Navigating Turbulent Times: A Conversation with David Frum

A resilient investment strategy demands more than close attention to market indicators. It requires a clear understanding of the broader forces shaping the global landscape, from political leadership and trade policy to regulatory developments and geopolitical risk.

Nicola Wealth hosts thought leadership events to provide clients and guests with deeper context behind the headlines. These events offer timely insights from respected voices who help interpret the shifting dynamics that influence long-term investment decisions.

On May 21, 2025, Nicola Wealth welcomed political commentator and author David Frum to Toronto for a conversation on the evolving relationship between Canada and the United States. Moderated by Nicola Wealth Chairman, CEO, and CIO John Nicola, the session examined key policy developments, cross-border risks, and Canada’s strategic position in an increasingly complex environment.

Hosted at the Design Exchange, the former home of the Toronto Stock Exchange, the event drew a full audience despite the spring rain. Frum delivered a keynote address followed by a fireside conversation with John Nicola, providing valuable perspective on the current state of U.S.-Canada relations and broader global economic challenges.

David Frum: A Political Voice with Deep U.S.-Canada Insight 

David Frum brings both lived and professional experience to his political analysis. A dual citizen of Canada and the United States, he has spent decades writing for leading publications including The Atlantic, The Wall Street Journal, Forbes, National Post, and NPR. As a former speechwriter for President George W. Bush, Frum is widely known for coining the term "Axis of Evil." 

Frum's political journey began as a teenager campaign volunteering in Canada; an early spark that evolved into a career shaped by real-world experience analyzing global policy. Though long associated with Republican politics, Frum has emerged as an independent voice in recent years.

Today’s Tensions Are Policy-Driven, Not Inevitable 

"We are here to review North American affairs at a time of unnecessary crisis," Frum began, highlighting that today’s tensions are not natural disasters but policy-driven choices, and therefore reversible.

According to Frum, three major challenges should have taken priority for any administration entering office in 2025: 

• Fiscal Restoration: Bringing order to U.S. finances after decades of debt accumulation from wars, recessions, and pandemic-related spending 
• Trade Restructuring: Managing the relationship with China and rebuilding international trade frameworks after COVID-19 disruptions 
• AI Governance: Establishing international protocols for artificial intelligence to maximize benefits while minimizing risks 

 Instead, the focus has shifted toward implementing broad-based tariffs as a central strategy policy tool. 

How Tariffs are Reshaping Economic Risk 

 Unlike traditional taxes, Frum described how today’s tariffs differ in three critical ways:

• Presidential Control: Unlike taxes imposed by Congress, tariffs are now directed by the president 
• Discretionary Relief: The president can grant exemptions, creating opportunities for both political favour and potential corruption 
• Regressive Impact: Tariffs fall most heavily on lower-income Americans who spend more of their income on goods rather than services 

 As Frum explained, “The towel is tariffed, but the swimming club membership is not. The doll is tariffed, the nanny playing with it is not.”

Beyond their immediate cost, tariffs destabilize supply chains and reduce long-term competitiveness. Even threats of tariffs have lasting consequences. When China imposed a 25% tariff on U.S. soybeans at the start of the 2018 trade war, the shift in global trade flows was immediate. Brazil quickly became China’s dominant supplier, accounting for over 80% of Chinese soybean imports that year, while the U.S. share fell sharply to less than one-fifth.

He also addressed recent market volatility. Six weeks prior to the event, weak participation at U.S. bond auctions spiked rates, raising questions about global confidence in American debt. While equity markets have since bounced back, largely on AI enthusiasm, Frum warned that underlying problems remain unaddressed.

Canada’s Deep Integration with the U.S. 

 "The United States is Canada's best friend, whether Canada likes it or not," Frum remarked. Geography creates unavoidable interdependence, but also vulnerability.

 He pushed back on the idea that Canadian imports can be easily replaced with goods from other nations. In reality, the relationship runs far deeper than many realize.

 For instance, about one-third of pulp for American toilet paper comes from Canada, but U.S. industries cannot simply switch suppliers. The recipe for toilet paper production has been refined so specifically that it depends on the exact chemical composition Canadian pulp provides. Substituting pulp from another nation could be disastrous for product quality. 

The same is true for Canadian wheat, a key ingredient used in significant amounts of U.S. pasta production. Decades of refined processes built around specific Canadian grain characteristics cannot be easily replicated elsewhere. 

This level of economic integration is so thorough that former Canadian ambassadors to the U.S. have said their toughest task wasn’t managing the bilateral relationship, it was understanding its full scope.

Cooperation between the two countries is embedded in nearly every layer of governance, trade, and legal systems. Much of it is so routine that it rarely reaches high-level political discussion. For example, cross-border law enforcement often executes warrants with seamless coordination, because that’s simply how the system functions. 

Defence Cooperation Is No Longer Separate from Trade

For over 70 years, Canada has collaborated with the U.S. on Arctic missile defence, sharing infrastructure and access without ever requesting compensation, even though Canadian airspace is critical to that system.

Now, as the Trump administration pushes for a new missile defence initiative, what they call the “Golden Dome”, Canada may need to rethink its approach. As Frum put it, Canadians should no longer offer such cooperation unconditionally. His new question becomes: “What are you going to give us for it?”

How Canadian Leadership Is Adapting Its Strategy 

When asked about Prime Minister Mark Carney's approach to managing the Trump administration, Frum offered cautious praise.

Carney, he said, has maintained a firm and respectful tone in negotiations, something previous leaders have struggled to enforce. Second, he has favoured the use of export taxes rather than retaliatory tariffs. "Export taxes impose harm on the other person," while tariffs are like "each picking up a mallet and hitting yourself on the head." 

He particularly supported Ontario Premier Doug Ford's proposed 25% export tax on electricity as both a weapon and signalling device, though he noted Quebec's much larger electricity exports represent the true "nuclear weapon" in any trade dispute. 

The Meaning Behind Trump’s Rhetoric

Trump's frequent references to Canada as the “51st state” were a focal point in the discussion. Frum argued these comments aren't predictions but "indications of intent", expressions of malice that reveal the deteriorating relationship's true nature and put pressure on Canadian negotiators to be "much pricklier than you would normally want to be." 

Four Strategic Priorities for Canada

To navigate this era of uncertainty, Frum closed his remarks with a focused set of recommendations for the Carney government, outlining a roadmap to navigate mounting U.S. pressure and preserve Canada’s strategic leverage.

1. Strengthen the Canada–Mexico alliance

While the two countries may differ on certain policies, a united front could limit the United States’ ability to pressure either partner independently. A stronger trilateral dynamic would also help ensure the U.S. remains accountable to the trade agreements it has signed.

2. Exercise patience while U.S. political momentum fades

Despite pressure to respond quickly, Frum advised Canadian leaders to wait. He described the Trump administration’s position as “visibly weakening, month by month, week by week,” and suggested that its ability to apply pressure would be significantly diminished within the year. Entering negotiations closer to the U.S. midterm elections could yield a more favourable environment. 

3. Focus on export leverage, not tariff retaliation

 “We cannot win a tariff war,” Frum said. Instead, he urged Canada to concentrate on targeted export taxes, such as oil from Western provinces or electricity from Quebec, that would place financial pressure directly on U.S. consumers and decision-makers.

4. Preserve national unity to protect negotiating strength

Frum warned that provinces most affected by export taxes, particularly Quebec and Alberta, may seek separate trade arrangements with the United States if not adequately supported. To maintain Canada’s leverage and policy cohesion, the federal government will need to provide compensation or support mechanisms to keep the country aligned in its approach.

History Shows the Cost of Turning Inward 

The discussion concluded with a historical perspective on the long-term consequences of protectionism. Frum pointed to Argentina as a cautionary example, a country that was among the world's wealthiest in the early 20th century but experienced a significant decline after turning inward and prioritizing domestic market protection over global competitiveness. 

He warned that "the United States could follow that same path." Noting that tariffs distort every economic signal and make producers less competitive globally, even if they offer short-term advantages in domestic markets.  

Key Takeaways 

1. Tariffs distort competitiveness. Unlike traditional taxation, tariffs are politically discretionary and disproportionately impact lower-income households.
2. Canada’s economic leverage lies in exports. Strategic use of export taxes, like electricity and oil, offers more effective pressure than retaliatory tariffs.
3. National unity is a strategic asset. Keeping provinces aligned is essential to preserve Canada’s negotiating power on the world stage.
4. The U.S.-Canada relationship is deeply interwoven. From pulp to power grids, supply chains and cooperation are complex and relatively irreplaceable.

Looking forward

The discussion served as a timely reminder of how quickly decades of cross-border cooperation can be tested. While David Frum expressed confidence in Canada’s ability to adapt, the path forward will demand strategic thinking, national cohesion, and a clear understanding of an increasingly unpredictable partner.

For Canadian policymakers and investors alike, the message was clear: long-standing assumptions about the U.S.-Canada relationship can no longer be taken for granted. Navigating this shifting landscape requires preparation for structural change, not just short-term volatility.

At Nicola Wealth, we understand that resilient investing goes beyond reacting to markets; it requires anticipating the macro forces behind them. Events like this are part of our commitment to empowering clients with exclusive access to global thought leaders and contextual intelligence. Whether navigating elections, tariffs, or technological shifts, our clients count on us for clarity and conviction.

Curious how the geopolitical or macroeconomic environment could impact your portfolio? Connect with a Nicola Wealth advisor for a no-obligation personal assessment.

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