How will the outcome of the US Election effect the Canadian Economy? If this isn’t a question you are asking yourself, it should be!
Why should you care ? You ask. I’ll tell you why.
Foreign Investment in Canada is both direct (made to manage and control actual enterprises) and portfolio (made only for the interest or dividends paid, or the possible capital gain to be achieved). The amount of both types is very large, with the consequence that a considerable amount of the Canadian economy is controlled by foreigners.
Canada and the United States share a common trading relationship. The United States is by far Canada’s largest trading partner, with more than $1.7 billion CAD in trade per day in 2005. In 2009, 73% of Canada’s exports went to the United States, and 63% of Canada’s imports were from the United States. Trade with Canada makes up 23% of the United States’ exports and 17% of its imports. By comparison, in 2005 this was more than U.S. trade with all countries in the European Union combined, and well over twice U.S. trade with all the countries of Latin America combined. Just the two-way trade that crosses the Ambassador Bridge between Michigan and Ontario equals all U.S. exports to Japan. Canada’s importance to the United States is not just a border-state phenomenon: Canada is the leading export market for 35 of 50 U.S. states, and is the United States’ largest foreign supplier of energy.
Bilateral trade increased by 52% between 1989, when the U.S.-Canada Free Trade Agreement (FTA) went into effect, and 1994, when the North American Free Trade Agreement (NAFTA) superseded it. Trade has since increased by 40%. NAFTA continues the FTA’s moves toward reducing trade barriers and establishing agreed-upon trade rules. It also resolves some long-standing bilateral irritants and liberalizes rules in several areas, including agriculture, services, energy, financial services, investment, and government procurement. NAFTA forms the largest trading area in the world, embracing the 405 million people of the three North American countries.
The largest component of U.S.-Canada trade is in the commodity sector.
The U.S. is Canada’s largest agricultural export market, taking well over half of all Canadian food exports. Similarly, Canada is the largest market for U.S. agricultural goods, with nearly 20% of American food exports going to its northern neighbour. Nearly two-thirds of Canada’s forest products, including pulp and paper, are exported to the United States; 72% of Canada’s total newsprint production also is exported to the U.S.
At $73.6 billion in 2004, U.S.-Canada trade in energy is the largest U.S. energy trading relationship, with the overwhelming majority ($66.7 billion) being exports from Canada. The primary components of U.S. energy trade with Canada are petroleum, natural gas, and electricity. Canada is the United States’ largest oil supplier and the fifth-largest energy producing country in the world. Canada provides about 16% of U.S. oil imports and 14% of total U.S. consumption of natural gas. The United States and Canada’s national electricity grids are linked, and both countries share hydropower facilities on the western borders.
It should be noted that neither Trump nor Clinton were supporters of the TPP and so the fate of the TPP which by all economists estimates would be good for Canada was in the balance regardless of which candidate was successful in the US election.
How will a Trump Presidency effect our economy? The election is over and Trump has been voted in, so now we have to ask, how will this affect us?
“I am going to bring our jobs back to Ohio and Pennsylvania and New York and Michigan and all of America and I am not going to let companies move to other countries, firing their employees along the way, without consequences,” – Trump – July’s acceptance speech.
If Mr. Trump carries through with his promises, shock waves could be sent through the global economy and financial markets and Canada could be the most affected country.
With that in mind, here’s how a Trump presidency might affect Canada’s economy:
“This wave of globalization has wiped out totally, totally our middle class, It doesn’t have to be this way. We can turn it around and we can turn it around fast.” – Trump – June 2016
Mr. Trump plans to axe the Trans-Pacific Partnership, an ambitious trade agreement between 12 countries (including the U.S. and Canada) that account for 40 per cent of global economic output. The deal, which has yet to be ratified, “would be the death blow for American manufacturing,” he says.
Likewise, in a 2015 interview on 60 Minutes, Mr. Trump described the North American free-trade agreement as a “disaster” he would renegotiate or even “break.” He’s reiterated those comments on the campaign trail.
Mr. Trump now has the leeway to further his protectionist platform.
For instance, he could terminate any free-trade deal, though such a decision would likely get dragged through the courts, a trade expert tells Reuters. (Under the NAFTA agreement, any party to the deal can withdraw with six months’ notice.) However, Mr. Trump’s plans for tariffs – he’s proposed steeper taxation on goods imported from China and Mexico – would need congressional approval.
The implications for Canada could be significant.
The TPP would lower trade barriers, allowing Canada to import goods at lower prices. Broadly speaking, the deal would facilitate “higher productivity, higher GDP and higher incomes,” economics professor Trevor Tombe wrote in Maclean’s, though not every industry would benefit.
Moreover, Canada is highly dependent on a healthy trade relationship with its southern neighbour. The vast majority of Canadian exports end up on U.S. soil.
Approximately 78% of all of our exports are to the US.
So what can we do? The relations between Canada & the US have always been of paramount importance to Canada. Now that Donald Trump is president, it is essential that Canada foster these relations and ensure that US investment in Canada is maintained.
If you look at all the Foreign ownership in Canadian Industry (approximately 50%) and then consider 50% of that is American, that means that in just the industrial sector alone, the United States accounts for approximately 25% of all goods produced for export in Canada. Considering they buy approximately 78% of all of our exports, this puts us in a very dangerous position if Trump decides to reduce imports and/or put higher tariffs on imports to the US.
It is of vital importance that Justin Trudeau work to ensure maintained import/export relations with the US as these things alone will influence US presence in the manufacturing sector in Canada.
The success or failure of economic relations between Canada and the US has a trickle down effect on all of us. The less we can export, the less gets manufactured. Lowered manufacturing means fewer people required.
I urge everyone to do your part and speak your voice to send a clear message to the Trudeau government that we must work to ensure maintained economic relations with the US and work together as a North American Society. Our livelihood depends on it!
The Globe & Mail | How much of Canada’s energy resource lies in foreign hands?
Wikipedia | Economy of Canada
The Globe & Mail | How a Trump presidency would affect the Canadian Economy
The Canadian Encyclopedia | Foreign Investment
In bed with an elephant | A gripping retrospective of United States-Canada relationships as personified by successive presidents and prime ministers. Explains the continuing fight for Canadian independence in North America. | Parts 1-5 on Youtube |