Blain’s Morning Porridge August 1^st 2025 – Blame Canada! That’s a problem for the UK.

“It seems everything’s gone wrong since Canada came along..”

Donald Trump has made an example out of Canada: a 35% tariff rate will show these damn Canadians! Probably a mistake. He reminded the world how capricious he is. It will remind markets that Trump and certainty don’t go hand in hand. It leaves the UK in an embarrassing spot.

Trump’s decision to impose 35% overnight tariffs on Canadian goods imported into the USA is… problematical. It opens a whole new can of geopolitical worms. It could reopen the rolling uncertainty crisis that has plagued markets since January 20^th.

The fact the Canadian negotiating team are sitting by their phones in a Washington hotel hints it’s not over yet. There are signs Trump has manufactured a bit of drama – a deliberate Trade Spat with Canada is part of his game. Trump is a bully. He wants to strut his power, flexing America’s muscles to demonstrate to the Canadian Premier Mark Carney who the boss is. He’ll let the Canadian’s stew for a few days, and then offer to row back the number to 15 or 20%.. He’ll make noises about how lucky they were. If there is any hint of retaliation – if the Canadians dare to impose tariffs back – they will be told how foolish they were.

However, the consequences of 35% tariff rate on Canada and America as a reliable business partner will be felt acutely elsewhere, particularly here in the UK. King Charles is head of state of Canada. Given the King’s snap decision to attend the Canadian Opening of Parliament earlier this year, ostentatiously wearing all his Canadian decorations, it’s clear where his sympathies lie. While King Charles can’t be seen to be political, the unpopular Labour government should be reading the mood in the UK. Friends and Allies are valued. The Canadians are popular – certainly more popular and closer in thought and deed to Brits than MAGA republicans.

It’s a tough call for UK Premier Sir Keir Starmer. The UK’s 10% tariffs were something of a win for the UK during a period when there were few political wins to celebrate. However, Trump has used tariffs to divide the UK from Europe (which accepted a 15% rate last week). After Trump’s extraordinary behaviour in Scotland last week, lording it over Starmer, it does rather feel like the UK is Trump’s new puppy as we got the lower number for being a good dog.

History teaches us many things: appeasement never works, and Trump falls out with everyone – given time.

I suspect UK Premier Starmer will try to dodge the issue – that’s his default mode. Cancelling the state visit could be a chance to make a decisive but probably grand, futile gesture. (Don’t expect Nigel Farage’s Reform Party to criticise Trump – they are beholden to the hope of Maga Yankee money to fund their “British” brand of populism.)

Just how much pressure there will be to cancel Trump’s State Visit to the UK in September is debatable – it would set a whole series of ructions in motion. Trump will be mightily offended. He will lash out. There will be consequences. Trump being Trump the likelihood of him taking strong action against Russia will diminish. Putin will be delighted. Sometimes doing nothing is the right thing to do.

If the visit was cancelled, maybe the UK gets will be tipped with a tariff hike to 15% to match Europe, or even put us in the same bucket as Canada… but it’s difficult to see how the King of Canada can meet with Trump when America has just imposed Economic War on his nation and a member of The British Commonwealth. I will be proudly wearing a maple leaf in my lapel at a US reception in September.

Britain’s predicament will be closely watched by the markets. They were thinking the Tariff saga was effectively over – the fact most countries accepted 15% tariffs as better than all out trade war as a good thing, ushering in a period of less disruptive Trump and introducing a period of much needed certainty back into markets.

It’s unclear what went wrong in the trade negotiations between Trump and Canada, but it was clear weeks ago they would not be offered the chance of a take-it-or-leave it 15% tariff crumble which the Europeans, Japanese and others accepted.

The New York Times suggests that Trump wants to renew pressure on the Maple Nation to become the 51^st State. There are hints Trump wants ructions with Canada to distract from the mounting pressure over his relationship with Jeffrey Epstein – which is turning increasingly bizarre as Trump now claims he fell out the sex-predator because he “stole” his staff from Mar-al-Lago… the same girl linked to the Prince Andrew case, and who recently committed suicide in Oz. Highly strange and curious. Gosh… what twisted secrets there are…

Canada is the USA’s largest trading partner. Under the last Trump administration, the USA, Canada and Mexico agreed a zero-tariff zone. Trump is now citing the 19 kgs of Fentanyl seized by US custom agents this year on the northern border as a justification for the harsh duty rate. 10 tonnes of the stuff is stopped on the Mexico border every day, but they are getting a 90 day negotiation extension.

I suspect Trump found Canadian President Carney a little intimidating – a smart and polished banker, economist and now politician.

The bottom line is Trump has chosen his enemy. Canada will be blamed from every failure of policy, the pressure upped on them to cave, and Carney will be insulted as a loser and called Governor. “Blame Canada” was the jaunty song from the South Park film many years ago – it could have been written for a President seeking to distract attention from domestic woes.

Choosing an enemy is populism 101. Slava Canada.

The porridge will be intermittent over the next three weeks. I will be sailing down the South Coast of England… and truing not to think about anything except the wind and waves…

Have a great weekend…

Bill Blain

Author, The Morning Porridge

CEO Windshift Capital

Partner Shard Capital