign companies to ship parts to Canada and then assemble for transport into the U.S. without tariffs.

Over time the Canadian economy became more and more dependent on this system of brokering goods, while Canada simultaneously dismantled their heavy industry at the request of extreme environmentalists.

The Canadian assembly system for durable goods was always at risk of the NAFTA loophole being closed. When President Trump renegotiated the USMCA, primarily with Mexico, the loophole was closed. The USMCA rules on origination now require the parts to come from inside the North American manufacturing system.

Importing parts from Asia and simply assembling them in Canada is no longer permitted under the USMCA agreement. The majority of the parts -which require heavy industry to produce- must originate from North America. Canada has little capacity to take advantage of this economic opportunity because they dismantled their heavy industry.

As a consequence, if any multinational company wanting to invest in a manufacturing system, that avoids tariffs, to bring their end product to the massive U.S. market… well, Canada is no longer a viable option for that investment.

The multinational banks and investment groups who fund corporate manufacturing investment; and who are now no longer willing to underwrite Asian investment due to the impact of Trump tariffs; are focusing on where that investment can support the economic activity.

As with this latest report, when we see: “Canada’s goods-producing industries saw a decline of 26,600 net jobs, largely on manufacturing” leading the headline, this is a direct consequence of the economic dynamic identified above.

Elections have consequences; and those economic consequences are extraordinarily impactful in the era when U.S. President Trump is dismantling global supply chains; focusing on bringing high-wage manufacturing industry back to the U.S; and driving a process of profound consequence through economic nationalism.

“Economic Security is National Security” ~ President Trump

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