I never used to listen to very many podcasts. But lately I've started doing it while heading to/from meetings, either in the car or on the train. This past week I listened to a Bankless podcast talking about crypto and AI, and one of the arguments that was made was that it's probably a safe bet to assume that we're going to need dramatically more compute and electricity in the future.
This seems obvious enough. If you recall, there's no such thing as a wealthy, low-energy nation. If you're a wealthy country, you consume a lot of energy. And that's why Build Canada recently argued that we need a kind of energy revolution. By 2050, it's likely Canada will have 2-3x the electricity demand that we have today. So today I thought I would share a few related charts.
Here's electricity production by source across the world. Coal dominates.
Looking at renewables more closely, we again see that wind and solar are making a run for it. And if you consider that solar is one of the fastest growing energy sources, it's not inconceivable that it will start to become a more dominant source in the near term. In the US, solar PV projects make up the largest share of new planned generation capacity.
But the US is not winning this race today. Right now it's China. (Chart below sourced from here.) They have the largest cumulative solar capacity, followed by the EU, and then the US. That said, coal still forms a dominant part of China's energy mix, and the country continues to construct coal-fired power plants to meet its short-term energy needs.
It's unfortunate that Canada is not on this list. That needs to change.
Cover photo by Benjamin Jopen on Unsplash
We all know what happened this week:
Donald Trump’s decision on April 2 2025 to enact sweeping “reciprocal” tariffs on US trade partners will go down as one of the greatest acts of self-harm in American economic history. They will wreak untold damage on households, businesses and financial markets across the world, upending a global economic order that America benefited from and helped to create.
We also know it was based on highly questionable math:
His “reciprocal” levies amount to a back-of-the-envelope calculation. They take trade partners’ US trade deficit in goods as a share of imports from that country, and then divide it by two. This is not a calibrated attempt to equalise tariff and non-tariff barriers facing US exporters, perceived or otherwise. It is, however, a reckless repudiation of all trade agreements the US has signed, as well as a deeply flawed plan to attract foreign manufacturing investment.
So what happens next?
Assuming this behavior persists, the US will continue to isolate itself from global trade, and the rest of the world will pivot and quickly move to trade more freely among themselves. This maybe isn't as problematic as some might think. Today, the US represents about 13.5% of global goods imports, which is down from almost 20% in 2000. And the biggest drivers of global growth are now China and the Euro area.
To that end, here's a fascinating study from IMD Business School that looked at how long it will take for various trading partners to completely wean themselves off of the US. And to do this, they looked at non-US import growth for the 10-year period from 2012 to 2022, and then extrapolated. This is what they learned:
What this chart says is that by the end of this year, some 70 US trading partners could, in theory, replace the loss of the US export market so long as non-US growth continues as it did in the past. And by 2039, the number jumps to over 140 trading parties. 2039 is obviously a long ways away, but I think it's noteworthy that year one in this specific chart already starts with 70.
Importantly, Canada does not fall within this initial bucket. Based on the study, we are in the danger zone. That is, exports to the US make up more than 10% of our GDP and it will take more than 10 years for full export recovery. But again, this is based on historic non-US growth. So all this means is that the status quo cannot continue; we need to dramatically increase this growth rate and do it as quickly as possible.
I hope our leaders recognize the urgency of this, because nothing can be taken for granted when it comes to the US right now. We need to be hyper focused on full trade recovery as soon as possible. Canada needs to be open for business to the world.
Trumps' tariffs are supposed to take effect today. Here's a quote from the Globe and Mail, published yesterday:
“Very importantly, tomorrow, tariffs, 25 per cent on Canada and 25 per cent on Mexico, and that will start. So, they’re gonna have to have a tariff,” Mr. Trump said.
But it's still not clear that he understands how these tariffs will work. Either that, or he's lying and trying to trick people. Because he continues to deny that tariffs represent a tax paid by US importers (and ultimately US consumers) on things coming from Canada and Mexico.
Here's another quote:
"It’s not going to be a cost to you [Americans], it’s going to be a cost to another country."
Yeah, that's not how they work:
When the US puts a tariff on an imported good, the cost of the tariff usually comes directly out of the bank account of an American buyer.
“It’s fair to call a tariff a tax because that’s exactly what it is,” said Erica York, a senior economist at the right-leaning Tax Foundation.
“There’s no way around it. It is a tax on people who buy things from foreign businesses,” she added.
In any event, in the real world, tariffs are bad. They're bad for everyone. So much so, that Warren Buffett recently described them in this way:
“Tariffs are actually, we’ve had a lot of experience with them. They’re an act of war, to some degree,” said Buffett, whose conglomerate Berkshire Hathaway has large businesses in insurance, railroads, manufacturing, energy and retail. He made the remarks in an interview with CBS News’ Norah O’Donnell for a new documentary on the late publisher of The Washington Post, Katharine Graham. “Over time, they are a tax on goods. I mean, the tooth fairy doesn’t pay ’em!” Buffett said with a laugh. “And then what? You always have to ask that question in economics. You always say, ‘And then what?’”
So let's look at "and then what" when it comes to the automotive sector.
The auto sector is the largest component of trade across Canada, the US, and Mexico. It makes up 22% of all the goods and services the flow across our borders. And in 2023, we produced some 16 million cars together, which generally include parts and materials from all three countries. We're extremely integrated. The WSJ recently broke this down, over here, and if you look at something like pistons, you'll see that this component alone typically crosses a border about 6 times:
What this means is that if you start forcing US importers to pay a tariff on Canadian and Mexican goods, and then Canada and Mexico retaliate with the same (because we/they have to), the entire model breaks down, unless of course consumers are comfortable paying a lot more. Of course, most of you already knew this. Last year, $1.6 trillion worth of goods moved back and forth across the US, Canada, and Mexico. It would be better for all three of us if this number went up, and not down, this year.
Cover photo by CHUTTERSNAP on Unsplash