Rabies-infested beavers
In this episode of Geopolitical Cousins, hosts Jacob and Marco analyze the escalating US-Canada trade war, arguing that Mark Carney's retaliatory strategy is stronger than it appears because Canadians have higher pain tolerance, fiscal space, and can wait out Trump's administration. They contend that the US fundamentally misunderstands the deal it has with Canada, which involves Canadian defense spending that actually protects American interests, and that Trump's approach threatens to undermine decades of North American alliance-building with potentially severe long-term geopolitical consequences.
Summary
The episode opens with discussion of Mark Carney's response to US tariffs on Canadian exports, with Jacob having been recently in Canada and observing strong public support for Carney's aggressive retaliatory stance. Marco initially predicted the USMCA renegotiation would go smoothly but concedes error, as Canada has recalled negotiators and implemented retaliatory tariffs.
Jacob argues that assessing who wins a trade war cannot rely solely on material power comparisons, using the schoolyard analogy that 'it's not the size of the dog in the fight, it's the size of the fight in the dog.' He notes that Canadians are exceptionally motivated—describing them as 'rabies-infested beavers'—with consumers actively seeking Canadian products in stores despite no government mandate. This demonstrates organic support for Carney's strategy among the general population.
A key strategic advantage Carney possesses is fiscal space. With Canadian debt-to-GDP at 100% but deficit at only 1.7% of GDP, he can use this period of conflict to justify infrastructure spending that would otherwise face political opposition. This includes pipelines to new markets, refineries, and hydropower expansion—investments that have been politically difficult due to climate concerns but now become justified as national security responses to American aggression.
Marco explains that approximately 70% of Canadian exports go to the US, but roughly 70% of that is effectively non-tariffable because Americans need it (hydropower from Quebec, natural gas, oil). Only 5% of Canadian exports have been touched by Trump's latest tariffs, yet Carney is responding as though it's a major escalation, suggesting a calculated strategy to create political space for infrastructure investment.
The hosts discuss polling data showing 76% of Canadian support for ending trade negotiations without agreement with the US, and note that even in non-Carney-friendly regions like Manitoba, they heard no criticism of him before Davos. Trump administration officials (particularly Chrystia Freeland) leaked that Howard Lutnick demanded conditions including French language restrictions and American veto power over Canadian trade agreements—demands that would be unacceptable to Canada and suggest the US side was overplaying its hand.
Marco emphasizes the critical importance of border state economies. He cites data showing that Michigan's exports to Canada represent 40% of its total exports, with similarly high percentages in Ohio, Wisconsin, West Virginia, and other key electoral states. These are states where Republican control is tenuous (Michigan is 'beyond close,' Sherrod Brown's Senate race in Ohio looks competitive, Maine has an important Senate race, and Iowa is up there too). Imposing tariffs on Canada imperils Republican electoral prospects in these crucial regions.
Jacob pivots to discussing American-Canadian defense relations, arguing that Canada has zero legitimate defense needs. Russia cannot invade Canada (no roads through the Yukon and Northwest Territories), China won't invade Canada, and the only possible invader is the US itself—against which military spending would be useless. He argues that every cent Canada spends on defense is actually spent securing American interests, making Canadian defense spending a form of subsidy to the US. The proposed F-35 purchase (88 aircraft, $75 billion over the program's life, representing 3.5% of GDP) is described as completely inappropriate for Canada's actual needs; a Swedish Gripen would be far more suitable for Arctic operations.
The hosts reference that Canada has already reviewed the F-35 program and may pull out, with potential negotiations ongoing regarding Swedish Gripen purchases. Jacob notes that this military industrial complex linkage is unnecessary—Canada could theoretically develop its own fighter jets given Quebec's air defense industry and Bombardier's capabilities, though they might not be as good as off-the-shelf options.
Marco argues the historical context matters enormously. For 164 years, Canada was America's greatest geopolitical threat. The War of 1812 resulted in the White House burning. As recently as 1935, the US Defense Department war-gamed scenarios involving Canada. Only in 1940-1941, with WWII creating mutual existential threats, did the two countries become allies. This alliance was cemented with NORAD in 1958 and Five Eyes intelligence sharing. The critical point is that America achieved this secure border through friendship and mutual benefit, not through coercion.
The hosts discuss sentiment shifts in the US public, citing a YouGov poll showing Republicans' views of Canada as unfriendly/enemy have jumped from 5-10% historically to 38% in recent years, driven by Trump administration messaging. This represents a dangerous cognitive shift in the American electorate from viewing Canadians as quirky but friendly neighbors to seeing them as competitors with resources America might need.
Jacob articulates this as the beginning of imperialism—when powerful nations decide weaker neighbors have things they want and take them. He notes this represents a fundamental break from the post-WWII alliance system. Marco connects this to similar pressure the Trump administration is placing on Japan and South Korea, who are also repatriating capital and reconsidering their relationship with the US.
The discussion turns to Mark Carney's strategic use of the phrase 'maîtres chez nous' (masters of our own house), originally used during Quebec's Quiet Revolution against Anglophone domination. By adopting this language, Carney is unifying the country around sovereignty and infrastructure development—a unification that wouldn't happen without Trump's pressure. This is historically significant as the last major infrastructure push in Canada was Quebec's hydropower development in the 1970s.
Both hosts emphasize that Canada is a wealthy country with sophisticated pension funds (the 'Maple 8' pension and sovereign wealth funds collectively manage nearly $2 trillion in assets). Carney can redirect these toward domestic infrastructure investment, trimming US allocations without necessarily pulling out entirely. This provides the financial foundation for an extended economic confrontation.
The hosts discuss the possibility of Canada joining the EU or diversifying its geopolitical alignment, which Jacob initially frames as increasing in probability daily. Marco pushes back slightly, arguing that cultural and geographic proximity means Canada will ultimately reconcile with the US, but at a higher cost. The question becomes whether Canada will accept American terms two years hence, or whether irreversible infrastructure decisions make the relationship permanently altered.
Marco suggests that if Republicans lose control of the Senate and House due to tariff-related damage in border states, they're effectively handing power to Democrats for multiple election cycles. The tariff strategy appears counterproductive even from a purely domestic political perspective.
The discussion concludes with reflection on the Peace Arch monument between Washington state and British Columbia, which bears three inscriptions: on the Canadian side 'Brethren dwelling together in unity' (from Psalm 133), on the American side 'Children of a common mother,' and inside the arch 'May these gates never be closed.' The hosts frame Trump's tariffs and hostile rhetoric as effectively closing these symbolic gates and represent a fundamental break with the post-WWII architecture.
About this episode
<p>Rabies-infested beavers. Not an insult - a <em>fiscal </em>strategy. Canadians have stopped buying bourbon, started flying maple leaf flags in grocery stores, and ~ most importantly ~ handed Mark Carney the political cover to build infrastructure needed since the OG Trudeau. This week: why "size of the fight in the dog" beats a trade balance sheet, why 5% tariff coverage is somehow triggering a national identity crisis, and why America might be the Uncle Dennis of North America - took free money, overstayed the welcome, and is now shocked nobody wants him at Thanksgiving.</p><p>--</p><p><strong><u>Timestamps:</u></strong></p><p>(00:00) - Welcome and Housekeeping</p><p>(00:35) - Canada Episode Setup</p><p>(01:05) - Trade War Rupture</p><p>(02:25) - Why Tariffs Now</p><p>(04:18) - States at Risk</p><p>(05:38) - Carney Strikes Back</p><p>(06:40) - Risk Tolerance Matters</p><p>(08:29) - Canada Consumer Backlash</p><p>(10:20) - Carney Fiscal Space Plan</p><p>(12:20) - Infrastructure Reality Check</p><p>(15:26) - Quebec and Unity Messaging</p><p>(17:22) - Economic Pain and Polls</p><p>(20:49) - What Exports Really Are</p><p>(24:00) - China Veto Red Line</p><p>(27:01) - Maple 8 Pension Power</p><p>(29:12) - Canada Defense Mythbusting</p><p>(37:41) - Is America the Threat</p><p>(42:00) - Imperialism and History</p><p>(44:03) - WWII Alliance Origins</p><p>(44:42) - Peace Dividend Border</p><p>(46:03) - Risk Logic Defense Costs</p><p>(46:37) - Why Invasion Fails</p><p>(51:56) - Trade War Won't Work</p><p>(53:17) - Canada Already Concedes</p><p>(57:38) - Defense As Bargaining</p><p>(01:00:46) - Schoolyard Bully Moment</p><p>(01:06:13) - Canada EU Option</p><p>(01:10:44) - Peace Arch Warning</p><p>(01:12:13) - US Politics Fallout</p><p>(01:16:25) - Higher Price Later</p><p>(01:19:54) - Sports Metaphor Wrap</p><p>--</p><p><strong><u>Referenced in the Show:</u></strong></p><p></p><p>--</p><p><strong>Geopolitical Cousins</strong> is produced and edited by Audiographies LLC. More information at <a href="https://audiographies.com" rel="noopener noreferrer" target="_blank">audiographies.com</a></p><p>--</p><p><strong>Jacob Shapiro</strong> is a speaker, consultant, author, and researcher covering global politics and affairs, economics, markets, technology, history, and culture. He speaks to audiences of all sizes around the world, helps global multinationals make strategic decisions about political risks and opportunities, and works directly with investors to grow and protect their assets in today’s volatile global environment. His insights help audiences across industries like finance, agriculture, and energy make sense of the world.</p><p><strong>Jacob Shapiro Site:</strong> <a href="https://jacobshapiro.com" rel="noopener noreferrer" target="_blank">jacobshapiro.com</a></p><p><strong>Jacob Shapiro LinkedIn: </strong><a href="https://www.linkedin.com/in/jacob-l-s-a9337416" rel="noopener noreferrer" target="_blank">linkedin.com/in/jacob-l-s-a9337416</a></p><p><strong>Jacob Twitter:</strong> <a href="https://x.com/JacobShap" rel="noopener noreferrer" target="_blank">x.com/JacobShap</a></p><p><strong>Jacob Shapiro Substack: </strong><a href="https://jashap.substack.com/subscribe" rel="noopener noreferrer" target="_blank">jashap.substack.com/subscribe </a></p><p>--</p><p><strong>Marko Papic</strong> is a macro and geopolitical expert at BCA Research, a global investment research firm. He provides in-depth analysis that combines geopolitics and markets in a framework called GeoMacro. He is also the author of Geopolitical Alpha: An Investment Framework for Predicting the Future.</p><p><strong>Marko’s Book & Newsletter:</strong> <a href="https://www.geopoliticalalpha.com/marko-papic" rel="noopener noreferrer" target="_blank">www.geopoliticalalpha.com/marko-papic </a></p><p><strong>Marko’s Linkedin:</strong> <a href="https://www.linkedin.com/in/marko-papic-geopolitics/" rel="noopener noreferrer" target="_blank">https://www.linkedin.com/in/marko-papic-geopolitics/</a></p><p><strong>Marko’s Twitter:</strong> <a href="https://x.com/Geo_papic" rel="noopener noreferrer" target="_blank">https://x.com/Geo_papic</a></p><p><strong>Marko’s Macro & Geopolitical Research at BCA:</strong> <a href="https://www.bcaresearch.com/marketing/geomacro" rel="noopener noreferrer" target="_blank">https://www.bcaresearch.com/marketing/geomacro</a></p>
Key Insights
- Jacob argues that Canada has no legitimate defense threats—Russia cannot invade due to geography, China won't attempt invasion, and the only possible invader is the US itself, making Canadian defense spending effectively subsidize American security interests.
- The hosts contend that only 5% of Canadian exports have been touched by Trump's latest tariffs, yet Mark Carney is responding as if it's a major escalation, suggesting he's deliberately using American aggression to justify infrastructure spending that would otherwise face political opposition.
- Marco presents data showing Michigan's exports to Canada represent 40% of total state exports, with similar dependency in Ohio, Wisconsin, and West Virginia—all electorally crucial states where Trump's tariff policy threatens Republican control.
- Jacob argues that every discussion of 'why is Canada independent' among educated Americans, prompted by Trump's rhetoric, represents a dangerous cognitive shift from post-WWII allied sentiment toward imperialist thinking ('they have resources we want, we should take them').
- The hosts cite a YouGov poll showing Republican views of Canada as unfriendly/enemy jumped from 5-10% historically to 38% recently, demonstrating Trump's ability to reshape public sentiment toward a long-standing ally.
- Marco explains Canada has fiscal space (100% debt-to-GDP but only 1.7% deficit) allowing Mark Carney to use the trade war as political cover for $2+ trillion in infrastructure investment that unifies the country around sovereignty rather than divisive climate debates.
- Jacob contends that the US achieved its secure Canadian border through friendship and mutual benefit (NORAD, Five Eyes, USMCA), not through coercion, and that Trump's approach reverses 80+ years of successful alliance-building.
- The hosts argue that Canadian consumers are organically demanding Canadian products without government mandate ('rabies-infested beavers'), demonstrating genuine public pain tolerance for trade war consequences that exceeds American consumer willingness to accept tariff-driven price increases.
- Marco points out that approximately 70% of Canadian exports to the US are effectively non-tariffable because they're essential inputs (Quebec hydropower, natural gas, oil) that Americans must purchase regardless of tariff rates.
- Jacob frames Trump's tariff strategy as potentially triggering a schoolyard collective action dynamic where allied nations (South Korea, Japan, Saudi Arabia, EU countries) coordinate a 'fuck you pay me' response if America continues demanding economic concessions.
- The hosts discuss that Mark Carney has positioned the F-35 purchase program under review, potentially switching to Swedish Gripen fighters designed for Arctic operations, representing a symbolic shift away from US military-industrial integration.
- Marco argues that if Republicans lose Senate and House control due to tariff-related electoral losses in border states, they effectively hand power to Democrats for multiple election cycles, making the domestic political cost of the Canada trade war potentially catastrophic.
Topics
Transcript
Hello listeners, welcome back to Geopolitical Cousins. Sorry for the brief delay in getting content out. Mostly my fault because I had some stuff that I had to deal with last week, which I will not bore you with. We're back on the train. We devoted the whole episode to Canada because it's that important. You can email me at jacob at jacobspiro.com. Any questions, comments, concerns? I think that's the housekeeping we should be back on on track next week for our cadence uh okay see you out there we're back at it um and it's not like anything's going on in the world is there cousin oh no it's it's nice and and calm in truth, until the…
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