Whether you are/have at one point been a Trump supporter or on the other hand, have been extremely taken back by his political movements, one thing’s for sure, he and his administration have been focused on implementing many changes to the way the United States is run. Of course, many of these actions have focused on trade and as a result are likely to also have various implications for the rest of the world.
As one of the United States closest geographic neighbours, Canada is for example, one of the countries that is sure to be impacted by certain U.S. movements. Again, it is no surprise that the Trump administration has proposed specific changes surrounding the future of their trading practices, and as such this begs the question ‘will Trump’s position on trade hurt the Canadian economy?’
Read on to hear 3 reasons why and how Trump’s stance on trade could be detrimental to Canada.
First and foremost, the basis of Trump’s campaign as well as his current position as President has revolved around the idea of putting ‘America First’. Right off the bat, this perhaps does not bode well for the realities surrounding international trade altogether.
It is probably also no surprise to that Donald Trump has also been very vocal about wanting to renegotiate the terms of NAFTA (North American Free-Trade Agreement). If this is in fact to be case, then Canada is very likely to be affected.
For starters, taking apart or altering these terms in any way is likely to have drastic ramifications for many businesses in Canada. Not only will these changes impact these big businesses as a whole, it will also directly affect the workers and the flow of goods that are transported across the Canadian – U.S. border.
All in all, while Canada might not be the first targeted in the Trump administration’s plans for trade, there is no doubt that Canada will be impacted by any drastic trade movements they make. As we do rely so heavily on our trade with the U.S., as a result, Canada will not likely avoid the influence of these types of changes.
2) Trans-Pacific Partnership Trade Agreement (TPP)
Beyond NAFTA, we have the Trans-Pacific Partnership Trade Agreement (TPP). This arrangement is trade agreement that includes 12 countries (including Canada and the U.S.) and affects over 800 million people worldwide.
At this point in time, it is estimated that the total annual revenue that Canada exports through TPP is about $160 billion. Here the reality is that with TPP, Canada can import goods at a lower price, as it enables lower trade barriers.
At this point in time, there are many other prior negotiated rules and regulations associated with the TPP that contribute to the Canadian economy. With that being said, should Trump opt to do away with their place in the TPP trading arena, TPP this can certainly impact the Canadian economy.
In about 90 days, this agreement is to be revisited by the Trump Administration and we will then see what this might mean for Canada. Perhaps Canada and other countries will remain apart of TPP, regardless of an impending U.S. departure.
3) New Tariffs on Imported Good
While in the beginning, Trump did not seem to target Canada regarding trade and other administrative changes, it wasn’t too long after Trump met with Trudeau to discuss a slight change to the trade agreement, that his administration went on to challenge two key Canadian trading areas, the Softwood Lumber Exporting Industry and the Dairy Supply-Management System.
With the trade position, Trump has proposed a 20% tariff on Canadian imports of softwood lumber. Currently the U.S. imports soft lumber from Canada each year totalling around $5.66 billion. In this particular instance however, many financial experts actually believe that the United States will be more greatly affected by this action.
This has to the fact that American’s currency rely so heavily on the Canadian soft lumber industry to support their home building and renovation requirements. These tariffs may in fact drive up the expenses associated with these services and supplies for American’s.
On one hand Canada already feels it’s trading prices are very reasonable, some believe this is a move that has more to do with the balancing of the ongoing U.S. trade deficits. Ultimately, however this does demonstrate an impact on the current Canadian economy with these industries being specifically being singled out.
In the end . . .
Many financial and political experts have expressed much concern over the Trump Administration’s level of knowledge of international trading practices. Moreover, up until this point, Trump’s entire presidency has been plagued by drama and confusion.
His clear perspective on putting ‘America first’, and how he has abruptly flipped from wanting to ‘tweak’ NAFTA to threatening to pull out of it altogether, points to the unpredictable nature of his Presidency and his trade position moving forward.
Regardless of President Trump’ s stance on global trade, only time will tell whether or not these plans actually come to fruition. If they do however, they will surely have a significant impact on the Canadian Economy, to be determined however, whether this will be on a small or a larger scale. It is however, still a good idea to follow along with these developments and identify how this might affect your finances.