Good morning, this is investment reporter Tim Shufelt, and today we’re wading into the torrent of news surrounding trade, tariffs and Donald Trump. In less than a week, the U.S. president-elect returns to the White House with a stockpile of grievances and promises of belligerence toward allies and trading partners, Canada perhaps chief among them. We’ll take a closer look at how the country is bracing itself for turmoil. But first:
In the news
Donald Trump’s proposed tariffs could cost Ontario 500,000 jobs, Premier Doug Ford warns
Barrick Gold Corp. has suspended operations in Mali after $245-million worth of gold seized by military junta
Canada’s telecommunications and television complaints watchdog saw complaints surge 38 per cent over the course of a year (with Rogers responsible for nearly a quarter of overall complaints)
Pizza Nova allegedly paid delivery drivers as little as $6 an hour after systematically misclassifying them as independent contractors, a class action lawsuit claims
On our radar
- Statistics Canada reports manufacturing sales data, wholesale trade data and new motor vehicle sales data
- On the housing front, we’ll get the numbers on existing home sales and the MLS Home Price Index
- The U.S will release its Consumer Price Index inflation report for December
- Earnings include JPMorgan Chase & Co. and Goldman Sachs Group Inc., which both recently exited the Net-Zero Banking Alliance intended to encourage climate change efforts at major financial institutions. Earnings are also coming from Citigroup Inc. and Wells Fargo & Co.
Canadian softwood lumber producers have started to warn their U.S. customers of price hikes should tariffs on Canadian exports come into effect.Jacques Boissinot/The Canadian Press
In focus
How a trade war with the U.S. is shaping up
Canada got a full dose of Trump’s hostile approach to trade during his first term. Now, hostilities are set to resume when he is sworn in for the second time on Monday. His threat of Day One tariffs of 25 per cent on all Canadian imports set off a crisis of uncertain proportions. That’s because one is never sure what Trump means literally and what amounts to tactical bluster. The threats to Canadian sovereignty have further muddied the waters as to what exactly Canada needs to be prepared to defend against.
Alberta Premier Danielle Smith, after visiting Trump’s home in Florida last weekend, urged Canadians to brace for the impact of trade tariffs starting next week, including on oil and gas destined for the U.S. market.
The battle lines
Over the past week, prime ministers past, present and possibly future have weighed in on the tensions growing between the two countries, with each espousing a different approach to navigating the grave risk to Canada’s economy that Trump could represent.
- Jean Chrétien insisted on the need for offence and called on Canada’s politicians to show some “spine and toughness.” Pressure the Americans to control the illegal guns crossing the border, he said. Assert our jurisdiction over the Northwest Passage. And reduce our economic vulnerability to the U.S. by eliminating provincial trade barriers, while banding together with others in Trump’s crosshairs, such as Mexico and the European Union. “The whole point is not to wait in dread for Donald Trump’s next blow. It’s to build a country and an international community that can withstand those blows.”
- Stephen Harper took issue with how Trump characterizes its trade deficit as “subsidizing” Canada, when that deficit is largely the result of the U.S. buying so much Canadian oil and gas. And since we sell it at a discount to market value, it’s actually Canada subsidizing the U.S., he said. “Maybe Canadians, if Trump feels this way, should be looking at selling their oil and gas to other people.”
- Prime Minister Justin Trudeau’s resignation announcement may have undermined his own leadership, but he’s still in office at a moment of potential economic crisis, at least until the Liberal Party chooses his successor. Lately, he’s been emphasizing the mutual benefits of the Canada-U.S. relationship, including the free trade deal his government negotiated with the first Trump administration. “No American wants to pay 25 per cent more for electricity or oil and gas coming in from Canada. That’s something I think people need to pay a little more attention to.”
- Conservative Leader Pierre Poilievre said Americans need to be reminded of the value of its close trade relationship with Canada. And the cost of tariffs should be made explicit to union workers and business leaders south of the border, he said. “We need to put Canada first by locking arms with American economic allies on the ground that will put pressure on Washington to do the right thing.”
What’s at stake
Considering the U.S. consumes nearly 80 per cent of Canada’s exports, it’s hard to overstate the potential economic shock that is now on the table. A few years ago, the Bank of Canada modelled a trade war similar to the one Trump has floated: 25-per-cent tariffs on all trading partners, with the cost of retaliation factored in. It estimated the blow to Canadian GDP would be around 6 per cent. Except for the temporary COVID-19 shutdown, that’s worse than any previous recession Canada has suffered, according to a note published by National Bank.
The Canadian labour market would be hit hard in such a scenario. Ontario Premier Doug Ford estimated that Trump’s tariffs would cost the province as much as 500,000 jobs.
In some respects, the tariffs are already having an effect. Some Canadian lumber producers have warned their U.S. customers of a 25-per-cent price increase, despite Trump’s assurances that the burden of tariffs falls on foreign exporters. Trump also dismissed the importance of Canada as a softwood lumber supplier. “We don’t need their lumber,” he said. “We have massive fields of lumber.”
Canada’s cards to play
The U.S. has no better customer in the world than Canada, Tony Keller writes. Over the past year, Canada has bought nearly half-a-trillion dollars of U.S. exports. Last year, Michigan sent 42 per cent of its exports to this country. For Pennsylvania, it was 27 per cent. Politicians and business leaders in those states would surely bristle at the idea of tariffs on their cross-border shipments, should Canada choose to respond with tariffs of its own. None of this would be lost on Trump’s inner circle.
Furthermore, Canada is useful to the U.S. in rivalling the industrial power of China: “To have less trade with an adversary, there must be more trade with friends,” Keller writes.
But in politics, as in life, if diplomacy fails, there’s always retaliation. To that end, Foreign Affairs Minister Mélanie Joly has refused to rule out restricting energy exports to the U.S., which currently relies on Canada for half of its imported oil.
Charted
A stock market palate cleanser
Canada has spent the past year being thoroughly shamed for its economic flaws, but for companies listed on the Toronto Stock Exchange, productivity is on the rise. Since the depths of the COVID-19 pandemic, sales per employee for companies in the S&P/TSX Composite Index are up by about 20 per cent.
Bookmarked
On our reading list
All work: The prospect of a career shift is exciting, but transitioning can be a process. Here’s how to make the leap successfully
No play: Play Airlines is pulling out of Canada less than two years after entering the market
Makes Jack: Jack Daniels’ parent Brown-Forman cutting work force and closing barrel-making plant
A dull boy: Rocky Mountain Bicycles’ creditor-protection filing highlights industry’s woes since the pandemic
Morning update
Global markets edged higher ahead of U.S. consumer price data that could shift the monetary policy outlook, while investors eyed whether big-bank earnings would match sky-high expectations. Wall Street futures and TSX futures pointed higher.
Overseas, the pan-European STOXX 600 was up 0.76 per cent in morning trading. Britain’s FTSE 100 rose 0.81 per cent, Germany’s DAX gained 0.63 per cent and France’s CAC 40 climbed 0.63 per cent.
In Asia, Japan’s Nikkei closed 0.08 per cent lower, while Hong Kong’s Hang Seng advanced 0.32 per cent.
The Canadian dollar traded at 69.70 U.S. cents.
This post was originally published on here
