By Michael O’Neill

The Lunar New Year has begun in China and across Asia, along with celebrations among Chinese communities worldwide. This Year of the Snake symbolizes rebirth, as snakes shed their skin, as well as wisdom, transformation, and strategic thinking. Gong Hey Fat Choy!

Lady Liberty Ashamed

Donald J. Trump was sworn in as the 47th President of the United States on January 20th, marking the dawn of the Year of the Snake Pit. This is the year America shifts from the Land of Opportunity to the Land of Not You.

Once, the United States was so welcoming that Emma Lazarus’ poem was inscribed on the Statue of Liberty:

“Give me your tired, your poor,
Your huddled masses yearning to breathe free,
The wretched refuse of your teeming shore.
Send these, the homeless, tempest-tossed to me,
I lift my lamp beside the golden door!”

Not anymore. Donald Trump and his MAGA constituents have reimagined Ms. Lazarus’ work.

“Don’t give us your tired, your poor.                                                                                                                                   We don’t want your huddled masses or the wretched refuse on your teeming shore.                                                    Keep the homeless and all the rest, while I securely bar the door.

It is already happening. Trump has ordered Immigration and Customs Enforcement (ICE) to arrest 1,500 illegal immigrants per day, with the military providing transport. To be fair, former President Biden’s administration was also deporting people and, by 2024, had hit a 10-year peak.

The Times, They Are A Changing

For decades, the United States led the charge for globalization, promoting free trade and tying economies to the U.S. dollar. It spearheaded the expansion of the World Trade Organization, NAFTA, and deregulation, solidifying the dominance of U.S. multinational corporations. It worked—until Trump.

Wisdom may not be a defining trait of the Year of the Snake Pit. Trump has surrounded himself with a cast of highly successful individuals, including Elon Musk, who built wealth by creating companies. In contrast, Trump amassed his fortune through serial bankruptcies—where only his investors lost money.

Trump sees tariffs as the cure for America’s economic woes. Sixteen Nobel Prize-winning economists disagree, along with former Treasury Secretary Larry Summers, former Fed Chairs Ben Bernanke and Janet Yellen, and Trump’s own former Director of the National Economic Council, Gary Cohn. But none of that matters. In 2025, tariffs are a reality, and governments worldwide are scrambling to contain the potential economic fallout.

Dream Big, And Your Wishes Will Come True!”

It was all colorful, caring, and magical for policymakers at the Bank of Canada. The inflation beast had been tamed, and quantitative tightening had ended. The economy was poised to expand by 1.8% in both 2025 and 2026, compared to 1.3% in 2024. GDP growth was expected to be driven by higher household spending as mortgage rates fell and an anticipated increase in oil and gas exports due to new infrastructure.

Naturally, there were a few speed bumps-unemployment remained elevated at 6.7%, businesses were hesitant to hire, and investment was sluggish. But nothing that a strong economy couldn’t fix. Then along came Trump.

His threat (promise? intention?) to slap a 25% tariff on all Canadian exports instantly rendered the Monetary Policy Report and its forecasts as useful as a computer with a blue screen.

That’s because the Bank of Canada’s baseline projections  don’t factor in a  trade war. Until tariffs are officially announced, it remains speculation and rumor— neither of which is useful for setting monetary policy.

But that doesn’t mean they aren’t crunching numbers like a bookie on Super Bowl Sunday.  BoC grunts are busy modeling scenarios based on various tariffs. For instance are the tariffs on everything Canada exports or just a few things. They are also connecting with businesses to gauge risks concerns and how it will affect their capital expenditures.   They do not like what they see and hear.

Neither did the Fed.  The FOMC left monetary policy unchanged but noted that the economic outlook is uncertain.  That is “bank-speak” for Trump is the wild card.

Crapped Out

In a trade war with the United States, Canada is the clear underdog. Think T-Rex versus hummingbird—and the U.S. is the T-Rex. With a population of approximately 337.7 million and a GDP of about $27.7 trillion in 2023, the United States boasts a highly diversified economy spanning technology, finance, manufacturing, and services.

In contrast, Canada’s population stood at just 34.12 million in 2024, with a GDP of nearly $2.89 trillion in 2023. Its economy is far less diversified as it is heavily reliant on natural resources such as energy, forestry, and mining. And according to Trump, three things that the US does not need from Canada.

Economists predict that a U.S.-Canada trade war could slash 2-2.5% off Canada’s GDP, put over a million jobs at risk, and push the country into recession. Both nations would suffer—but not equally. For the U.S., it would be like losing an arm; for Canada, it would be a decapitation.

It is the Year of the Snake Pit, and in this pit, the Loonie is the featured entrée.