What Canadians Need to Know About America’s Next President
People from all around the world were anxious going into the 2016 U.S. presidential election. Sometimes it felt like the two frontrunners were throwing more shade at each other than discussing real issues that actually matter.
Some pundits warned that if Donald Trump becomes the next president, there will be hell toupee. 😄 In the end, Trump won and will become the 45th U.S. president. And since he is replacing Barack Obama, I guess you can say that orange is the new black. 😀
But before anyone freaks out, I don’t think Donald Trump will ruin the economy like some critics say he will. It’s important to put things into perspective. So here are some things to consider for Canadians about our finances and investments in the short to medium term. 🙂
Donald Trump on Canada/U.S. Trade
We know that Donald is willing to be protectionist in order to create more jobs for Americans. He also wants to renegotiate NAFTA. But this shouldn’t have any large impact on trade between our 2 countries. Scott Sinclair, a senior researcher with the Canadian Centre for Policy Alternatives says that “most of Canada’s free trade with the United States is locked in through World Trade Organization (WTO) rules, and doesn’t apply to NAFTA. Furthermore, anti-trade policies will also hurt the U.S. economy. Just compare the living standards of insular versus free-trade countries around the world. Since Donald will be judged, at least in part, by the performance of the economy, I don’t expect any drastic changes to Canada/US trade agreements. I also think programs like NEXUS aren’t going anywhere. Cross border shopping has way more benefits than drawbacks for the U.S.
Donald’s anti free-trade position seems to be more about an anti-Mexico sentiment, so I don’t think he’s out to purposefully tarnish the relationship between Americans and Canucks. But if he does impose new tariffs on goods moving across our border, then the impact to Canadians will depend on where we live. About 50% of trade in British Columbia is now done with countries other than the U.S. It has been a deliberate effort of the provincial government over the past 12 years to divest away from Canada’s largest trading partner. However, 80% of Ontario’s trade is with the U.S. so people in Ontario will be hit harder. Alberta’s trade is nearly all dependent on the U.S. The province has diversified its economy over time, but it’s still heavily dependent on oil and gas today. Donald wants to ramp up fossil fuel production in the U.S. which would likely keep energy prices lower for longer. Trade is only a part of the much larger economy. But it would be prudent for Albertans to prepare for an extended recession just in case. 🙁
Currencies and Interest Rates
Our loonie will likely stay lower for longer if the U.S. doesn’t import as much Canadian goods anymore. The value of a country’s currency depends on how productive its people are. Less trade with the U.S. means slower economic growth for Canada. This is also why the Mexican Peso dropped 10% after the election. But a lower Canadian dollar may actually help us gain back some manufacturing jobs, and make it more profitable for exporters to sell their goods. This boost in tourism and exports could make up some losses from any negative anti-trade effects. The FED in the U.S. may also take longer to increase its country’s interest rates.