Prof G Markets - Why Tariffs Could Crush Canada’s Economy — ft. Mike Moffatt

Episode Date: February 27, 2025

Ed and Scott open the show by discussing Apple’s new investment in “American innovation,” Howard Lutnik’s decision to put his sons in charge of Cantor Fitzgerald, and a new Moody’s Analytics report on U.S. consumer spending. Then Mike Moffatt, Founding Director of the University of Ottawa's "Missing Middle Initiative” and former economic adviser to Liberal Leader Justin Trudeau, joins the show to unpack the biggest challenges facing Canada’s economy. He offers insight into the country’s political landscape, breaks down its housing crisis and explains why small businesses struggle to thrive in Canada. Finally, Mike explains how Canadians perceive the Trump administration’s rhetoric and what tariffs could mean for Canada’s economic future.  Subscribe to the Prof G Markets newsletter  Order "The Algebra of Wealth," out now Subscribe to No Mercy / No Malice Follow the podcast across socials @profgpod: Instagram Threads X Reddit Follow Scott on Instagram Follow Ed on Instagram and X Learn more about your ad choices. Visit podcastchoices.com/adchoices

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at indeed.com slash Vox CA. Just go to indeed.com slash Vox CA right now and support this show by saying you heard about Indeed on this podcast. Indeed.com slash Vox CA. Terms and conditions apply. Hiring Indeed is all you need. It might be enticing to try and sleep through the next four years, but if you're wondering how to survive a second Trump term while staying fully conscious, Pod Save America is here to help you process what's happening now and what comes next. Every Tuesday, Wednesday, and Friday, John Lovett, Tommy Vieter, John Favreau, and Dan Pfeiffer wade hip-deep into the week's political news and fish out some political analysis you can

trust. Yes, Tommy's shoes get ruined. Yes, he'll do it again tomorrow because the endeavor is worth it. And so is your sanity. Tune into Pod Save America wherever you get your podcasts and on YouTube. Today's number, 202,080 kilometers. That's the length of Canada's coastline, the longest in the world.

A true story, if you're ever wondering what it means when a young woman, a young attractive woman is wearing a Canada goose jacket, it means she's one bad decision away from having an OnlyFans. 1977, no me diga no, no lo presiento. Todo lo que cambio lo heredice, en el año que nació la CPM. I don't fully get it. Surely she's rich if she's got the Canada goose though.

I don't get it either, but for some reason it made me smile. Maybe it doesn't matter at all. I made that one up. Yeah, I can tell. Doesn't that make sense though? When you see a hot girl in the Canada goose jacket, there's like a reasonable chance. Surely you've owned a goose. Oh, I own several geese and now I'm on Claire.

Cause I'm the rich douchebag. I went, I literally, I hit a new low. I went shopping in Montclair with my kid last week. He's like, I need a ski jacket. I'm like, I'll take it to Montclair. I love the apparel and the fashion and skiing. I just don't like skiing much. Yes.

I was trying to imagine you skiing all week. I just can't picture it. That's what you were doing, right? None of us actually really knew where you were or what was going on. You were skiing, right? Yeah. I was in Zermatt. Any takeaways from being in... That's in Switzerland, right? I am officially done skiing. All I can think about, I get off the lift and all I think about is this is definitely the run I'm tearing the other ACL. And then going to the hospital, catching pneumonia and dying. And then, you know, I wonder, and I think a lot about my funeral.

I it's, that's just not how I want to go. Pneumonia from the torn ACL from Zermatt. I think it's a pretty cool way to go. I think skiing is so overrated. Are you a big skier? I love skiing. Really? Yeah.

My favorite thing is, is having lunch in the middle of it. I love that you kind of get up early. You're sort of working out, but it's not that intense, but you feel like you've had this big workout, and then you all kind of like get together and have this great big lunch, and then you head home. I skipped to the lunch part. One of the wonderful things about European skiing

is you'll literally get off a lift and you'll see a plume of smoke, and you walk down a hill, and you go through this big, you know, this giant wooden door that excited Game of Thrones, and inside are much as Swiss Germans partying and planning the takeover of Austria. I mean, they're just going crazy. That's it's a ton of fun. By the way, it's probably crazier in Aspen now.

The ground zero for douche bag, Inc. Is this place called cloud nine. Have you heard of this place? I've been there yet. So basically it's this place on the mountain and you don't really eat lunch. There's one sitting that's actual lunch. And then the next sitting is they pass out, no

joke, trash bags that you wear as armor. And then you buy a nice bottle of champagne and two cheap bottles of champagne for defense. And then they put on crazy music and all these wealthy people with too much money start spraying champagne on each other. And I remember I was there and standing and dancing, which me is shaking my shoulders back and forth to 80s music. And our waitress came over and somebody, this guy next to me hit her accidentally kind of in the head and she buckled over.

Oh no. And I mean, no, she was fine, but like lost control of whatever she was bringing us. And a bunch of champagne spilled on the hot fondue griddle and this waft of pink champagne went up into her face. And I thought, oh God, I thought this is the planet of the apes moment where everyone working behind the counter jumps over,

kills all of us. Totally. And then starts traversing down the mountain, gathering everyone that the 0.1% have been abusing for the last 40 years, and it starts the revolution. The revolution starts at cloud nine. It is so fucking obnoxious. And I am totally down to party and waste money,

but I remember thinking, this is so indulgent and stupid, people spraying champagne on each other. We'll talk more about that revolution in this episode. Shall we bust into the headlines? Let's get on it. Now is the time to buy. I hope you have plenty of the well worth of. Apple plans to spend more than $500 billion on American innovation over the next four years. The investment will fund the development of a manufacturing facility in Houston, which

will build servers to power Apple Intelligence. The company has also pledged to create 20,000 new jobs. Following Howard Lutnick's appointment as Secretary of Commerce, his 27 and 28 year old sons will now help lead his investment bank, Canter Fitzgerald, in his place. Brandon and Kyle Lutnick will take on the roles of Chairman and Executive Vice Chairman respectively, while three long-time executives will share the CEO position. And finally, the top 10% of earners now drive nearly 50% of all consumer spending in the US. That's a record according to Moody's Analytics and it's up from 36% three decades ago. Moody's also estimates that the spending from this group alone accounts for almost one-third

of the nation's GDP. Very timely considering our conversation just now, but let's start with Apple and Apple's plan to spend more than $500 billion on American innovation. This big spending plan, Donald Trump is very happy about it. He posted about it on Truth Social. Scott, your thoughts on this new investment from Apple. I think Tim Cook is really smart. I think he is saying, okay, for a press release, maybe we spend it, maybe we don't.

I don't think Trump cares if he actually spends it or not, but I think what he's trying to do is negotiate some sort of carve out from anything resembling a tariff on Chinese manufactured products where a great deal of Apple products are produced. And I think he said, okay, coordinate with the White House. All they want is a symbolic victory. Call it 500 billion. Maybe it is, maybe it's already spending more planning.

I see this as a giant fucking yawn. I don't even know if it actually means anything in terms of what they weren't already planning on doing or they're repackaging or they're saying. This is literally, I'll chip no salt at your thoughts. 100% in agreement. I think the thing you have to understand here

is that Apple was gonna spend this money anyway. If you look at the company's financials, you look at the OpEx, you look at the CapEx, look at the guidance, 500 billion over four years is pretty much in line with expectations. In fact, some would say it's actually below expectations. So yeah, this is not some big, bold new investment. This is par for the course for Apple.

And I think the question is, okay, well, why would you make such a to-do about this? And the answer is quite simple. As you say, it's to appease Trump, because you have to remember, Apple, of all the big tech companies, is the most reliant on China by far And they have all of their supply chains are in China. They also unlike

Companies like Google and comes like meta. They also sell products in China. They're allowed to sell iPhones in China That's a big market for them So they can't afford to lose China as a supplier or as a customer and so they need to figure out a way to or as a customer. And so they need to figure out a way to protect that. And so this to me is like this genius cost-effective way of doing that. Instead of investing billions in lobbying, or instead of investing even billions in new investments,

they're basically just rebranding their pre-existing investment plan, which they were already gonna do, but now it's got this pro-America, pro-Trump feel to the whole thing. If you look at the big guys, if you look at a meta, um, an alphabet, uh, an Amazon, they're growing somewhere between 10 and 30% a year. Apple is basically flat.

I think Apple's total sales this year were up low single digits, but they are a profit cash volcano and that's's what the market values in that. And right now, their P-E ratio, I believe, as of February 24th, is about 39, which is higher than its 12-month average of 34. And typically, I think its average over the long term is around 19. So the market values them on profits. Now the danger of that is that their capbacks as a percentage of their total top line revenue is actually the lowest in big tech and it's lower than when IBM was at their peak. So the question is, is Apple got so much top line

revenue that they just manage their capbacks better and are able to find greater returns. For example, I think you got to give it to them, their approach to not going down this spending rabbit hole of around AI and just leveraging other people's catbacks and doing something called Apple intelligence, which was sort of cheap and cheerful. And bad, thus fall. Well, it's better than their mixed reality headset.

Yeah, fair enough. It'll be interesting to see if their lack of catbacks relative to their competitors comes back to haunt them. But I own Amazon and Apple are my biggest holdings. I'm actually thinking about trimming my Apple holdings because now it's I think about what is it? Maybe five or seven percent of my total not worth. I'm thinking I'm taking it down to three percent. And we've talked about this rotating into non-U.S. stocks or non-U.S. tech. The problem is, is I bought, it's trading at 240.

I think I bought it at 11. So I would take a pretty big- This is crazy to hear that, yeah. But I bought it in 1838. And I bought it, I think I bought it in 2011. Anyways, I wonder about Apple. It's trading at a historical high, P on any metric. And I also wonder if they're, are they just better

at managing their capbacks than everyone else? Or are they eventually, is this going to come back to haunt them in terms of their inability to grow? Yeah, I think that's the big, big question and there's huge downside potential there. So I'm sort of in support of your move to trim. Let's move on to Cantor Fitzgerald and Howard Lutnick's decision to put his

sons in charge of the company. Just some context on how wild this move actually is. You know, you might not have heard of this company because it's a private company. So it doesn't get that much publicity. It doesn't get that much coverage because, you know, you can't trade the stock. But on Wall Street, this is one of the biggest names. This is a huge bank. It employs 14,000 people.

They have 60 offices across 20 different countries. And now, what is essentially a mega corporation on Wall Street, it is now controlled by a 27-year-old and his brother, who is 28 years old, and who is also a DJ, which is just a funny, but probably important little side note about the new vice chairman of Cantor Fitzgerald. So I think the two questions people are probably asking here is one, how is this even allowed? How is this possible?

The answer is Howard Lutnick controls and owns the company. He's certainly the majority shareholder. To the best of my knowledge, he's the only shareholder. But if you look into the ownership and the governance structure, it's actually not very clear. I think it's probably intentionally obscure. But what we do know for sure is he has the power

in this company so he can do whatever he wants. And then the second question I think people are asking is why on earth would he do this? Why would you hand over a multi-billion dollar corporation to your Gen Z children who have basically no experience? And I have my own theories about this, but I'd first like to start with your take, Scott. Why is Howard Lutnick, the new Commerce Secretary, handing this company to his kids? Because he can.

Look, your sons are the only people that you really hope are going to be more successful than you and your daughters. And you can trust them or you think you can trust them. You want to see them successful. You think the whole world under appreciates. You think they're capable of great things. So it's just a natural instinct to want to advantage your sons. And you know, theoretically, or your daughters, you know, theoretically

that that's probably not good for them, but you just can't help it. And this happens everywhere. The Arno kid is, I think was the head of Ramoa and is now got a big job at LVMH and at some point will probably be the CEO. It's no accident that the last several publishers, the New York Times company had the last name Sulzberger. Was Arthur Sulzberger? Would Arthur Sulzberger, was he a good publisher? Yeah, I

think he was. Was there any fucking way he'd be published in the New York Times if his last name wasn't Sulzberg or no? This nepotism affects all sorts of companies and private companies, it's a little bit easier to pull off than public companies. But the New York Times company, an incredibly important company is riddled. I used to go to New York Times board meetings and I'm not exaggerating, there was a cousin on the board and his official job was submarine explorer. He had built a submarine to explore the seas.

And I said, well, tell me about that. And he was like, well, I've never actually been in it. I'm like, why? I was like, you know, I'm like, I, cause you wouldn't get in a vessel that you've built. It's obviously, this is stupid. He used to show up to board meetings in a Tommy Muhammad shirt and fall asleep.

Every board meeting. Literally Roman Roy. So it's almost like a tax that shareholders pay recognizing that, you know, people want their kids to be successful. And also sometimes the kids are outstanding. Herb Allen at Allen and Co brought in his son, Herb Allen the third, and he's outstanding.

He's great at what he does. I don't know if he's still running the firm. You, on a regular basis, you get really good cousins, nephews, whoever that are outstanding and running the company. This is striking for a couple of reasons. One, their youth. It's just unlikely they're the most talented people. You can't even pretend this isn't nepotism, but at the end of the day,

if he controls the firm, he gets to do this. Now, if their clients and employees he controls the firm, he gets to do this. Now, if their clients and employees start leaving in mass, he'll probably decide to make a change. We also don't know if this is just symbolic where he said to all the key people in the firm, wink, wink, I just want to keep the governance within the family.

I'm gonna have a succession strategy. I know this seems like bullshit, but you're really in charge of this. You're really in charge of this. I don't know what's going on internally, but this happens more often than you think. And generally the only arbiter or the only governor. I mean, keep in mind, we have nations where they have royalty. Where, okay, you're, you're the king because you're the son of this person.

But what happened to royalty? We got rid of it because it didn't work. We looked through all of world history. I mean, humans clearly love hereditary succession, but what we have found is that it's just a bad model. It just, it's, it's unstable as a form of governance. And I'll just on this point, from a shareholder perspective, if you look at corporate history and having family succession

plans, there's this study that we found that looked at all of the family-owned businesses through history and it found that when you post control onto the child, on average, financial performance declines. I think it's like a 5% drop in operating profitability. Another study found that family CEOs work, this is no surprise, on average, family CEOs work 9% fewer hours than other regular CEOs. And another study found that family CEOs

are held less accountable to their financial performance than regular CEOs. I don't think any of this is surprising, but I think the takeaway for me with these succession plans is it's almost never a good idea. One point that I, in which I think this is different and which kind of explains this is I think that this is Howard's way of not letting go of the company while he's serving in office.

So he gives it to his kids and he'll still sort of de facto run the company. All he needs to do is give them a phone call, tell them the instructions, they say, yes sir, yes dad, they execute. And he's still pretty much running the company that way. There's another family doing that. I'm trying to think of who that is. Another family that has a bunch of idiot sons running his business while he's in government. I mean, he's learning from his master. So I would predict that by the time he's done with commerce secretary, when he's out of office, my prediction, he's going to return to the company and reinstate himself as chairman. And it'll basically be like he never left.

Final headline, this new data from Moody's. The top 10% of earners in America now accounting for 50% of all consumer spending. That's up from 36% in 1995. This is basically just another signal of how bad the inequality in America is really getting. Scott, you've done a lot of work on this. You've done a lot of research on this. What are your initial reactions to this new data? I actually read it differently in the sense that, okay, so we know what it means, we know that the top decile are killing it and continue to have more

money to invest and spend. But my understanding is the top 10% control 90 plus percent of the assets. And if they're responsible for half the consumer economy, it means they're actually, and because they can, they're saving and investing a lot more than the bottom 90, right? As a percentage of their income. And what would that mean? That would mean that luxury brands would do really well, high-end travel would do really well. And for me, it's an argument for a more progressive tax structure where we put more money in the pockets of the bottom 90 because the wonderful thing about the lower and the middle classes is that distinct to the moral argument of putting more money in the pockets of the bottom 90 because the wonderful thing about the lower and the middle classes is that distinct

to the moral argument of putting more money in their pockets, when you give them a dollar, they spend it. And there's a much greater multiply for it. It's much more stimulative than when you put a dollar in the pocket. The Republicans have done a great job of convincing people that a dollar put in the hands of our most efficient or most productive is what they refer to rich people,

is that they invested and grow the economy. And you do need some of that. You do need capital and people who invest and save and take risks, but we're long on risk capital. What we're short on is people who have money to spend and grow in the economy. And I think this is another example, as you said, of income inequality,

but we're seeing essentially they're not spending nearly as much money as they have. And again, it's just another argument for more progressive tax structure. Yeah. We know what the wealth inequality looks like in America, as you said, the top 10% earning 90 plus percent of the assets. But finally we're seeing even despite the fact that the wealthy are actually underspending and they're hoarding, they are still driving the real economy. We're now having half of actual transactions in America are being made by the top 10%.

So I think it's sort of this double whammy. It's now transitioning into a new thing where, you know, in addition to controlling all of the assets, they now control the real economy itself. And, you know, we were discussing, like, what are the second order effects of this? I think just to list them off right now, I think the first thing you'll see is just reduced social mobility. You're going to see more economic instability. So you're going to see more debt accumulation, more inflation, higher likelihood of these financial crisis events.

And you're gonna see lower social cohesion, which we're already seeing less trust among your citizenry. And then I think the other thing is that we always see across every unequal society in history is you're gonna see more crime. You know, crime rates go way up with, you know, general distrust and dissatisfaction with the state of affairs in this country.

So our team kind of got together and we spitballed, okay, well, what is a good investment in that society? If that's where we're headed, where do you invest? Bunkers. Exactly. So, you know, just some kind of random ideas we threw out there, private security. I think we'll see more private healthcare, more investment in elite healthcare that services

the rich. And then one thing that you've mentioned, which I agree with, luxury real estate. So more homes in Aspen, more homes in Palm Beach, more homes in the Hamptons. You know, I think we'll start to see these more and more of these siphoned off private bunker communities. I guess at a certain point, this conversation becomes ridiculous because I'm essentially describing a dystopia and asking questions about how to invest in that dystopia. And I think, by the way, a lot of investors are having this conversation. So I guess my final question before we move on to a conversation with Mike is, at what point do we throw in the towel and say, okay, none of this is

worth it. Like, why are we discussing investing in this world that we don't want to live in? At what point do we decide, okay, instead of playing along with these trends and investing in these trends, we have to reverse them? Like what is the tipping point? At what point do you think that moment actually comes in America? It's a really good question, Ed, because unfortunately, unless you have, I think a key cohort in history has been class traders.

And that is when Teddy Roosevelt was elected by the railroad barons, he immediately got into the White House and said, now I'm, thanks so much. I'm breaking you up. And they thought, wow, what a trader or turncoat. We put this guy in office now he's breaking us up. And I think that where we really need some class traders is among the 0.1 or the 1%. And that is, I think there's this unholy bargain between.

Trump and the democratic party and the 0.1%. And that is, okay, at dinner parties, you talk about income inequality, but you're not really willing to go aggressively. You'll still show up at his inauguration and be paraded around like some little bitch because under the auspices of shareholder value, you decide to totally ignore American values.

And if the, and the reason why rich people are only giving kind of symbolic resistance here is because guess what folks, we're getting richer and richer, and here's the thing about rights. Everyone I know that I care about is going to have rights. Uh, if things ever, if shit ever gets real, I'll have the money and the liquidity and the Bitcoin or whatever it is on the need to peace out to Dubai or Tel Aviv or Singapore or wherever I need to go.

If anybody I know becomes the target of some weird right-winger, I can lawyer up like no fucking tomorrow and then move to a country that doesn't have extradition treaties. I just, money has now bought people rights. So when I'm in, rich people are in, a beast of the summer parting on yachts and there's people, there's oligarchs from Russia, there's kids from the Gulf, and there's tech bros. Everyone gets along in a civil with each other and talks about what a shame it is, but no one's actually really willing to get aggressive with their platform and speak up because here's the bottom line.

Our rights are portable. And for all the moaning, the fact that the unholy alliance here is Trump and along with the Democratic Party has said, even though there's a slow burn towards income inequality and now this escalation towards fascism, wink, wink, I'll make sure the rich are just fine. Guess what? Jeff Bezos, when you're on your deathbed, you're not going to remember being worth 120 billion or 90 billion, you're going to remember what a fucking infidel you were to the American values that made you worth $120 billion.

And I find this domino theory of cowardice amongst the rich is so incredibly disappointing because at the end of the day, they have opted for their wealth and they have the comfort of knowing that rights are a function of wealth. And to a certain extent for them, for the rich, it really doesn't matter what happens in America, because as long as there's a place they can go and have an amazing life and buy their rights, which they can in any number of countries, rich people are always welcome somewhere. There will always be a country that says, come one, come all. If you're rich, we'll ensure you're protected. Your daughter has access to

family planning. You have rights. Your kids will go to great colleges. Don't worry about it. And this is the unholy alliance between our government and the 0.1%. And unless the 0.1% decide to become class traders and actually speak up, none of this shit is gonna change. We are going to continue to build another brick in the fascist wall. So I am exceptionally disappointed that the exceptionally wealthy are just giving kind of like symbolic resistance to what is going on here.

If they wanna hand over America to a very dark side, we are well on our way. There needs to be more class traders and those class traders have to be the 0.1% because quite frankly, they're the ones with all the power right now. And it is not happening. What are you, what is the last thing that's going to run through in your head on your death bed that I was worth more money than I needed to be or that I stood up for American values? We'll be right back after the break for our conversation with Mike Moffat. If you're enjoying the show so far, be sure to give Proffesgy Markets a follow wherever you get your podcasts.

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Just go to indeed.com slash voxca right now and support this show by saying you heard about Indeed on this podcast. Indeed.com slash voxca and conditions apply hiring Indeed is all you need. Okay welcome back. Here's our conversation with Mike Moffitt, founding director of the University of Ottawa's Missing Middle Initiative and also a former economic advisor to Justin Trudeau. Mike, thank you so much for joining us on the podcast.

Oh, thanks for having me. I'll just start with this. We've been talking a lot about Canada lately, mostly in relation to Trump. We had this 51st state drama, we had the tariff stuff, we've got this potential trade war. And I've been watching all of this go down and it's gradually dawned on me just how little I actually know about Canada.

And I talk with my friends about this, and I talk with my peers, and it becomes clear to me, they don't really know much either. So I don't think I'm in the minority. I think there are just a lot of well-read, informed Americans out there who don't know a lot about this country, which is why I'm just so glad

to have you on today to fix that for us. So I'd love to start with just like an overview of Canada's economy. So how big actually is the Canada economy? What are its strengths? What are its weaknesses? And what makes it different from the Canada economy? What are its strengths? What are its weaknesses? And what makes it different from the American economy? So we're about a $2 trillion economy and a population of about 40 million. We're a little bit more heavily reliant on manufacturing than

the United States. As far as energy goes, I think we produce more oil per capita than most places outside of Norway and the Middle East. So like the United States, it's a pretty diverse economy. It's a very kind of regional economy. One of the big differences is we're far more reliant on trade. That trade is about 40% of our GDP relative to about 15 to the United States. And because of accidents of geography and history, needless to say that most of our trade is with the

United States. We are very reliant on a single customer. That makes me think that this tariff situation is going to be a big, big problem. And we will get there. But just as we continue to build this picture of Canada, give us a sense of the political situation in Canada right now. I think most people probably know Trudeau has resigned, but he's still, from my understanding, Prime Minister for now. What's happening in Canadian politics? What's going to happen with Trudeau moving forward? Right now, the Liberals are having a leadership campaign. The new leader will be selected March the 9th. It will almost certainly be Mark Carney, who will instantly become prime minister at that point.

Two or three months ago, the liberals were dead. They were going to be all but wiped out in the next election, but with Trudeau resigning, they got a little bit of a bounce back in the next election. But with Trudeau resigning, they got a little bit of a bounce back in the polls. But after all of this Trump, tariff Canada, United States, we're starting to see a resurgence of the federal liberal party that Mark Carney is about even in the polls with the conservative leader of Poliev. And it feels like the next election is basically going to be a referendum on who is better positioned to deal with Trump. On the one hand, you have Poliev who is a career politician versus Mark

Carney, who was a central banker in two G7 countries. Bank of England, right? I didn't realize that until recently. You got Mark Carney, Bank of England and Bank of Canada. This guy's a machine. Yeah, he absolutely is. But I think the big question up here is how much does monetary policy history affect your ability to do these things?

But I think one of the things that Carney has in his favor is he was over at the Bank of England during the whole Brexit period. So he has some kind of experience, you know, dealing with these issues where you've got political unrest, you know, you have these kind of geopolitical factors. So we're actually going to have a race up here and it didn't look like we were going to have one even three months ago. So interesting. And then my final question just on this Canada 101 segment is the history of Canada. Could you just give us a very brief history of Canada? How did this country form? What are its cultural roots? How do we get to where we are today?

Well, we can think of it essentially on the American side is it's the people who stayed loyal to the Crown. It was a lot of the people who were on the other side of the American Revolution who settled up here. Obviously, as well, we have a large French component that Quebec makes up about 25 percent of the population. We're culturally a little bit different. We're oddly more conservative in ways, in the cautious sense,

not the political sense. We don't as much like big changes, we're loyal to the crown. We're more of a place of evolution. I think the other big difference is when it comes to integrating newcomers, the United States has always had this kind of melting pot type approach, where you come in from all over the world and you kind of add and you're all mixed together and creating one harm, hopefully harmonized culture. You know, Canada is more of a patchwork quilt that people hang on to their cultural identities for generations. So you could be Indo Canadian or Scottish Canadian or French Canadian.

So we're more comfortable with those, those differences up here. Scott, I will turn it over to you to get into the economics. I feel as if I need to say to you what, as an American, what I should have said to my ex-wife, and that is, I'm sorry I've been such an asshole. The behavior is totally unacceptable, and I'm sorry on behalf of any sane American. And finally, we're saying the most important question,

let's talk about Conor McDavid. Edmonton Oilers, is that right? Uh, on behalf of any sane American. And finally, we're saying the most important question. Let's talk about Connor McDavid. Edmonton Oilers, is that right? Edmonton Oilers, Connor McDavid. Yeah. That was a mixed blessing for me. I'm a huge Calgary flames fan, which is the Oilers rival. So that was a tough day for me.

I was like, I was so happy Canada won, but I like, why did it have to be the guy we call McJesus up here? You know, it'd be like, uh, being a Yankees fan and, you know, seeing the Red Sox, you know, win a baseball tournament for the Americans. It's kind of a mixed blessing. I just want to point out, I'm completely, I'm shocked that you know anything about hockey, Scott. So let's explain to Ed, cause Ed is not much, he's not much of a man. The Four Nations hockey tournament, which was arguably the greatest sports spectacle of the last year.

Um, Connor McDavid in sudden death over time of the Edmonton Oilers put it in the net for team Canada. And you've never heard so many Americans root for Canada, I think in history. Anyways, my serious question now, what's interesting or one of the things that's interesting about America is that our news is 22 minutes of domestic and then eight minutes of international. Whereas most nations, it's reversed. We don't think much about other nations. And I think the general stereotype we have of Canada is it's basically a nicer, friendlier, maybe a little bit more shit together version of America. But it strikes me or my thesis is that a lot of the problems

that they all ask are the same problems you have and sometimes even worse, whether it's income inequality. It feels like someone told me that there's literally a half a dozen or a dozen families that control a disproportionate amount of the economy, that housing is just a shit show in Canada. And that many of the immigration problems, many of the problems we're struggling with are not just

as bad, but worse in Canada. Can you talk about as an economist, what two or three things you think are really ailing Canadian society right now? Yeah. So I think the first is the housing crisis. To put it in perspective, average single family home up here is about $550,000

US dollars in the US. Which is 3 million Canadian, right? Yeah, something like that. It depends on the tariff troch and how much the dollar has, the loonie has dropped in any given day. But we also have to realize that our incomes are a lot lower down here. And that was actually the impetus of us starting the Missing Middle Initiative

is that it's priced at the young middle class across Canada. So you were seeing, you know, young people living with their parents longer, you know, all of these things that you're seeing in the U S I think we actually have more of it up here. Um, you know, I think one of the things you can think about Canada is we're kind of a blue state on steroids and we have a lot of this kind of same blue state issues that you see in the United States. We've had very robust immigration and now our population has absolutely boomed and we haven't created the structures to

facilitate that. So there's a lot of tensions here. So I think that's one of it. Uh, second is absolutely right. That, uh, Canada's economy is like three oligopolies in a trench coat. Uh, you know, we are, we have a lot of inequality that way we have high levels of, of market

concentration because we have this tension in Canada where we want things to be Canadian, we want Canadian ownership, but when you do that you create a moat and whenever you create barriers to entry you're going to naturally create oligopolies. So I think that's another one. And finally we have a business culture here in Canada that's the classic, like nobody ever got fired for buying IBM. Our business leaders up here tend to be very small-see conservative and that flows her into things like procurement.

It's really hard for small businesses to break in here. I used to work in the chemical industry, worked with consumer chemicals, cosmetics companies and that kind of thing. And it's easier for a small Canadian cosmetics manufacturer to make their first big sale to CVS or Walgreens than it is to make it to one of the big pharmacy chains up here. They're just very, you know, it's like, okay, we've got our supplier relationships,

we have our products, We're fine with that. So healthcare, healthcare is something that is not working in the United States. I mean, I would argue, like many of our industries, I would argue that the bottom 90 are there as a vessel to optimize for the top 10. If you're in the upper decile of income earning households in the U S I think we have access to the best healthcare in the world, but it comes at the price or the expense of the bottom 90. And 40% of American households now have some sort of medical or dental debt.

Talk a little bit about Canadian healthcare and whether you think it's an example we should be following, learning from, why it doesn't work. Thoughts on healthcare in your country. I do think it's an example, perhaps not necessarily the best example, but you know, the idea that you can go to a hospital or a doctor and pay with your health card and not your credit card.

I think there's a lot of merit to that. There are a lot of strains right here now in Canada. And a lot of that is to do with population growth, that it's hard in my province of Ontario to find a family doctor. ER wait times have gotten absolutely out of control because of the combination of population growth and underinvestment by government. And healthcare here is so political. It's so wrapped up in how we identify ourselves as Canadians. it is really hard for us to reform. That any time anybody suggests a major healthcare reform up here, somebody says,

well, that's American style healthcare and we can't do that. So, you know, overall I've lived in the US, I live in Canada, I kind of like the Canadian system better, but there's a lot of room for improvement. And I find how just attached we are to the system here really prevents the system from evolving in the directions it needs to. It also kind of sounds like an indictment of Canada's government. And just, I mean, especially when I hear about the immigration issues, the idea that population is soaring as a result of loose immigration, which is leading to a lot of these problems. It sounds like that's where you land on this. What are your thoughts on the government and what the government's done, especially considering that you also worked with

the government at one point? Is this an indictment of Trudeau? What have they gotten wrong? Yeah, you are asking me to grade my own homework here a little bit. Uh, yeah, I do think the government did drop the ball on immigration. I think the government would be the first to admit that, uh, we, we have a new, uh, relatively new in the last year and a half or so, uh, immigration minister, uh, Mark Miller, who's made a number of reforms to the system.

And part of those reforms are just lowering the overall number, but we made some changes about 20 years ago to how our immigration system worked. Traditionally, we've had a lot of immigration and people come over at like age 28 or 29 and their labor market outcomes aren't good, simply because they don't necessarily speak the language, they have a degree or diploma from some institute we've never heard of, businesses don't want to hire them. So governments, the Trudeau government and the Harper government before them, made this kind of conscious decision to run more of our immigration system through our colleges

and universities. Instead of having people come over at 28 or 29, have them come over at 18 or 19, get four years of post-secondary under their feet, they'll get a degree or diploma in a place that Canadian businesses have heard of, and they'll have better labor market outcomes. Like everything had kind of worked well in theory,

but in practice, what happened was the colleges and universities use this as a cash cow. They just kept bringing in tons and tons and tons of students to help pay the bills. And not necessarily the highest quality students, but rather, okay, you know, can you, or, you know, do you have $50,000 a year to pay in tuition? Great, we'll let you in.

So that's caused a lot of problems, particularly in our college and university towns, and the federal government has had to unwind that many of those policies were by provincial governments. Um, so there is some jurisdictional issues there, but overall, yeah, the federal government dropped the ball on this. They're trying to clean it up right now, but it's caused a lot of tensions here in Canada. We'll be right back. If you're enjoying the show so far, hit follow and leave us a review on ProfGMarkets. We're back with Profgy Markets.

Are there any examples or anecdotes or color that you can help people understand the differences between Canadian life and US life or approach to business, approach to relationships, patriotism? What do you observe in Canada and America and you think that's uniquely American or Canadian? So I used to live in Rochester, New York, which is really not that much different than Southwestern Ontario where it was born and raised, you know, the kind of sort of Rust Belt area. You know, I do think there are cultural differences.

I find Americans a little bit more open and honest, more willing to tell you, uh, you know, what, what they think. Uh, I, again, I find the biggest one in the business community is just willingness to, to try things, willingness to try new suppliers, try new products. That, that kind of thing is, as somebody, uh, who again, was an entrepreneur for, for over a decade. And I think that actually might be the biggest difference that we are so much more afraid to fail up here in Canada.

It sounds like England. Yeah, we have this philosophy that failure is not an option, right? So we're never trying, it feels like here in Canada, we're never trying to maximize the best case scenario. We're trying to minimize the worst case scenario. And that creates a kind of level of mediocrity. As well, I think sometimes here we can get some tall poppy syndrome as well. This is 40 million people, but we all, particularly in the business and politics community, we

all kind of know each other. And we can get a little bit mean when, you know, we think somebody is, you know, getting a little bit too big for their head or accomplishing too much. With respect to the dialogue, if you can call it that, between America's leadership right now and Canada's leadership, how are Canadians on the street? And I'm not sure, my guess is the majority of your colleagues would probably, you know, label you with the biggest American insult, the cultural elite, but do your best to kind of, kind of, if you will, mimic or channel how you think Canadians on average are reacting to some of the rhetoric that's come out of US leadership.

Yeah. I think it's a combination of we're hurt and angry. I think weirdly, we've come together more as a country. I think we are less divided than we have been in probably a decade here. So that's the silver lining to all of this, that the Trump administration has brought us together and created a bit of a common enemy. But the folks on the ground here are just like, what the hell?

We fought two World Wars with you guys. We were in Afghanistan with you guys. We've done all of these things together. And we will admit that we're not perfect up here. We know that we need to do more on defense, uh, military spending. You know, we need to have better security at our ports. So, you know, there is an acknowledgement that some of the things that the administration talks about, and some of the things that Americans talk about

are legitimate issues and that we do need to be raising our game. But, you know, we feel particularly, uh, insulted, uh, up here and it creates those, those conditions of patriotism. You know, we haven't seen when it comes to the hockey game, for instance, for us, it felt like the summit series of 1972 when we played the Soviets, you know, that was the last time we really cared that much about, you know, winning an international hockey match. So we've kind of come together as a country, you know, because we do, you know, we are not happy with the administration and the rhetoric coming out of the United States. I'd love to hear what you think about these tariffs.

Just as a refresher, Trump has obviously made all these tariff threats to Canada, 10% on energy, 25%iff threats to Canada, 10% on energy, 25% on steel and aluminum, 25% on cars and trucks, and then 25% on pretty much everything else that America buys from Canada. You mentioned the reliance on trade in Canada, it sounds like more so than America. How bad are these tariff threats? If these tariffs actually go through, and it looks like they might,

what would it do to Canada's economy? Bank of Canada has done some estimation on this, and it would basically look like the 08, 09 financial crisis up here. You'd be looking at a kind of immediate drop of about three to 4% of GDP, and then kind of recovering drop of about three to four percent of GDP and then kind of recovering over time. But unlike 08, 09, it would actually be inflationary in nature. So maybe it's actually a little bit more like the pandemic where we get the GDP drop of the financial crisis without the

deflation of the financial crisis. And it and it would really screw up our, our supply chains. Cause I think how people conceptually think of trade is sort of, uh, you know, I I'll trade you my finished good for your finished good, but we have to understand that, uh, these supply chains are, you know, they cross the border several times. And, you know, a lot of what gets traded is intermediate goods. And it's kind of going to screw up our ability to do a lot of things. So for instance, if we look at housing drywall, most drywall that we use in Canada is manufactured

in Canada. So like on, in theory, we're kind of self-sufficient on this until you realize that the outer paper that covers drywall, almost all of that is made in the United States. So because of that, that if there's tariffs or other issues in the border and reciprocal tariffs, even this product, this made in Canada product used in Canada, we're going to see price rises. We're going to see, um, you know, we're going to see difficult to getting that.

So, uh, you know, because the United States specializes in, you know, the paper for drywall, that's going to be an issue we specialize in the paper for toilet paper. So, you know, we might not be able to build homes, but you guys might not be able to do other things and it's just not going to be good for anyone. We won't be able to do other things. And it's just not going to be good for anyone. We won't be able to wipe our ass. Okay. It's not going to be good for anyone.

Yeah. And my final Trump related question, I just have to get your comments on his proposal to make Canada the 51st state. Is there a soul in Canada who thinks this is a good idea or is it just completely absurd to everyone in the nation? Well, there is actually a market for it. I would say it's about 12 to 15% of the population. Yeah, we've done a lot of grips up here and get it.

I've done a lot of polling on it. So there is a certain segment of the population that is more conservatively minded that thinks that that might not be a bad idea. Trump does have his supporters up here, it tends to only be about 20 to 22% of the population, but yeah, for the rest of us, we're just absolutely no way. We love our country, we love being Canadians, we want to stay Canadians. We love visiting the United States, particularly in February February up here. So, you know, we want to be good neighbors and friends, but we don't want to move in together.

Just some additional data that Michael referenced. In World War II, Canada entered the war two years before the US and trained over 130,000 allied airmen. During the Iran hostage crisis, Canada or Canadian diplomats sheltered hit six American embassy staff and helped orchestrate their escape. And had they been caught doing this, they would have been hanged from cranes. They stuck behind in Tehran, took huge risks. After 9-11, Canada launched Operation Yellow Ribbon, accepting 224 diverted flights when US airspace closed, sheltering 33,000 stranded American passengers. Canada, as Michael referenced, fought alongside the US in World Wars I, II, Korea, the Persian Gulf, Kosovo, Afghanistan,

and against ISIS. It is the largest undefended border in the world, the border between Canada and America, which gives you a sense for how much mutual trust there has been leading up to this point. And there's also really deep people to people connection with extensive family ties across borders. My parents initially immigrated from Glasgow and London respectively to Toronto, where they were welcomed with open arms. I tell the story, I was actually conceived in Toronto, born in San Diego.

And the only time my dad, I've ever seen my dad cry is I, every year I give him something off his bucket list and he doesn't choose to hang out with me or his grandkids. He wants to go to the Air Canada center and see the Leafs play the Habs in the opening night of the Toronto Maple Leafs. And at the beginning of the game, a bunch of Scotsmen, Scottish Canadian, come out with bagpipes and he just loses his shit. But Canada and America,

it's such a wonderful friendship and alliance. And I trust and hope that you and your countrymen recognize there's a lot of Americans that feel a very deep bond with Canada and that we, I generally believe this is just total nonsense. And again, to my ex-wife and to Canada, I am sorry for this type of behavior. This is unacceptable. And I trust that sooner rather than later, we'll be back to just being great, great siblings in what has been one of the strongest alliances in history. Anyways, that's my Ted talk, Michael. Yeah, no, I appreciate that. And, you know, I think Canadians are recognizing that. And we're

always trying to keep that in the back of our head, that the American people are our friends. They're not our enemies. This is coming from a particular administration. And even folks who voted for Trump didn't necessarily vote for this. He did not campaign on it. So as hurt and as offended as many of us are, I think we are being able to make that distinction.

Again, I think we also recognize that we're not perfect in the Canada-US relationship either, and we have areas where we need to improve. We're just hopeful that we can find some common ground. Final question from me, Mike, and thank you so much. This has been informative, enlightening, and thank you so much. This has been informative and lightning and really appreciate your time. If America could learn one thing from Canada,

what do you think it should be? Hockey. I was going to say, I saw that coming. Hockey. I saw that coming. You're so close. I mean, made it to the final, made it to overtime.

I'm a little bit worried though, over the last decade or so, uh, that American team is really coming up. It's coming up. Coming up. You guys are nine times the size we are. So, you know, I, I'm worried you're, you're learning quickly and you're bigger than us. Um, but yeah, overall, uh, you know, I think we can learn a lot from, from each

other, um, and you know, we can teach you hockey, you're teaching us baseball and let's keep playing together. I'm more bullish on hockey. Mike Moffitt is an economist, business professor and a co-host of the podcast, The Missing Middle. Mike is the founding director of the University of Ottawa's Missing Middle Initiative devoted to restoring middle-class prosperity to young Canadians. Mike previously held the role of Chief Innovation Fellow

for the Government of Canada, advising on innovation and manufacturing policy, and is a former economic advisor to liberal leader Justin Trudeau. Mike, this was a pleasure. Thank you so much for joining us. Thanks, Michael. Oh, thank you for having me. Scott, your reactions to Mike, I thought he was great. He's infinitely Canadian.

He's nice. He's smart. I just think it's so embarrassing that we are pissing on our neighbors and friends and allies. I just don't get it. I just don't, let's surrender to and cozy up and give Putin a lap dance, but let's insult Canadians. I just, it just, I don't understand what's going on. And I trust that they're, like Michael,

they're a little bit more measured and more mature than our current leadership. And I hope this is just an embarrassing, an embarrassing kind of moment in history in terms of the relationship. But I don't know, I've thought a lot about, you know, America seems so strange. People say, well, is it time to leave?

I heard of one of my friend's ex-wife is moving to London because she's so freaked out about Trump. And I said, now this is the time to move back to America and, you know, get in the fight. I mean, I think I've told you this, I'm moving back in 18 months. And I said, finally, my God, finally, right? Thank God. Thank God. Thank God.

The nation, a huge sigh of relief. Yeah, seriously. I shall return. Watch out In-N-Out Burger, sales are about to go up 12% year on year. Yeah. It's going to be flying them into Delray. There you go. I think this is a, I really do think this is an opportunity and a call for Americans living abroad.

If you are worried about the U S about what's going on and maybe you support it. Uh, but if you don't, as I don't, I think it's a good time to get back to the U S not to be worried about leaving, at least not yet. I think it's time to come home and become part of the resistance. As you've said before, we're a nation of reformers, not quitters. It's much more noble to reform than quit. That's good. That's very profound, Ed. Well, I didn't come up with it. It was you. I'm going to make you CEO of my investment bank. I can't wait. This episode was produced by Claire Miller and engineered by Benjamin Spencer. Our associate

producer is Alison Weiss. Mia Silverio is our research lead, Isabella Kintzel is our research associate, Drew Burrows is our technical director, and Catherine Dylan is our executive producer. Thank you for listening to ProfG Markets from the Vox Media Podcast Network. If you liked what you heard, give us a follow and join us for a fresh take on markets on Monday. As the world turns And the dark lies In love, love, love, love