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America’s trading partners are bracing for trouble now that Donald Trump has been elected president of the United States again — and for good reason. He’s a protectionist and an isolationist who will use the threat of tariffs to negotiate more favourable trading terms for the U.S.
Trump will seek to renegotiate the deal with Canada and Mexico when the free trade agreement between the three countries comes up for review in 2026. Both countries must be prepared to give concessions to “Buy America” lobbyists and special interest groups. Quebec’s insistence that supply management remain so that Canadians can continue to overpay for dairy, poultry and eggs won’t pass muster with American farmers, who have lobbied to get greater access to the Canadian market.
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In 2023, Mexico overtook China and Canada as the biggest exporter to the United States, partly due to the existence of new Chinese-owned car parts manufacturing plants that were built to take advantage of tariff-free access to the U.S. and Canada. Trump has already hinted that such practices by China won’t be permitted and has threatened to impose a 60 per cent tariff on all exports from China. He also proposes an across-the-board tariff of 10 to 20 per cent on all exports to the United States.
Such tariffs would likely violate the United States-Mexico-Canada Agreement, whose existence is threatened altogether by the Trump trade team. They want aggressive tariffs or major concessions. They hope to bolster “Buy America” requirements on government procurement contracts that shut out Canadian and Mexican competitors.
However, the three economies have integrated their economies since the signing of the North American Free Trade Agreement in 1994 and Canada will be somewhat protected from Trump’s draconian proposals. Given the reliance of many American industries on trade with Canada, a powerful American lobby is in place to prevent the disruption of their supply chains, a reality that will likely mitigate protectionist damage.
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China, on the other hand, is in for a rough ride. The country is already suffering from strategic mistakes made by its government. These include permitting real estate speculation to run riot, allowing local governments to borrow excessive amounts to build fancy infrastructure and the $1-trillion cost of China’s Belt and Road Initiative around the world. Beijing has built ports, rail, roads, airfields and other infrastructure for struggling countries to curry political favour, but many of these countries are unable to pay for them.
China will be hit hard, but Canada has little to fear from Trump trade policies for two reasons: we are inter-dependent and economically integrated; and Canada remains America’s most important customer and economic partner.
However, Trump’s plans to deport millions of undocumented migrants will create chaos in Canada, as many will flee here because we are separated by the world’s longest undefended border. Border controls and surveillance measures should be enhanced in anticipation of this.
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But by far, the biggest threat is the fact that Trump dislikes Prime Minister Justin Trudeau. This is because Trudeau was caught on mic at a summit ridiculing Trump with other world leaders. The fact that Trudeau remains in office will invite trouble from Trump.
Financial Post
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Publish date : 2024-11-07 04:26:00
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