Friday, August 1, 2025

Canada’s volatile neighbor

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Welcome to Balance of Power, bringing you the latest in global politics. If you haven't yet, sign up here.

As the world digests Donald Trump's self-declared tariff day, a heavy fog shrouds what happens next.

But it's increasingly clear that the president's rationale for imposing an array of seemingly arbitrary rates on countries' exports to the US is every bit as political as it is economic.

Take Canada, where Prime Minister Mark Carney won a spring election largely on the premise that he could take on Trump and get the tariffs removed. Since then, the nation has mostly watched from the sidelines as Trump focused on hammering out deals with other trade partners.

Trucks approach the US-Canada border at the Ambassador Bridge in Windsor, Ontario. Photographer: Geoff Robins/AFP/Getty Images

Then yesterday, Trump hiked Canada's tariff rate to an eye-watering 35% — even as he gave Mexico a 90-day reprieve.

Trump cited a supposed failure to curb an "ongoing flood of fentanyl" into the US. That's despite statistics showing the amount of the deadly drug intercepted at the northern US border is a tiny fraction of that seized at the Mexican frontier.

His other justification — and what really seems to have piqued him — was Canada's decision to retaliate.

It's part of a pattern of economic coercion, including targeting Brazil over its prosecution of former President Jair Bolsonaro and India over its purchases of Russian energy.

In Canada's case, the headline number is misleading due to a carveout for goods shipped under the USMCA, the trade pact Trump negotiated in his first term. Those put Canada's effective rate closer to 6% — not so bad compared with most other nations.

To be sure, some Canadian industries, like steel and lumber, are still facing steep levies. But overall, it may benefit the country right now to be left out as Trump strikes lopsided tariff deals elsewhere.

The economic hit is manageable for Carney as long the USMCA exemption remains in place.

But as all leaders have learned, the question with Trump is always how long the status quo will last. — Brian Platt

Mark Carney on Parliament Hill in Ottawa on June 6. Photographer: David Kawai/Bloomberg

Global Must Reads

Among those most surprised by the outcome of Trump's tariff blitz was Switzerland, which suffered a 39% rate — one of the steepest reciprocal levies globally — threatening to leave the country's key exports reeling. Laos and Myanmar were meanwhile hit with a 40% import duty — the highest rate in the world behind only Syria at 41%. Here's a list of all the US tariffs announced.  

China said the US exploited a flaw in Microsoft's email servers to steal military data and launch cyberattacks on its defense sector. The White House spoke with technology and recycling companies about ramping up production of permanent magnets using rare-earth elements, a key leverage point in the trade war with China, while Treasury Secretary Scott Bessent said he'll discuss with Trump an extension of the tariff-hike truce with Beijing as negotiations continue.

Colombia's conviction of ex-President Álvaro Uribe — the country's first former leader found guilty of crimes — is reopening the wounds of its brutal drug war just as another bout of cocaine violence erupts. With Colombia facing a presidential election next year, the case has polarized a nation that's struggled to agree on the legacy of Uribe's hardline security approach, and reignited debates about how to deal with drug-fueled brutality that has long roiled Latin America.

A protest against Uribe in Bogotá on Monday. Photographer: Jair F. Coll/Bloomberg

Ukraine's anti-corruption officials fear they'll remain under pressure from President Volodymyr Zelenskiy's administration even after he backed down over a measure to strip the two main graft-investigation agencies of their independence. Anxiety is lingering that Kyiv may still undermine the bodies through scrutiny on investigators or removing their directors, sources say — concerns one European official said were shared by Kyiv's allies.

British executives are less confident in economic prospects than when the UK shut down during the pandemic, a survey showed, suggesting Prime Minister Keir Starmer's government has lost the support of the business community. While the Labour administration put growth at the heart of promises to fix public services and drive investment, it raised taxes on companies to fund its ambitious spending plans and directors aren't seeing any green shoots in the economy.

Keir Starmer at Downing Street in London on July 14. Photographer: Andy Rain/EPA/Bloomberg

Chinese automakers surpassed a 10% share of Europe's electric-vehicle market in June, marking a full comeback from tariffs set in place last year by the European Union.

Trump escalated his campaign to pressure pharmaceutical companies to lower drug prices, sending letters to 17 of the world's largest drugmakers demanding they charge the US what other countries pay for new medicines.

London Heathrow Airport has submitted a proposal to the UK government for a £49 billion ($65 billion) expansion that includes construction of a controversial third runway as the biggest European hub seeks to maintain its competitive edge.

Don't miss from Bloomberg Weekend: Mishal Husain talks with Israeli bureau chief Ethan Bronner about reporting on the Gaza conflict and how perceptions are changing both inside and outside Israel, while Simon Nixon explains how Trump's EU deal could cost Europe for years to come. Subscribe to the Bloomberg Weekend newsletter here.

Sign up for the Washington Edition newsletter for news from the US capital and watch Balance of Power at 1 and 5 p.m. ET weekdays on Bloomberg Television.

Chart of the Day

India told its oil refiners to come up with plans for buying non-Russian crude, a scenario that would have far-reaching consequences for the global market if it ultimately meant reduced dealings with Moscow. The government has asked state-owned processors to prepare an outline of where alternate barrels can be sourced and at what volume if Russian flows get stopped, sources say, with one adding that the instruction amounted to scenario planning in case Russian crude were to become unavailable.

And Finally

In an ordinary garage in central Taiwan, a dozen people clad in helmets, bulletproof vests and goggles stand quietly in formation, airsoft rifles in hand. They're not soldiers, but civil-defense volunteers learning how to neutralize an enemy in close-quarter combat. Facing the persistent threat of Chinese invasion, a growing number of civilians armed with air guns are signing up for urban warfare courses under a broader Taiwanese government push to improve resilience.

Vega Kung, president of Taiwanese airsoft-gun manufacturer, Vega Force Company. Photographer: An Rong Xu/Bloomberg

Pop quiz (no cheating!). Which country backtracked on an earlier decision to exclude YouTube from its social-media ban for children under 16 years of age? Send your answers to balancepower@bloomberg.net

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Microplastics at bedtime

Don't breathe in.
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Prognosis is exclusively for Bloomberg.com subscribers. As a loyal reader, you're receiving a complimentary trial. If you'd like to continue receiving Prognosis, and gain unlimited digital access to all of Bloomberg.com, we invite you to subscribe now at the special rate of $149 for your first year (usually $299).

Hi, it's Harry in London. It's time to say goodbye to the plastic lunch box that I saved after my last takeaway. I've decided to make the switch to glass. But more on that to follow...

Today's must-reads

  • The first test for Novo's new CEO is winning back the US weight-loss market that the company pioneered. 
  • An "entrepreneur of the year" brought the first big bust to the AI boom. 
  • Amazon, Apple and Google pledge to work with health systems and the Trump administration to make fragmented US medical data more useful.

Plastic in Our Lungs?

When sunlight filters through the window, most of us presume that the tiny particles dancing in the air are dust. Turns out many are probably fragments of polyethylene and other microplastics. 

The polluting debris floats around indoors in far higher concentrations than previously thought, researchers in France said in a paper published this week. We could be inhaling 68,000 microplastic fragments a day just in our homes and cars, according to Nadiia Yakovenko, who co-led the study, and her colleagues at the University of Toulouse.

Even more importantly for human health, the scientists found that the vast majority of particles were smaller than 10 micrometers — about a seventh to a 10th of the thickness of a strand of hair. "The smaller the particles are, the further it's going to penetrate into human tissue," Yakovenko said in an interview. Because they can go deep into our bodies, the pollutants may contribute to damaging the lungs and the digestive system, triggering inflammation and many associated diseases, she added. 

"These particles are completely invisible to the naked eye," the authors wrote. "We inhale thousands of them every day without even realizing it. Deep inside our lungs, microplastics release toxic additives that reach our blood and cause multiple diseases."  

The scientists used their own cars and homes as testing grounds. In three apartments in Toulouse, they collected samples from bedrooms, home offices and living rooms, placing the filter holders lower in the bedrooms to reflect inhalation during sleep. The two cars, one new and one old, had polyester fabric seats and were tested while being driven. The results showed there were more microplastics in cars than apartments, but not significantly so.

The scientists called for more research on the topic, saying their findings hint at far more potential public health damage than previously estimated,  describing the situation as "particularly worrisome." 

Yakovenko acknowledged that all of us are exposed and there isn't much we can do, except perhaps to cut back on our plastic use. In cars, that could mean a return to old-fashioned leather seats. On my desk, I'm definitely getting that new lunchbox. — Harry Black

What we're reading

This startup proposes to remove microplastics from our blood for about $13,000, the New York Magazine reports. 

Scientists are developing ways to probe hidden layers of consciousness in people, animals and maybe even AI, Nature says. 

Using messenger RNA, scientists are overcoming a key challenge to HIV vaccines, according to STAT. 

Contact Prognosis

Health questions? Have a tip that we should investigate? Contact us at AskPrognosis@bloomberg.net.

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