Canada is in a good place with Trump
It’s no big shocker, in a country leaning heavily Democrat, that reaction to President Donald Trump’s truculent inaugural speech in the first 48 hours has run the gamut from fear, to loathing, to horror. But a pause for breath is in order. There’s room for qualified reassurance, from a Canadian standpoint, in the blunt clarity of the new administration’s plans.
The inaugural address last Friday was a near-verbatim reiteration of Trump’s major campaign theme, in terms calculated to appeal to the roughly 63 million Americans who voted for him. This was the big line: “Every decision on trade, on taxes, on immigration, on foreign affairs, will be made to benefit American workers and American families.”
Hand-wringing and hair-tearing aside, that now becomes the standard by which every Trump administration decision will be measured and anticipated, at home and abroad, for the next four years. It means, for starters, that Canadian individuals and businesses can begin to plot a way through the previously impenetrable murk. That leaves us better off, in this narrow sense, than we were Thursday.
Judging from the speech, and a series of brief policy statements that appeared on the White House website immediately after Trump was sworn in, there is profound geopolitical uncertainty ahead. There’s also room for cautious reassurance. This country has cards to play — considerably better ones, it must be said, than Mexico or China.
Here’s what did not appear in the inaugural, or in any of Trump’s remarks since: Any repetition of his prior musings about banning Muslims from entering the United States, or forcing Muslim Americans to register in a database, or curtailing immigration from specific countries, or building a Great Wall on the U.S.-Mexican border.
The wall, front and centre throughout Trump’s run for the Republican nomination and the Presidency last year, has been relegated to the sixth paragraph of a White House website policy summary on law and order. That’s a far cry from a declaration that construction will begin by such-and-such date. It is a concession, perhaps, to the manifest impracticality, grotesque expense and sheer impossibility of forcing Mexico to pay for a wall, either now or later.
Here’s what is on the table in the weeks and months ahead, unequivocally: Combatively protectionist economic policy, which represents the most dramatic and far-reaching shift in the global order since the fall of the Berlin Wall, and perhaps since the Second World War.
“We must protect our borders from the ravages of other countries making our products, stealing our companies, and destroying our jobs,” read one line of the inaugural speech, which was reportedly co-written by Trump’s chief strategist, Stephen Bannon. “Protection will lead to great prosperity and strength.”
Setting aside that this statement is wrong and has been demonstrated to be wrong time and time again, most recently by the North American Free Trade Agreement, under which threeway trade between Canada, Mexico and the United States has tripled in the past 25 years, here’s what it likely means.
The Trump administration, as the speech hammered home yet again, is monomaniacally focused on bringing manufacturing back to the continental United States. America’s three largest manufacturedgoods trading partners are China, Canada and Mexico, in that order.
Mexico, according to the Office of the United States Trade Representative, had two-way goods trade with the United States worth US$531 billion in 2015. The U.S. deficit in that exchange was $58 billion, meaning Americans bought $58 billion more in goods from Mexicans, than they sold to them.
It’s a significant imbalance with a partner just next door and helps explain — along with illegal immigration — Trump’s rhetoric targeting Mexico and Mexican imports.
China had two-way goods trade with the United States of $659.4 billion in 2015. American exports to China amounted to just $116 billion, whereas U.S. goods imports from China were worth $482 billion.
The U.S. deficit in that exchange was a whopping $366 billion. It’s a huge imbalance.
It helps explain, again in the context of the inauguration speech, why Trump has for weeks sounded markedly less friendly to China than have previous presidents, and markedly friendlier to Taiwan, which Beijing considers a renegade province. He’s laying the table for a trans-Pacific trade war.
And Canada? This country had two-way goods trade with the United States worth $575 billion in 2015, but in almost even measure — a deficit for America of just $15 billion.
American “goods” bought from Canada are led by mineral fuels, oil and natural gas, to the tune of $70 billion in 2015.
The top three categories of American goods bought by Canadians, meantime, were vehicles ($48 billion), machinery ($43 billion) and electrical equipment ($25 billion).
The United States has no larger manufactured goods export market than Canada. That is why, as the message now burning up the lines between Ottawa and Washington, D.C., reminds us, an estimated nine million jobs in 35 states depend on exports to Canada.
Put most simply, Canada buys American.
Whatever trade action the Trump administration may take in an attempt to balance U.S. trade with Mexico or China, it cannot seriously jeopardize American exports to Canada without causing widespread manufacturing job losses on its home soil — and in the very rust belt states that gave Trump the victory in November.
Canada will be buffeted by the secondary effects of U.S. protectionism and the geopolitical turmoil that ensues. We are too good and reliable a client to become a target ourselves.