Oh, to be a fly on the wall in the office of Canada’s Finance Minister.
If Chrystia Freeland is finding respite from questions about her political future, it’s only because Donald Trump became the official Republican presidential nominee two days after surviving an assassination attempt.
Ahead now for Freeland, who also serves as Deputy Prime Minister, is a flood of economic challenges as analysts and investors predict an emboldened Trump could be riding a wave back to the White House. We have more on that below.
In the news
- Cleveland-Cliffs CEO confident of Ottawa’s approval on proposed Stelco acquisition
- Downbeat Bank of Canada business and consumer surveys raise odds of second rate cut
- Corus plans more job cuts as broadcaster faces declining revenue and regulatory challenges
Just a chill picture of a man building a sand-castle cake
That's all this is. I didn't look for a business angle; I just thought it would be nice to take a break. Canadian Jonathan Bouchard – better known as Jobi – is pictured yesterday making a sand-castle cake thingy at the International Sand Sculpting Festival in Revere, Mass. The three-day festival starts on July 19.JOSEPH PREZIOSO/Getty Images
Okay, back to business. But send me your sand sculptures, please: cwilsonsmith@globeandmail.com
In focus
Why Canada’s watching the race to the White House
I asked Freeland’s office how closely they are tracking the developments down south, and whether plans were under way in anticipation of a possible return of Trump to office. Navpreet Chhatwal, a spokesperson for the minister, responded by pointing out the government has experience working with both Democratic and Republican administrations.
“It’s up to Americans to choose their president and Canada will work with whomever is democratically elected,” Chhatwal said.
How Canada will work with another Trump White House might be the bigger question. I asked Tony Keller, a columnist for The Globe and Mail who has covered Canada’s relationship with America for decades, to lay out the challenges he sees. His answers range from merely serious to existential.
Investors, for their part, are betting on Trump returning to the White House. What issues does that raise on Parliament Hill?
First, a Trump presidency would push Canada far harder on defence spending than the Biden administration. A key item in the GOP platform is that it expects allies to meet their spending obligations, pronto. Justin Trudeau recently said Canada will eventually reach the NATO target of 2 per cent of GDP, but not until 2032, and he also called the benchmark a “crass mathematical calculation.” Trump would beg to differ. So that could immediately mean billions in new spending.
That’s the least of my worries. We can fix that easily with money – higher taxes, spending cuts elsewhere or a bigger deficit.
The least of your worries?
The U.S. is already a low-tax jurisdiction. It would get even lower under Trump. He’s pledged significant corporate tax cuts, which would create a wide gap on the cost of doing business between the U.S. and trading partners around the world. And no country besides Mexico will feel that pain more acutely than Canada.
How so?
Lower U.S. taxes on business lower the cost of operating a business in the U.S., so that means there will be pressure on Canadian businesses, or any international business thinking of investing in Canada or recording earnings in Canada, to consider making these investments or recording those earnings in the U.S.
That brings us to one key divergence between Canada and the GOP: their approaches to energy. How might that clash play out?
The words “Drill Baby Drill” are actually in the Republican platform. Which is to say you can expect Trump to scale back or end environmental regulations Biden has enacted and is now championing as a pillar of his campaign. Republicans are basically promising to lower the price of pollution. Canada’s policy is to discourage pollution, by raising its price. To the extent that our largest trading partner makes it cheaper to operate high-carbon industries – think everything from oil and gas to steel and cement – Canada will be under pressure, lest those industries shift operations and investments south.
You mentioned other industries. Can you elaborate?
He’s doubling down on a pledge to impose a 10-per-cent tariff on all products imported into the United States. That would obviously have a huge impact on any country or export-exposed industries, but Canada would take a massive hit. About 75 per cent of its exports are to the U.S.
So much of our economy is tied to our trade with the United States. A 10-per-cent tax on all Canadian exports to the U.S.? Right away that changes the calculus.
What’s the biggest economic issue that we aren’t talking about?
We don’t know how seriously to take this, even though it’s mentioned repeatedly and prominently in the platform, but he is pledging to deport every person living illegally in the United States. That’s well over 10 million people. It could mean large numbers of people trying to enter Canada, legally or by simply walking across the border. This could make Roxham Road look minor by comparison. And Trump might even like that image of chaos headed north.
You can read more from Keller on the storms ahead here.
This interview has been edited and condensed.
📙 Related reading: David Berman on where the market is placing its bets.
Charted
Yellow metal shines again
Gold prices climbed to a near two-month high on Monday, aided by hopes for interest rate cuts from the U.S. Federal Reserve as traders await for more comments from Fed officials to gauge the timing of those cuts. Analysts at Australia and New Zealand Banking Group wrote in a note that India’s gold demand will likely remain strong despite higher prices, because of forecasts for above-average rainfall and a favourable macroeconomic backdrop.
Reuters
The outlook
On our radar and reading list
On the road: Canada’s trade and industrial policy in the balance as it contemplates Chinese electric-vehicle tariffs.
Under water: A rise in climate-related floods is leaving Windsor, Ont., residents uncertain about insurance coverage.
On The Eras Tour: Qantas pulled out its biggest jet to get stranded Swifties to the show on time.
On demand: The Financial Times has an interesting (paywalled) profile on Bela Bajaria, Netflix’s chief content officer. “If you try to make a show for everyone, you make a show for no one.”
Morning markets
Global markets were mixed as investors took their foot off the gas, assessing what a Donald Trump re-election as U.S. president might mean and ahead of key Canadian inflation data and U.S. retail sales figures that could influence interest rate policy. Wall Street futures were steady while TSX futures were flat.
Overseas, the pan-European STOXX 600 was down 0.47 per cent in morning trading. Britain’s FTSE 100 slipped 0.38 per cent, Germany’s DAX gave back 0.51 per cent and France’s CAC 40 slid 0.83 per cent.
In Asia, Japan’s Nikkei closed 0.2 per cent higher, while Hong Kong’s Hang Seng fell 1.6 per cent.
The Canadian dollar traded at 73.08 U.S. cents.