The future of Canada’s trade relationship with the United States was finally revealed over the past seven days in a trifecta of trade “deals” announced by President Trump. First came a new “understanding” with Indonesia, followed by a similar “agreement” with Japan. The president’s busy week culminated with European Commissioner Ursula von der Leyen, and her 27-nation trading bloc, being brought to heel in the “DJT” ballroom of the Turnberry golf resort. The details were different, but the core of each agreement was identical: a new baseline tariff of 15 to 20 percent on all goods entering the U.S. along with punishing additional duties on specific economic sectors.
For those in Ottawa who still cling to the hope of a special treatment for Canada, these deals should be a wake-up call. They are the clearest signal yet that Donald Trump’s tariff agenda is not a series of one-off negotiations. It is the rollout of a new, non-negotiable revenue plan for the U.S. government. The goal, simply put, is a flat tax of 15 to 20 percent on all imports, and its primary purpose is not to protect American industry, but bail out the U.S. from its worsening fiscal crisis.
To understand why, you have to look at the recent numbers coming out of the non-partisan U.S. Congressional Budget Office. Before Trump’s latest tax cuts and new federal spending, the U.S. debt was projected to surge from 100 percent of GDP in 2025 to an unprecedented 118 percent by 2035. This isn’t a cyclical problem; it’s a structural crisis. An aging population and, most alarmingly, vast unfunded liabilities in Medicare and Social Security are creating a vicious feedback loop where the U.S. must borrow more just to pay the interest on what it has already borrowed. Case in point: In seven short years, Social Security is projected to only be able to provide three-quarters of scheduled benefits. By then, interest payments on the U.S. debt are projected to hit 6 percent of GDP, consuming nearly a quarter of all federal revenues.
Now, enter Trump’s signature economic proposal: a legislative package of massive tax cuts making the 2017 reductions permanent, adding a host of new ones, and adding to government spending, the so-called One Big Beautiful Bill Act. Its fiscal consequences cannot be understated. The bill could add $4.1 trillion to the deficit over the next decade, including interest. The CBO’s analysis confirms that at these debt levels, the tax cuts don’t pay for themselves; the drag from higher interest rates required to finance the borrowing overwhelms any stimulus from the cuts themselves. Under this scenario, the U.S. national debt wouldn’t just hit 118 percent of GDP by 2035; it would rocket past it to 133 percent if interest rates remain at current levels.
