When in Doubt, Weaponize the US Currency
On the last Friday in February, at approximately 3:00 p.m. EST, a major event unfolded in the financial world.
The United States used the U.S. dollar as a tool of pressure against Canada. By presidential decree, Donald Trump demanded that Canada immediately guarantee energy and oil supplies to the U.S. government under a binding agreement. The move was framed by the U.S. as a matter of “American sovereignty,” with officials arguing that Canada’s “weaponization” of energy created an unacceptable risk to U.S. national security and that Canada needed to understand the consequences of its decision.
Soon after, the U.S. imposed U.S.-dollar restrictions on Canada’s six largest banks and froze their operations across all U.S. states. These institutions collectively control roughly $4 trillion in assets. TD Bank alone operates more than 1,100 branches in the United States; as a result, U.S. customer accounts were frozen. Canadian banks process an estimated $400 billion in U.S. transactions each month, and under the U.S. directive, the banks were told they would need to be fully separated from Canada in order to comply. The consequence, as described, would be immediate: millions of American citizens could lose access to their own money, triggered by what is fundamentally a political dispute over energy policy. The president reportedly claimed this would bring Canada “to its knees” within 48 hours.
Roughly two hours later, Canada’s prime minister responded publicly and refused the demand. In that press conference, he announced Canada would begin selling U.S. Treasury holdings at an estimated pace of $25 billion per month, about $350 billion in total. He also said China’s central bank would begin selling U.S. Treasury bills as well.
Next, the prime minister announced that the Canada Pension Plan, nearly $600 billion of which is invested in the United States, would be directed to start reducing its U.S. exposure. He stated that approximately $390 billion in U.S. Treasury bills would be sold within 90 days, with proceeds shifted into Japanese government bonds, gold, and EU bonds.
The stated rationale was straightforward: large-scale Treasury selling would push U.S. interest rates higher, increase inflationary pressure, and raise mortgage costs for Americans. In effect, the message to other central bankers was: if the U.S. is willing to do this to Canada, it could do it to anyone.
The prime minister further said he had spoken that same day with central banks and officials in England, the European Union, China, and Japan. According to his statement, they agreed to provide liquidity reserves for Canada and to scrutinize the U.S. action closely.
He argued that America’s vulnerability is its debt, its reliance on issuing Treasury bills to cover deficits, and that central bankers around the world were already calling one another. He added that discussions had begun as early as January about expanding trade and settlement in currencies other than the U.S. dollar.
He also positioned himself as different from a typical politician, emphasizing his familiarity with central banking and crisis management. He described the U.S. move as an attack on Canada, not as an ally but as if Canada were a foreign adversary, driven by a desire for Canada’s natural resources.
Finally, he claimed Canada had prepared for this scenario, including additional anticipated directives from Trump since January 2026, by arranging currency-swap and settlement pathways with the central banks of England, the EU, Japan, and China, enabling trade in pounds, euros, yen, and yuan. In his framing, this would “neutralize” the U.S. dollar’s leverage. He warned that while the U.S. dollar is currently used in roughly 57% of global trade, large-scale selling of Treasuries and bonds would erode trust.
To cap it off, he announced Canada would begin issuing its own bonds and treasury bills, fully backed, he said, by Canada’s resource base, positioning them as direct competitors to U.S. Treasuries. He concluded that the downstream impact on American citizens would be severe, especially through higher borrowing costs and a rising cost of living.
Sarge