How a Trump presidency would affect Canada's economy
"President Donald Trump" is now a distinct possibility.
Once considered a long-shot to emerge from the Republican field, Mr. Trump has stormed his way to the party's nomination, garnering support for his tough-on-trade agenda.
"I am going to bring our jobs back to Ohio and Pennsylvania and New York and Michigan and all of America and I am not going to let companies move to other countries, firing their employees along the way, without consequences," he said in July's acceptance speech.
If Mr. Trump is elected and carries through with his promises, shock waves could be sent through the global economy and financial markets.
With that in mind, here's how a Trump presidency might affect Canada's economy:
Trump and trade
Mr. Trump is pledging to overhaul U.S. trade relations.
"This wave of globalization has wiped out totally, totally our middle class," he said in June. "It doesn't have to be this way. We can turn it around and we can turn it around fast."
Mr. Trump plans to axe the Trans-Pacific Partnership, an ambitious trade agreement between 12 countries (including the U.S. and Canada) that account for 40 per cent of global economic output. The deal, which has yet to be ratified, "would be the death blow for American manufacturing," he says.
Likewise, in a 2015 interview on 60 Minutes, Mr. Trump described the North American free-trade agreement as a "disaster" he would renegotiate or even "break." He's reiterated those comments on the campaign trail.
If elected, Mr. Trump would have some leeway to further his protectionist platform.
For instance, he could terminate any free-trade deal, though such a decision would likely get dragged through the courts, a trade expert tells Reuters. (Under the NAFTA agreement, any party to the deal can withdraw with six months' notice.) However, Mr. Trump's plans for tariffs – he's proposed steeper taxation on goods imported from China and Mexico – would need congressional approval.
The implications for Canada could be significant.
The TPP would lower trade barriers, allowing Canada to import goods at lower prices. Broadly speaking, the deal would facilitate "higher productivity, higher GDP and higher incomes," economics professor Trevor Tombe wrote in Maclean's, though not every industry would benefit.
Moreover, Canada is highly dependent on a healthy trade relationship with its southern neighbour. The vast majority of Canadian exports end up on U.S. soil.
"We would view a Trump win as very bad for Canada's economy," Capital Economics said in a June report. "If he doesn't push the U.S. economy into recession by slashing public spending, Canada's exports might end up as collateral damage in his push to increase protectionism."
For its part, TD Economics is not wildly concerned by the campaign rhetoric.
Protectionist talk is common in U.S. presidential campaigns, TD economists Beata Caranci and Leslie Preston note in a report. "But, when it comes time to govern, [presidents] frequently implement much more pragmatic policies that attempt to level the playing field rather than rewrite history."
It's worth noting that Democratic candidate Hillary Clinton does not support TPP, a change in position, and has also levelled criticism at NAFTA.
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Trump and Keystone
Mr. Trump says he would greenlight Keystone XL, the cross-border pipeline project that President Barack Obama rejected in November of 2015 following a multiyear push to get it approved.
"I want it built, but I want a piece of the profits," Mr. Trump said in May. "That's how we're going to make our country rich again."
Approving Keystone XL is part of the Republican Party's official 2016 platform, adopted by delegates at the convention in Cleveland.
"Our Canadian neighbours can count on our co-operation and respect," the platform reads. "To advance North America's energy independence, we intend to reverse the current administration's blocking of the Keystone XL Pipeline."
Canadians and Americans are divided on Keystone, with a far greater share of Americans in favour of the project, according to a 2015 survey from the Pew Research Center.
Canada during Democratic and Republican presidencies
Who's better for Canada: Mr. Trump or Ms. Clinton?
CIBC World Markets probed that question in a May report, though it didn't rule in either candidate's favour.
However, the report's authors found that "whether causal or not, Democratic presidents have presided over faster growing economies. More importantly for us north of the border, since 1962 Democratic presidents have also been associated with better Canadian growth statistics."
Of course, that doesn't automatically mean a Clinton presidency would be best for Canada.
But CIBC does note that Mr. Trump's "aggressive assault" on the national debt and deficit would hurt North American growth.
Mr. Trump is calling for a consolidation of income tax brackets to three buckets from seven, at rates of 12 per cent, 25 per cent and 33 per cent, respectively. He revised the rates higher from a previous proposal.
"It is likely that this change will reduce the revenue loss from Trump's tax plan (which would have cost at least $10 trillion in its original form), although this will depend significantly on how wide the new bracket thresholds are," wrote Scott Greenberg, analyst at the Washington, D.C.-based Tax Foundation.
Reaction to Trump's NAFTA talk
Mathieu Bédard, economist at Montreal Economic Institute:
"If the U.S. walked away from NAFTA, it would definitely have a huge impact on the Canadian economy, but it would also have a detrimental effect on the U.S. economy.
"It's not true, that as Trump says, the U.S. produces nothing any more. … Manufacturing production has increased tremendously since [NAFTA]; the U.S. is producing 58 per cent more than it did before the deal came into effect.
"He is so wrong, it is hard to even respond to his arguments, because a lot of it is just fantasy. How do you make a reasonable argument as a response to something completely fantasy?"
Global Affairs spokeswoman Diana Khaddaj:
"Canada believes NAFTA is in the best interest of our three countries and we are focused on deepening our trading relationship. Our three countries traded $1-trillion (U.S.) in 2015, generating nearly 27 per cent of the world's GDP with almost 7 per cent of the world's population. The benefits for Canadian middle-class families are clear.
"Canada is also the United States' largest customer. We buy more from the United States than China, Japan and the U.K. combined. Co-operation through NAFTA has created a North America where Canadian, American and Mexican companies do more than make and sell things to each other; now, our companies increasingly make things together.
"We look forward to a productive relationship with whomever the American people decide to elect in November."
Perrin Beatty, president and CEO of the Canadian Chamber of Commerce:
"The Canadian Chamber of Commerce is following the U.S. elections with a watchful eye, and we are concerned about the anti-trade rhetoric coming from many candidates in both parties. The Canada-U.S. Free Trade Agreement, and later NAFTA, have been hugely beneficial to the economies of all countries involved. They've reduced costs for consumers, helped businesses become more efficient and stimulated trade and investment.
"When we hear comments criticizing free-trade deals, it's not just the deals that are under attack but also the spirit of collaboration under which they are developed and implemented. … We will continue to press governments to take down the barriers that stand in the way."
Monique Moreau, director of national affairs at the Canadian Federation of Independent Business, which represents more than 109,000 small businesses in Canada:
"About 50 per cent of our members import from the U.S., and about 25 per cent export, so that's a significant amount, and if there is a decrease in access to the U.S., that will certainly have an impact on our members. But we're still very much in wait-and-see mode at this time."
Jim Phillips, president and CEO of the Canadian/American Border Trade Alliance, representing public and private organizations involved in Canada-U.S. trade:
"I don't see a major impact of any kind on Canadian-U.S. relations or Canada's own self-interest or sovereignty interest because of the election. … I look forward to a continuing very positive trade relationship between the U.S. and Canada, and I'm not losing any sleep at night about any major adjustments, whoever wins the political arena."
With a report from The Canadian Press