Canada Scraps China FTA After Trump Tariff Threat

Canada is holding its ground on a trade diversification strategy, refusing to alter its course despite escalating pressure from Washington and a direct tariff threat from U.S. President Donald Trump. Foreign Minister Anita Anand confirmed the government will continue its push to reduce economic reliance on the United States, signaling that external pressure will not dictate its trade policy.

The core message from Ottawa is clear: its plan to seek new global partners remains firmly in place.

Trump Vows 100% Tariffs Over Canada-China EV Pact

The diplomatic friction intensified after President Donald Trump, the 47th U.S. president, issued a sharp warning on social media. Targeting Prime Minister Mark Carney, Trump threatened to impose a 100% tariff on all Canadian goods if the country becomes a "drop off port" for Chinese exports destined for the American market.

This threat was a direct response to a new agreement between Canada and China. Under the deal, Canada agreed to lower its tariffs on a limited number of Chinese electric vehicles in exchange for China easing its own restrictions on Canadian food exports, including canola and beef.

Ottawa's Strategy: Diversify Trade, Reduce US Reliance

In response, Foreign Minister Anand pushed back, clarifying that Canada is not negotiating a comprehensive free trade agreement with Beijing. She framed the government's actions as a matter of economic necessity, not ideology.

The government's stated goal is to double its non-U.S. exports within a decade. "We need to protect and empower the Canadian economy, and trade diversification is fundamental to that," Anand stated. "That is why we went to China, that's why we will be going to India, and that is why we won't put all our eggs in one basket."

This strategy is already in motion. Energy Minister Tim Hodgson is traveling to Goa, India, for an energy conference, where he is scheduled to meet with officials from Indian industry and Prime Minister Narendra Modi's government. Discussions are expected to focus on cooperation in critical minerals, uranium, and liquefied natural gas—resources Canada possesses in large quantities. Prime Minister Carney also plans to visit India soon, with a subsequent trip to Australia scheduled for March.

The Deep Economic Ties Behind the Dispute

Despite the recent tension, Anand emphasized that the relationship with Washington remains strong and is expected to continue that way. The economic partnership between the two nations is massive. In the first ten months of last year, the U.S. exported approximately $280 billion in goods to Canada, more than to any other country. During the same period, U.S. imports from Canada totaled $322 billion, according to Commerce Department data.

The automotive sector is the backbone of this relationship, with manufacturing supply chains deeply integrated across the border. This integration is precisely why Canada's EV deal with China, which allows just 49,000 vehicles per year, struck a nerve in Washington.

"We have a highly integrated market with Canada," U.S. Treasury Secretary Scott Bessent explained on ABC's This Week. "The goods can cross the border during the manufacturing process six times. And we can't let Canada become an opening that the Chinese pour their cheap goods into the US."

Economists Weigh the Risk of a Full-Blown Trade War

Analysts agree that the economic risk from a major trade rupture is not symmetrical. Canada's smaller, less diversified economy would be hit much harder.

"If there were 100% tariffs on Canada, it would be a disaster," said Randall Bartlett, deputy chief economist at Desjardins Group. "I guess my question would be, what's the likelihood of that happening?"

Bartlett noted that President Trump frequently issues tariff threats only to reverse his position later, suggesting the probability of full-scale tariffs is low.

Meanwhile, Trump continued his social media commentary on Sunday, posting on Truth Social: "China is successfully and completely taking over the once Great Country of Canada. So sad to see it happen. I only hope they leave Ice Hockey alone!"

California, once nicknamed the "Golden State" for its 19th-century Gold Rush, long symbolized the American Dream—a place of ambition and prosperity. Today, however, the state is the center of a political experiment that increasingly mirrors European centralist ideology, with significant economic and social consequences.

The contrast was on full display at this year's World Economic Forum in Davos. While U.S. President Donald Trump used his speech to declare EU-style, centrally planned climate policies a failure, California Governor Gavin Newsom offered a starkly different performance.

The day after Trump’s address, Newsom, a potential Democratic presidential candidate, presented his counter-vision. In a move widely seen as bizarre, he accused Western leaders of a "pathetic" and cowardly response to the Trump administration. As a political prop, he carried bright red "Trump Signature Knee Pads," suggesting he should have brought a pair for every world leader present. This conduct raised questions about his seriousness as a statesman, especially as his own policies back home are creating deep economic and social challenges.

California's European-Style Climate Agenda

If California were a nation, it would be the world's fourth-largest economy. Governor Newsom, however, often seems to prioritize the role of a climate activist over that of a pragmatic governor.

He has consistently attributed events like the 2024 wildfire disaster to climate change, using the immediate shock of catastrophe to push his policy agenda. Similarly, state-induced water shortages are framed as the result of extreme droughts caused by CO₂ emissions. This narrative loop reinterprets every major weather event as a climate catastrophe, sidelining normal conditions in a media-driven panic.

Newsom’s approach extends beyond environmental policy. Under his leadership, California has become a hub for progressive social policies, often prioritizing gender politics and state control over individual autonomy. This shift away from the traditional American spirit of a minimal state mirrors the bureaucratic model of the European Union.

Since Newsom took office in 2019, California has become the U.S. model for implementing a radical Green Deal. Regulatory codes for industry, agriculture, and transportation are structured much like Brussels' playbook, with a goal of eliminating CO₂ emissions by 2045.

The Soaring Costs of a Green Transformation

This green transformation, funded by debt and subsidies, has come at a staggering cost. Over the last three years, California's budget deficit has reached approximately $110 billion. The state's total debt, including unfunded social obligations, now stands at an estimated $1.8 trillion.

Newsom's tenure has also seen the rise of a state-funded, privately managed system of homelessness care. The number of people managed by this social complex has surged tenfold to 180,000. Critics argue this system functions similarly to a network of immigrant-run daycares in Minnesota that created a tax-extraction model. In California, poverty is managed and monetized, with major beneficiaries often connected to the Democratic Party, creating a political donation machine to finance future campaigns.

Despite these fiscal realities, Newsom continues to position himself as a savior of the American Dream, a message he delivered on the friendly turf of the WEF, where belief in a centrally planned Net-Zero economy remains strong.

Tax Hikes and the Billionaire Exodus

To delay an economic collapse, California is pursuing aggressive fiscal measures. Alongside heavy burdens on the middle class and businesses, a so-called "billionaire tax" is close to being enacted. This populist tool mirrors policies seen in Europe, where wealth taxes are used to assign blame for economic decay while distracting from its root causes.

Newsom’s billionaire tax is seen by many as a Trojan horse. Initially proposed as a one-time plunder of the private wealth of roughly 200 California billionaires, it is expected to become a recurring levy. The proposal calls for a five percent tax on total net worth, payable at once or over five years.

This policy ignores the fact that much of this capital is invested in companies that create jobs and fund the state's future. Newsom needs liquidity to fund the green transformation, especially as the Trump administration's deregulation of the energy sector is encouraging businesses to leave California for "Red States" that value market freedom.

The state's billionaires have responded decisively:

• Larry Page, former CEO of Alphabet/Google, is spinning off parts of his companies to Delaware.

• Elon Musk relocated Tesla long ago.

• Peter Thiel, co-founder of Palantir, is moving capital to Miami, Florida.

• David Sachs of Craft Ventures has also left California for Austin, Texas.

This industrial exodus is a direct boost for business locations that protect private property, a dynamic nearly identical to the one currently unfolding in Germany under similar policies.

A Familiar Playbook for a New Socialism

Like his European counterparts, Newsom uses media skirmishes with political opponents like Donald Trump to distract from economic decline, capital flight, and criticism of his misplaced priorities.

The proposed solutions in both California and the EU follow a similar pattern of controlled "green socialism." This includes social scoring models based on carbon footprints, expansive censorship on social media, and digital central bank currencies that would grant the state total control over the private sector. The ultimate goal is to forcibly reshape society to fit a political ideology, regardless of the cost, using "woke" rhetoric to soften its brutal reality.

As countries worldwide pour investment into expanding their liquid natural gas (LNG) production and export capacity, the market is bracing for a potential oversupply. With a record-breaking 2025 in the books and even more gas expected to come online in 2026, a critical question emerges: how much LNG is truly needed to bridge the gap during the global transition to renewable energy?

The US Dominates the Global LNG Market

Last year marked a historic peak for the LNG trade, with export volumes surpassing multiple industry forecasts. This expansion has been overwhelmingly led by the United States, which shipped over 100 million metric tonnes of LNG in 2025 as several new plants became operational.

According to data analysis firm LSEG, the U.S. exported an estimated 111 million metric tonnes (mmt) in 2025. This figure represents a 23 mmt increase from the previous year and towers over the 20 mmt exported by Qatar, the world's second-largest supplier.

U.S. shipments accounted for roughly 25% of all global LNG exports in 2025. A key contributor was the new Plaquemines facility, operated by Venture Global, which shipped a reported 16.4 mmt after starting operations in December 2024. In December alone, the U.S. set a monthly export record of 11.5 mmt.

Jason Feer, head of business intelligence at shipping firm Poten and Partners, highlighted the rapid growth. "It is remarkable that in nine years the U.S. has gone from zero LNG exports to over 100 mmt," he stated, validating the American approach of selling free-on-board and the reliability of its supplies.

Europe's Shift and the Risk of Oversupply

While the U.S. ramped up its LNG capacity, initial fears of a market glut were offset by geopolitical events. Following sanctions on Russia after its 2022 invasion of Ukraine, many European nations urgently sought alternative gas suppliers. The United States was perfectly positioned to fill this void. In December alone, Europe purchased 9 mmt of LNG from the U.S. as it continued to reduce its reliance on Russian imports.

However, this has created a new set of concerns. One is Europe's growing dependence on the United States, which could supply up to 80% of the region's LNG imports by 2030. At the same time, as Europe accelerates its own renewable energy development, fears of an LNG glut in 2026 and beyond are resurfacing.

Supply Is Set to Surge, Squeezing Profit Margins

The wave of new supply is far from over. The Plaquemines facility is expected to reach full production capacity this year. Meanwhile, Cheniere's smaller modular plants are set to hit their capacity, with potential for further expansion. The Golden Pass LNG project, a venture between QatarEnergy and ExxonMobil, is also slated to begin production this year. Combined, these projects could add another 20 mmt to annual U.S. LNG production.

Looking further ahead, the International Energy Agency (IEA) projects that new LNG export capacity will increase by about 300 billion cubic meters per year between 2025 and 2030—a staggering 50% rise. The U.S. is expected to account for 45% of this growth.

This flood of supply is expected to drive down profit margins. While this is welcome news for consumers facing high energy bills, it poses a challenge for producers. Saul Kavonic, head of energy research at MST Marquee, noted that while "U.S. LNG has made outstanding margins since late 2021," these have now returned to more normal levels.

If margins fall further, producers may be forced to scale back production to support prices. Conversely, lower LNG prices could make the fuel more attractive compared to more expensive options like coal and oil, potentially boosting demand.

The Long-Term Outlook for LNG Demand

The exact timing of when LNG supply will definitively outpace global demand remains uncertain. However, a consensus among energy experts is that the world's appetite for LNG will continue to grow until 2050.

This prediction marks a reversal from a previous IEA forecast, which suggested that demand for all fossil fuels would peak much sooner. The updated outlook reflects two key realities:

• Several countries are failing to meet their renewable energy capacity goals.

• Power demand is rising sharply, driven by the tech sector's plans for massive new data centers to fuel advancements in artificial intelligence.

In 2026, the continued expansion of global LNG production is set to exert downward pressure on prices, potentially revealing the first signs of a supply glut. At the same time, global LNG demand will likely keep rising, buoyed by the tech sector's energy needs, until renewable sources can fully close the gap.

Foreign exchange traders are bracing for a volatile week after Japan’s government issued a clear signal that it may intervene to halt the yen's recent slide. Officials warned that speculative currency moves have gone too far, putting the market on notice for direct action.

Prime Minister Takaichi Sanae stated that the government is prepared to act if trading becomes "speculative and abnormal." This comment immediately shifted market sentiment after weeks of one-sided bets against the Japanese currency.

Tensions escalated late Friday when reports surfaced that the Federal Reserve Bank of New York had contacted financial institutions to inquire about the yen exchange rate. That move alone was enough to rattle traders. Earlier the same day, Japan’s top currency official had pointedly refused to confirm whether Tokyo had conducted its own rate check, deepening the uncertainty.

Fed 'Rate Checks' Trigger Sharp Yen Rebound

Talk of intervention intensified as news of the New York Fed’s calls spread. Michael Brown at Pepperstone noted that rate checks are often the final warning before authorities step into the market. He added that the Takaichi administration has shown less tolerance for speculative currency moves than previous governments.

This message forced a rapid reassessment among traders who had accumulated massive short positions on the yen, which had grown to their largest level in over a decade. The currency reacted violently, reversing a decline and surging by as much as 1.75% to 155.63 per dollar. The move marked the yen's biggest single-day gain since August, catching many short sellers off guard.

Tokyo's Firm Line on 'Abnormal' Market Moves

Prime Minister Takaichi reiterated her stance during a televised debate on Sunday. While acknowledging that exchange rates are determined by the market, she emphasized that "all necessary steps would be taken to deal with speculative and highly abnormal moves."

Although she did not specify a market, officials have recently highlighted risks associated with both the yen and Japanese government bond yields. The bond market had already flashed warning signs last week, with yields on the longest-dated bonds jumping to record highs before retreating. This convergence of currency volatility and rising debt costs has increased pressure on policymakers.

Nick Twidale of AT Global Markets advised caution ahead of Monday's trading open, suggesting the yen could trade near the 155-per-dollar level, a new focal point after last week's sharp reversal.

Is Coordinated US-Japan Intervention on the Table?

The yen’s recovery began shortly after Bank of Japan Governor Kazuo Ueda's press conference on Friday. It gained momentum during the U.S. trading session as Wall Street interpreted the Fed’s rate checks as a precursor to a possible joint intervention. Some traders even began pricing in the possibility of U.S. participation.

Twidale noted that while the underlying desire to short the yen remains, traders will proceed with caution given the official warnings. He stressed that confirmed U.S. involvement would have significant ripple effects across global markets.

This has led to comparisons with the 1985 Plaza Accord, where major economies coordinated to weaken the U.S. dollar. According to New York Fed data, the U.S. has only intervened in currency markets three times since 1996. The most recent instance was in 2011, when G7 nations jointly sold the yen to stabilize markets following Japan's earthquake.

Anthony Doyle at Pinnacle Investment Management argued that Japan would struggle to support the yen alone without causing domestic or global fallout, making coordination a more viable strategy. He said that inquiries from the U.S. Treasury typically indicate the situation has escalated beyond routine market fluctuations.

Politics and Key Price Levels to Watch

Japan has a recent history of direct intervention, having spent nearly $100 billion buying yen in 2024. Those four interventions all occurred near the 160 yen-per-dollar level, establishing it as an unofficial line in the sand.

Homin Lee at Lombard Odier said that authorities must take real action to anchor the USD/JPY exchange rate, noting that a joint move by Japan and the U.S. would be a powerful signal of direct coordination.

Political factors are also at play. Lee pointed out that 160 is a psychologically important level ahead of Japan's snap lower-house election scheduled for February 8. Prime Minister Takaichi's campaign pledge to cut food taxes has already unsettled the debt market, pushing the 40-year bond yield above 4% for the first time since its introduction in 2007.

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