MNI INTERVIEW: Canada Faces Trouble Under Harris Or Trump- EDC
MNI (OTTAWA) - Canadian exporters can expect trouble whether Kamala Harris or Donald Trump wins the U.S. presidential race with both candidates embracing protectionism and the backdrop of an American economic slowdown, the chief economist of the government’s trade financing agency told MNI.
“The economic nationalism genie is out of the bottle, and on that there is interestingly general agreement between Trump and Harris,” said Stuart Bergman, chief economist at Export Development Canada.
“While they may approach things differently, remember that Vice President Harris, she didn’t oppose using U.S. government mechanisms to oppose the Nippon Steel takeover of U.S. Steel.” The Biden administration also blocked construction of the Keystone XL oil pipeline from Canada into the U.S., he noted.
Another clash looms with the former Nafta pact up for review in 2026, Bergman said. U.S. officials have suggested more full-scale talks are needed while Canada and Mexico say the intention is really for more technical refinements. (See: MNI POLICY: Canada Fears US Reaction To Mexico-China Auto Ties)
Trump's call for a global tariff of 20% is the most prominent threat, something Bergman said would hit Canadian output, jobs and investment. Canada and the U.S. were the world’s largest trading partners until China and Mexico emerged as competitors, though two-way trade still amounts to billions of dollars a day.
HURTS YOU MORE THAN ME
“An across-the-board tariff of this nature would certainly hurt Canadian exporters, but at the same time let’s remember that our two economies are so intricately connected, that I actually think that these across-the-board tariffs would probably hurt the U.S. economy the most,” Bergman said. Canada would likely impose retaliatory measures damaging the 45 U.S. states that have Canada as their top or second-highest export market, he said.
The U.S. dollar would also strengthen against Canada's and other currencies, dampening American competitiveness, Bergman said. EDC predicts Canada's dollar remains stable at 74 cents per U.S. dollar next year versus 73 cents this year, but Bergman said he may need to adjust such calls depending on what happens after election day.
EDC is one of the few agencies forecasting Canada's exchange rate. Bergman adjusted his prior view the currency could weaken to 70 U.S. cents following the Federal Reserve's 50 basis point rate cut that helped catch up to the BOC's earlier three quarter-point reductions. “Given that interest-rate differential now has narrowed, we don’t see as much sustained weakness,” he said.
The Bank of Canada will cut today's 4.25% rate to a terminal mark of 2.75% by the end of next year, EDC predicts.
MAKE EXPORTS GREAT AGAIN?
Commodity prices, another historic currency driver, in broad terms won't make a major difference to Canada next year, Bergman suggested. Modest growth in China and Europe alongside the U.S. suggest stable demand, with the key risk of a wider conflict in the Middle East that swings oil prices, he said.
There's some good news with the global economy seen by EDC as pulling off a soft landing but that comes with slowing growth next year in the U.S., which buys three-quarters of Canada's exports. Canada has recorded six straight trade deficits through August as a narrowing surplus with the U.S. lagged the traditional shortfall with other nations.
Bergman sees U.S. growth fading to 1.8% next year from 2.5% even as the Fed cuts and “it doesn’t say great things for the demand environment for Canadian exports,” Bergman said. Canada's growth is projected to be even slower at around 1% this year and next because some consumers are heavily indebted and others are building up savings rather than spending. (See: MNI INTERVIEW: BOC Needs Faster Cuts, Labour Congress Says)