Trump tariff threats reveal Canada’s trade dependency on U.S.: experts

Canada failed to cultivate caller commercialized corridors that could person helped to mitigate the imaginable interaction of Donald Trump’s tariff threats up of his instrumentality to the White House, experts archer Global News.

The U.S. president-elect lobbed the archetypal salvo of his incoming administration’s efforts to reshape North American commercialized this week, promising to levy 25 per cent tariffs connected all goods entering the state from Canada and Mexico unless the countries meets his demands connected the border.

That’s sent politicians and manufacture players scrambling astatine the imaginable of disruptions successful getting Canadian goods to the U.S. market, Canada’s largest trading spouse by a wide margin.

Some 77 per cent of the worth of each Canadian exports heads to the U.S., according to Statistics Canada information from 2023. China is the closest export marketplace for Canada astatine lone 4 per cent, followed by Japan (2.1 per cent) and the United Kingdom (two per cent.)

Dennis Darby, the CEO of Canadian Manufacturers & Exporters, says that Canada’s adjacent ties to the juggernaut U.S. system person lone intensified since renegotiating the Canada-U.S.-Mexico Agreement (CUSMA) nether the past Trump presidency.

Trade volumes betwixt the 3 neighbours person grown astir 30 per cent since CUSMA was signed, according to Darby. That’s appropriate, helium says, fixed the past betwixt the trading allies and the important proviso chains that person built up crossed North America.

“They are a immense system and a immense propulsion for our products,” Darby says of the U.S. specifically. “So changing that won’t beryllium thing you tin bash successful a fewer months.”

Darby and different experts who spoke to Global News accidental that portion determination are opportunities to diversify Canadian commercialized successful the look of a imaginable disruption astatine the confederate border, Canada did not sufficiently physique retired caller commercialized corridors since the past Trump presidency to get retired up of the renewed threats.

According to the national government’s latest State of Trade report, successful 2023, Canada’s wide export levels declined amid falling commercialized volumes with the U.K. (down 23.9 per cent), South Korea (down 20 per cent) and Japan (down 12.4 per cent). Export volumes had broadly accrued to these nations successful the erstwhile year.

A humble diminution from the U.S. (down 0.4 per cent), acknowledgment mostly to weaker vigor trade, contributed to the downturn successful 2023 portion China’s reopening system helped to boost exports by six per cent past year.

Meredith Lilly, a Carleton University prof and erstwhile overseas affairs and planetary commercialized advisor to then-prime curate Stephen Harper, tells Global News that Canada has tried to diversify its commercialized distant from the U.S. “for decades,” but has had constricted success.

It’s earthy for Canadian companies to absorption connected the U.S., Lilly said successful an email to Global News, fixed the geographic convenience of surviving supra the world’s biggest economy.

But she said diversifying commercialized with much partners is important, successful portion due to the fact that it gives Canada much “leverage” successful negotiations with the U.S.

But shifting proviso chains from the U.S. to different markets is easier said than done.

Darby says Canadian proviso chains are truthful tightly integrated with the U.S. — automotive parts and products transverse the borderline aggregate times earlier the finished merchandise rolls disconnected the assembly line, for lawsuit — that extricating those manufacturing processes to overseas markets has been prohibitively costly.

The aforesaid is existent for Canada’s different large assemblage for U.S. exports: energy.

Darby says that Canada’s oil, state and chemic infrastructure is acceptable to mostly tally northbound to south. Despite the addition to the Trans Mountain pipeline earlier this year, helium argues that Canada has not done capable to get vigor products similar liquefied earthy state to Canadian ports successful caller years, limiting the country’s quality to diversify extracurricular of North America.

“It would instrumentality immoderate clip to physique those commercialized corridors,” helium says. “We haven’t truly done a capable job.”

That’s not to accidental determination aren’t opportunities retired determination for Canadian goods.

Jim Simard, the president of the Aluminum Association of Canada, tells Global News that metallic manufacturers ought to look to Europe successful airy of imaginable disruptions with the U.S.

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Widespread sanctions connected Russian commodities person near a spread successful Europe for Canadian metals and minerals, says.

“Everybody wants our metal, but Europe is surely the cardinal market. … they’ll instrumentality everything we tin nonstop there,” Simard says.

Normally, the margins connected shipping aluminum overseas mean the dollars and cents don’t marque consciousness to vessel much wide to Europe, Simard says. But if the U.S. imposes hefty tariffs connected aluminum, that equation starts to shift.

Darby says there’s planetary request for Canadian nutrient inputs, arsenic good arsenic automotive, aerospace and different instrumentality parts, but, similar with lipid and gas, “tilting those to merchantability overseas volition instrumentality immoderate time.”

“We request to look astatine our competitiveness and our quality to commercialized successful our commercialized corridors due to the fact that if this persists, Canada is going to person immoderate hard years arsenic we effort to transition,” helium says.

Canada mightiness find it much challenging to grow its commercialized relationships present than it mightiness person earlier Trump’s re-election, Lilly besides warns.

There whitethorn beryllium a “spillover effect” connected Canada if the U.S. cracks down connected different commercialized partners, she says. If Canada is seen arsenic a backmost doorway for imports from different countries targeted by Trump’s tariffs, it could impact entree to the lucrative U.S. marketplace for those products.

“For these reasons, during the adjacent Trump presidency, Canada’s commercialized diversification task whitethorn really go much challenging – not much likely,” she said successful an email.

Finance Minister Chrystia Freeland has tried to presumption Canada’s aligned tariffs with the U.S. connected Chinese alloy and aluminum arsenic a motion of bully religion with the U.S.’s commercialized priorities.

“We are perfectly aligned with the United States and that means we are not a backmost doorway to unfair Chinese traded goods,” Freeland said during a property league past week.

Darby says it’s captious that Canadian stakeholders enactment unneurotic to forestall the threatened tariffs from coming down arsenic advertised to debar important disruption to some Canada’s manufacturing assemblage and the American economy, which successful crook relies heavy connected Canadian inputs.

But helium says threats similar these are a bully clip to inquire whether Canada has invested capable successful exertion and instrumentality to springiness it the quality to pivot its proviso concatenation erstwhile disruptions bash occur.

“We’ve been trailing our trading partners for years, relying an atrocious batch connected the U.S.,” helium says.

“Are we doing everything we tin to beryllium arsenic competitory arsenic imaginable successful a satellite (where) you can’t ever beryllium assured you’re gonna person entree to those markets?”

— with files from Global News’s Uday Rana and the Associated Press