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What Trump’s victory could mean to Canada’s economy
Loonie tanked overnight on global markets.
The Canadian Press on November 9, 2016
A Donald Trump administration, combined with a Republican-controlled Senate and House of Representatives, could have reverberations that will be felt by the Canadian economy for years.
Overnight, Canada’s dollar took a wild ride in trading, shedding nearly 1.3 cents before stemming some of its losses.
The loonie tanked on global markets, falling as low as 73.89 cents US on Wednesday at around 12 a.m. ET, down 1.27 cents from its close Tuesday.
It later regained some ground, trading at 74.38 cents US, not far off the levels it’s been at in the waning weeks of the U.S. presidential election campaign.
While the currency appeared to have shaken off some volatility, traders will be watching how the Toronto stock exchange responds when the opening bell rings at 9:30 a.m. ET.
“Equities are set to open sharply weaker, as investors wake up to the surprising outcome,” CIBC economists Royce Mendes and Avery Shenfeld wrote in a commentary for clients.
“It’s clear that equity markets dislike some of the uncertainties raised by the prospect of a Trump White House, particularly for multinationals with global supply chains.”
Here’s a look at what Trump’s victory could mean for various sectors of Canada’s economy:
Energy:
Plans to build the 1,900-kilometre Keystone XL pipeline from Alberta to Nebraska were thwarted last year under U.S. President Barack Obama. But Trump’s win could breathe new life into the project at a time when Canada’s oilpatch needs it. Trump has said he would “absolutely approve it, 100 per cent.”
Still, when considering Trump’s propensity for categorical statements, one should keep in mind the details. He has said he wants a greater cut of the profits, but hasn’t explained what that means. There is also TransCanada’s outstanding request for US$15 billion in damages after Obama’s rejection. Trump is also regarded as a friend of U.S. fossil fuels, on record as favouring oil and gas drilling on federal lands. That could stifle appetite for Canada’s oil and gas production.
Trade:
Canada’s largest trading partner will soon be led by Trump, who has committed to ripping up NAFTA if it isn’t renegotiated. Any country can withdraw from the free trade agreement with six months’ notice. And with Republican control of both the legislative and executive branches, Trump is better positioned than past presidents who’ve made similar threats.
But some say he could face resistance from legislators in states that have reaped the benefits of the deal. As former prime minister Brian Mulroney, the architect of NAFTA, recently told CTV’s Question Period, “You tear that up, my mother used to say, ‘You’re cutting off your nose to spite your face.’”
Softwood lumber:
One of the first trade irritants that could test U.S.-Canadian relations is softwood lumber. A 10-year-old agreement that removed U.S. duties on Canadian softwood lumber expired last month. That paved the way for the possibility of steep taxes, which could result in layoffs throughout Canada’s forestry sector.
Trump can expect to face pressure from the U.S. lumber lobby to implement such duties. In an era of rising protectionism, he may be emboldened to oblige.
What Trump’s victory could mean to Canada’s economy
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