So, as of now, there’s no going back. Inauguration Day has dawned upon us and a morally questionable, unpredictable, real estate mogul will be taking the Presidential Oath of Office a little under an hour. Thankfully, while sipping on maple-flavoured Crown Royal under heated, beaver-patterned blankets, we Canadians are relatively shielded from this utter madness they call American politics.
Much of Donald Trump’s rigamarole in the lead up to him getting elected has been sheer entertainment for Canadians — the fact that he called us Snow Mexicans, and referred to Justin Trudeau as “President of Canada” actually makes it really hard to take his current threats of renegotiating NAFTA seriously. So we reached out to a bunch of prominent Canadian economists to get their take on just how much Canada’s economy will be impacted by President Trump & co.
“As far as the U.S.-Canada relationship is concerned, although Trump’s comments regarding NAFTA are concerning, I am cautiously optimistic,” TD economist Brian DePratto told VICE Money. “Most of his ire appears to be focused on Mexico and China rather than Canada.”
Potential trade tragedy
Trade is our foremost concern when it comes to Trump, considering that more than three-quarters of Canada’s exports go to the U.S. In fact, Canada was the United States’ second largest supplier of goods in 2015, with $575 billion in total two-way goods traded that year. The Trump administration’s constant threats of “putting America first” could significantly impact the price and hence demand for Canadian goods in U.S. markets.
“Unlike Trump, Canada doesn’t look at trade as a zero-sum game, but a partnership that makes both countries succeed,” says Craig Alexander, Chief Economist at the Conference Board of Canada.
Alexander believes that Trump’s protectionist policies are a concern for Canada. “Trump is worried about job losses in the U.S…. fair enough. But Canada is not a low cost labour centre. We’ve actually seen the same sort of decline in manufacturing jobs as in the U.S. We’re not part of the problem, we’re experiencing the same kind of challenges as they are.”
Trump’s unpredictability, according to Finn Poschmann, Chief Executive Officer of the Atlantic Provinces Economic Council is in fact, deliberate.
“It’s a shrewd strategic choice and approach to negotiation. It upsets the negotiation plans and stances of of counterparts who anticipate a particular response to a typical set of options.”
Protecting against protectionism
Dealing with Trump, says Alexander, requires a different, fresher approach since his perspectives are not at all aligned with the Trudeau government. “The fact that they might be using [former Canadian Prime Minister] Brian Mulroney as a conduit when it comes to economic negotiations is a good idea.”
That’s probably true, considering the latest Twitter-fingers kerfuffle that emerged from Trump Tower involving a suggestion that any product not manufactured in the U.S. would be subject to a “big border tax”.
“That would be a clear negative for Canada,” says Krishen Rangasamy, Senior Economist at National Bank of Canada. “Recall that our dependence on exports [to the U.S.] is growing in light of slowing domestic demand. Non-petroleum good exports could sink almost 11 percent if this tax is actually implemented.”
RBC Deputy Chief Economist Dawn Desjardins points out that while a border tax would be negative for Canada, it will likely also be negative for the U.S. Which means, like many other things Trump promised, it is unlikely to materialize.
“It’s important to consider that 35 U.S. states ship the greatest share of their exports to Canada; the largest share of imports in 22 states come from Canada and two-way trade accounted for more than 5 percent of GDP in 11 of those states,” Desjardins told VICE Money.
Translation: there already is a mutually beneficial relationship between many American and Canadian manufacturers, so no one has the incentive to mess it up.
Trumponomics still a mystery
Overall, the consensus among economists we spoke is that because Trump’s policy statements are so vague, it is truly impossible to determine the extent to which the Canada will be affected by a Trump administration.
“It is important to remember that all we have to work with right now are broad statements, not specifics, and much of the commentary around trade has not been focused on Canada,” says DePratto.
Poschman calls fears of a Trump presidency “exaggerated”. “The potential for a negative impact is significant, but it is not currently obvious that the impact (as opposed to the potential) will be significant.”
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