How are you coping with President Trump?
Depending on where you get your news, the transition to the Trump administration will be portrayed as great or horrific. Regardless of any bias, there is one constant. Things are moving at a breakneck speed. This is apparently going to continue. The Trump team is dismantling and remodelling a system they believe is wasteful, inefficient, and has the wrong priorities. Others may disagree, but whoever has control sets the policy agenda.
Some things being done seem quite sensible. Trying to eliminate waste and nonsense is one. Trump supporters have pulled out old videos of Presidents Clinton and Obama giving speeches about how they’d do the same. However, President Trump does say some ridiculous things and it’s always hard to know when he’s being serious, trying to gain leverage, or just trying to get attention.
An example of this recently, Trump mentioned that America may have less debt than first thought, referring to US treasuries. It was a very reckless comment, casting doubt over what is the safest asset on the planet. An asset issued by his own government! Normally, you’d expect some reaction. However, financial markets didn’t blink. Suggesting this time around financial markets are very likely to shrug off random Trump comments and will wait for concrete action.
Tariffs
Tariffs have been a prominent issue, and did get a market reaction. Mexico, China, and Canada have all been either threatened with tariffs, or had them slapped on. As tariffs have an influence on financial markets, we thought this was worth a brief look. The reaction to the tariffs on China, Mexico, and Canada tanked the Australian dollar. Global equity markets fell. The ASX fell a couple of percent in a day. Thankfully though, markets have shrugged them off.
China and Mexico aren’t new issues for The Donald. President Trump’s long had a bee in has bonnet about China. While building a border wall with Mexico was a major focus during his first presidential run. It’s the Canadian one that has people confused. It raises the question why is Trump carrying on about drugs flooding over the Canadian border?
On the face of it, Canada is a stable, first world country bordered with the US. Given the country to the south of the USA, Mexico has long been the home of multiple trans-national drug cartels, and there’s been ongoing scenes of people flooding across that border, why would Canada be lumped in with Mexico?
Evidence that Canada has nothing to answer for has come from this chart showing drug seizures at the Canadian and Mexican border. Pretty convincing? Case closed?
Certainly, if you look at it in the most obvious way. That is, drug seizures at the Canadian border are low, therefore drugs crossing the Canadian border must also be low. But different levels of trust are afforded to Canada and Mexico.
US $2.7 billion in goods cross the US/Canadian border daily. On average, there’s over 15,000 daily truck crossings across the border. Then there’s port and rail. It’s not feasible to stop and check every truck and every container that crosses the border. Back in 2021 US Customs & Border Patrol said they only scanned 1% of private vehicles and 15% of commercial cargo at land ports, most of that at the US/Mexican border.
There is a reason that border agencies participate in the production of border security television shows. Impressions are important. It’s to reinforce to the public that they’re on the job and diligently inspecting many containers or packages, pulling aside every suspicious person so we’re safe. They’re likely doing a good job with the resources they have, but basic logic says they can’t check everything. As the Washington Post noted in 2022 regarding the issue of drugs going across the US/Mexican border, “drug traffickers play the percentages”. The cartels know some drugs will be intercepted, but the majority will slip through.
Criminals Exploit Gaps
There is more trust afforded to Canada than Mexico in both these relationships. With some irony, it’s been suggested that trans-national drug cartels might have a good understanding things are lax in Canada, and there is a lower level of scrutiny at the US/Canadian border. And what of the drug that President Trump has been consistently mentioning? Fentanyl.
One only needs to google “fentanyl lab busts Canada” to see there is large scale fentanyl production in Canada. Before President Trump’s focus on fentanyl, various media outlets even wrote balanced stories, acknowledging precursor chemicals were being shipped into Canada, Canadian port security was lax, fentanyl labs on Canadian soil were a serious concern, and there was the potential for export.
In 2022, Canadian border authorities intercepted a suspicious shipment from China declared as “toys.” It had 1,133 kilograms of a chemical precursor used to produce fentanyl, enough to make a billion doses of the opioid.
criminal organizations in Canada produce fentanyl both for domestic consumption and to sell abroad. Key markets for Canadian fentanyl include the United States, Australia, New Zealand and Japan, law enforcement officials say.
Officials from Treasury’s Financial Crimes Enforcement Network and Office of Intelligence and Analysis will also work with counterparts in Mexico and Canada to stop the flow of fentanyl across the northern and southern borders.
…the spread of clandestine fentanyl labs in Canada has the potential to undermine U.S. enforcement efforts and worsen the opioid epidemic in both nations. The Canadian labs are a curveball for U.S. authorities whose efforts to combat fentanyl are focused on the southern border with Mexico.
Then, late last year, Canadian police found the largest, most sophisticated drug lab in Canada’s history. The Royal Canadian Mounted Police said they believe organized crime ran the operation where there was mass-production and distribution of fentanyl and methamphetamine across Canada and internationally.
After President Trump slapped the tariffs on Canada, linking it to fentanyl coming across the border, the media took a different position. They were quite keen to fact check him, and point to those border seizure stats as evidence there were no issues with Canadian fentanyl crossing the border.
Canadians are furious about this. They see Trump’s tariff threat as an attack from a hostile neighbour. At recent sporting events they’ve booed the US national anthem, but a report released in December 2024 by their own Criminal Intelligence Service highlighted three criminal organisations operating out of Western Canada that were a security threat. All were involved in fentanyl and had networks extending across North America.
While Canadian politicians are happily exploiting the Canada vs. US conflict for their own ends, they’re also doing exactly what President Trump is asking. The latest move was following the US to designate several drug cartels and crime groups as terrorist organisations.
While this isn’t quite a financial and investment story, in some ways it is. Tariffs influence financial markets, so it’s worth knowing what the thinking might be behind them. While statistics can tell many stories, both what they clearly show, and what they may not show.
It will be hard to make sense of the next four years. President Trump can be an unreliable figure, but he also prompts unreliable behaviour from the media and those who oppose him. It’s a lose/lose for truth.
Thankfully, financial market data is reliable and unimpeachable!
This represents general information only. Before making any financial or investment decisions, we recommend you consult a financial planner to take into account your personal investment objectives, financial situation and individual needs.
