Trump may boost Canada’s economy
Keystone XL pipeline back from the dead
Take heart, Canada! Don’t let the dour faces on American television journalists, Twitterati and our own CBC get you down. They might all be miserably contemplating the next four years under the ethically challenged, but transformational Donald Trump, instead of the ethically challenged establishment-entrenched Hillary Clinton they clearly hoped would win. Tuesday might have delivered a huge loss to the political class, intellectual class and left-leaning media. But, economically speaking anyway, Donald Trump’s victory is looking like a big win for Canada.
A Trump administration, combined with a Republicancontrolled Senate and House of Representatives, could have reverberations that will be felt by the Canadian economy for years.
To be sure, we can’t be entirely certain — the NAFTA question looms large. But here’s one thing we can be sure of: a Clinton win virtually guaranteed one big loser would have been us.
It’s still impossible to tell which of Trump’s often-wild promises he will actually keep, given how unpredictable he has shown himself to be. But the risk with Clinton was always the opposite. It was her political determination. Had she been allowed to govern as she was resolved to, Canada would have paid the price for as long as eight more difficult years — probably more than it will under even a loose-cannon amateur like Trump. President Hillary Clinton would have implemented policies that would have been sure to drag down growth of an economy on which Canada overwhelmingly relies for its own.
She was unapologetic about her plan to increase taxes, promising to raise the estate and capital gains taxes (where she planned to hike the top rate from 23.8 to 43.4 per cent) and proposed taxing high-frequency stockmarket trades. She said she was open even to new payroll taxes, which would have injured U.S. competitiveness yet further.
Her campaign said she would “take a look at” a carbon tax, if Congress had proposed one. Congress, still firmly in the hands of the Republicans, will now entertain no such thing.
Throughout her campaign, Clinton also distinguished herself as the candidate of multiplying regulations to rein in Wall Street and more spending on entitlements: Where Trump said only he would not cut social security, she went further and said she would “expand it.” She showed no interest in tax relief for corporations or personal incomes, focusing on raising tax revenues, $1.4 trillion over 10 years, another $1 trillion the following decade, in an attempt to reduce inequality through redistributionist schemes.
All these were growthkilling policies overlooked by Canadian pundits who prioritized their distaste for Trump’s vulgarity and jingoism over the prospect of a robust U.S. economy that could help Canada enhance its own prosperity. U.S. gross domestic product has been growing at not much more than two per cent a year for more than a decade, much to Canada’s detriment; under Clinton, that seemed bound to continue.
Will a Trump administration, as unhinged as some might fear it will be, prove more propitious for Canada? There is at least some reason for optimism.
There’s no question the election of a xenophobic and chauvinist president is a problem Americans will have to grapple with; perhaps Canada will now become the North American destination of choice for talented, ambitious immigrants. But however unrealistic or even loopy you might understandably think Trump’s proposals and opinions about immigration, NATO, Russia and the Federal Reserve, his election platform was more geared toward reviving American growth than Clinton’s — and that‘s good economic news for us.
Trump expressed unqualified support for importing Canadian energy in general, and the Keystone XL pipeline in particular. Clinton, once a staunch Keystone backer, chose to flip and turn against it, as a way to appease the most left-wing Democrats. Canadians, and struggling Albertans especially, can renew their hopes we might soon be sending up to one million more barrels of our oil every day to U.S. refineries.
Just as importantly for Canada’s exporters, Trump has promised to slash federal corporate income taxes — combined top marginal corporate rates are some of the highest in the world — from 35 per cent to 15 per cent. Eager to lure home the US$2.4 trillion of U.S. corporate profits sitting idle offshore, he has shrewdly promised a one-time, low tax rate of 10 per cent that, if enacted, will encourage major corporations to repatriate their cash and reinvest it in the U.S., a massive private stimulus program that will do much to spur demand for Canadian exports.
Of course, there remains the significant matter of the North American Free Trade Agreement, which, if Trump keeps his word on cancelling the deal holus-bolus, would spoil any reason for Canadian optimism. But it remains unclear whether he ever intended to erect barriers to Canadian exports, or meant only to impair Mexico when he promised to take his scissors to NAFTA. That, somehow, was never made clear throughout the election campaign.
Nor could trade experts ever agree whether a president even has the power to cancel the deal without approval from Congress. The fate of Canada-U.S. trade will undoubtedly depend on the diplomatic skills of our Liberal government. Improving our odds, to its credit, the Trudeau government wisely avoided publicly taking sides in the U.S. race (despite being urged by anti-Trump pundits to do so, and despite the fact the prime minister’s team would so obviously have favoured Clinton, a fellow liberal).
But a Republican House and Senate are even more apt to stand firm for continued free trade with Canada than a Democratic Congress would have. In the most probable scenario, if our exporters can maintain open trade with the U.S., Trump’s preference for economic growth looks far more likely to benefit Canada than Clinton’s preference for an expanded welfare state. It is too early yet to be certain whether these promising economic changes will come to pass. But on Tuesday night, Canadians at least won some hope of finally escaping from the last 11 years of more muddling along, with our largest export market politically fated to remain underperforming and torpid.