The Current - What would a Trump win mean for trade with Canada?

Episode Date: October 16, 2024

Donald Trump says he’ll slap tariffs on global imports if he wins the White House, which could spell trouble for Canadian business. But Kirsten Hillman, Canada's ambassador to the U.S., says these protectionist tendencies aren’t new — and her team is already pushing back.

In 2017, it felt like drugs were everywhere in the news, so I started a podcast called On Drugs. We covered a lot of ground over two seasons, but there are still so many more stories to tell. I'm Jeff Turner, and I'm back with Season 3 of On Drugs. And this time, it's going to get personal. I don't know who Sober Jeff is. I don't even know if I like that guy.

On Drugs is available now wherever you get your podcasts. This is a CBC Podcast. Hello, I'm Matt Galloway, and this is The Current Podcast. If you've been watching the U.S. election race, maybe some of it makes you a bit, well, worried. But if you run a business or work for a company that's connected to the U.S., you might be particularly anxious, not just because America seems to be turning inward, becoming more protectionist,

but because one candidate, Donald Trump, has signaled he'll bring in a global tariff on imports if he retakes the White House. This is part of what he had to say yesterday during an onstage interview with Bloomberg's top editor, John Micklethwaite. We're going to bring the companies back. We're going to lower taxes still further for companies that are going to make their product in the USA. We're going to protect those companies with strong tariffs because I'm a believer in tariffs. I'm not sure that you are. I don't think you are, but I congratulate you on your career. But to me, the most beautiful word in the dictionary is tariff.

Kirsten Hillman is Canada's point person in Washington looking out for this country's interests. She's Canada's ambassador to the United States, and she's joining us this morning from Washington, D.C. Good morning. Good morning, Rebecca. Thanks for joining us, Ambassador. We just heard Donald Trump say tariffs are beautiful.

What word would you use to describe them? I would say that tariffs are cost-raising, certainly as between Canada and the United States, Cost raising, certainly as between Canada and the United States, and they are counterproductive to the kind of open and efficient trading relationship that's making both of our countries stronger and more prosperous. Cost raising. The Canadian Chamber of Commerce says it could reduce the size of the Canadian economy by about 1% and result in billions of dollars in economic costs. How worried are you about the possible fallout from these tariffs if they were to come into effect? Well, you know, I think that it's important not to worry. It's important to sort of get to work. And that's what we've been up to. Both of the parties in this election, both the Harris and the Trump campaigns, are, you know, playing on protectionist tendencies that exist here in the United States. It's not new. We've been dealing with this for a successive presidents. I've been doing Canada-U.S. trade for

almost my entire career. And these tendencies come up from time to time, stronger sometimes and less strong. But you're right to point out that the 10% tariff that is being proposed by candidate Trump is another sort of level of protectionism, not, again, unprecedented. Nixon tried the same thing back many years ago. But Canada, I think, has a very good ability to push back on this proposal. You know, we have, with the United States, the highest trading levels in history in the past couple of years. U.S. exports to Canada are at an all-time high. And part of that is due, in fact, to the renegotiation of the NAFTA that happened under the Trump administration last time. So, you know, we've been spending a lot of time talking to the Trump team, his advisors, and saying that at a time when we've just renegotiated the NAFTA to remove 99% of tariffs between our two countries,

to remove 99% of tariffs between our two countries, when we're spurning growth and working really hard to bring all sorts of dynamism to our two economies, this just isn't the right move. So that's the message that we're giving. We're not just giving it here in Washington, but we've spent the better part of a year and a half traveling the country and talking to folks across the country about that. And I think it's resonating.

You know, I think the important thing to remember is that not only do we have this massive relationship with the United States as a whole, but Canada is the number one customer for two thirds of the states in the United States. And that really matters to governors, to local politicians, to local communities. to local politicians, to local communities. So we have a lot of tools at our disposal to show through real facts as to why this policy is bad for the Americans. It may be resonating on a state level or a municipal level, but just yesterday we heard what Trump said.

So, you know, you may be making headway on those other levels, but if Trump is saying what he's still saying, is that not concerning? Well, again, I think that we're at a moment in time where it's a political campaign. The President is making statements around his broad policy that he wants to apply across the board. And our job is to get in there and talk about the implications of that policy as it applies to Canada and trade with Canada. And to, you know, to demonstrate that we take, you know, we take no position on whether or not that makes sense with respect to the rest of the

world, but we can tell them and we can demonstrate to them that this will be a problem for the United States and for key supporters of the president if it's applied to Canada. And that's what we're doing. Yeah, it's not just Canadians who are worried, though. Last month, New Jersey's Democratic Governor Phil Murphy came to Canada to support trade between his state and this country and said he was deeply concerned about what might happen if Donald Trump wins. Here's a bit of what he said to the CBC's as it happens. Given how close an ally Canada is and the extent to which we so deeply share common values, never mind the cold-blooded trade, jobs, investment implications, it's a tall statement to say, but I'm going to stand by it to say that everything's at stake. What do you make of that? What do you say is at stake?

Well, I mean, I think that that's stronger than I would put it. I think that this is a relationship that we work on in many facets every day. The trade and economic relationship is central. There's no question about that. And it's deeply mutually beneficial. And it's not always easy to navigate. But Canada, you know, has a lot of strengths that bring to the table in our economic conversation because we are by far their biggest customer. And because we provide access to very critical materials for them,

energy products, critical minerals, and a variety of other things that they need and they would rather get from us than other countries. So we have a lot of strength to bring to this conversation, and we do that. The rest of the relationship, you know, there are so many other ways in which we work with the Americans at home and abroad on infrastructure, on energy, on environment, on, you know, policing, on intelligence in the globe, protecting our hemisphere, protecting the Arctic. that I would say I think that we will be able to cooperate and work well with a Trump or a Harris administration in these domains.

I'm quite confident of that because it's in the best interest of our countries. And ultimately, political leaders are elected to serve the best interests of their citizens. I mean, it's nice to hear your optimism. I am curious, though, why do you think Donald Trump and his team has made this a central part of its campaign? What do they stand to gain by? I mean, you say things are lost on both sides if we have these tariffs, but clearly there is some belief that it would help the U.S. in some way. Yeah, well, there's no question. I don't think anybody should question that candidate Trump, former President Trump, believes that tariffs are a good policy.

That's clear. He believed that last time. He continues to believe that. And there are many economists who believe the opposite. So I don't think it's worthwhile for us to debate the economic rationale. I think that that's just not going to get us anywhere. I think that that's just not going to get us anywhere. What will get us somewhere is to demonstrate how the application of that particular policy that he believes in in order to achieve a specific policy result, which is to reshore jobs, which is to, you know, increase revenues and gain prosperity in the United States. If applied to Canada, their single biggest trading relationship and a country upon which they rely for critical inputs. If they apply to us, it will have the opposite impact of what he's hoping to achieve. And what about Kamala Harris? You mentioned that she's also protectionist, and we know that she's talked about wanting to renegotiate parts of the trade agreement that replaced NAFTA. I mean,

are we facing a protectionist either way? Yes, I think so. I mean, I think the U.S. is fundamentally, you know, it ebbs and flows, but it is largely an inward-looking country. It's far less reliant on trade than Canada is for its prosperity. here in the United States that restricting certain kinds of contracts and policies to American production or reshoring production into the United States rather than importing goods is important for job creation. So I think that that's something that is a widely viewed and a very politically popular view. But then again, we always come back to, and I do think that the Harris campaign and the Harris team understand this, that something that is also true is that we are the number one customer for the vast majority of U.S. states. And so we can say job creation is tied to trade with Canada in a way that is not necessarily the case with any other trading partner.

Just before you go, I know you're really confident that this will all be sorted. But if you fail in making those arguments successfully to Americans, even temporarily, what will it mean if these tariffs are imposed in Canada? It'll be difficult for Canada. There's no question it'll be difficult for Canada. And there's studies out there, you mentioned one, that quantify that. There are others here in the United States as well that quantify the effects on the United States. And there are a lot of experts trying to make the case that this policy is really, as I say, inflationary, but also detrimental to the U.S. economy. So there's no question about it.

And that's why the work that we've been doing for the past year and a bit to make the case now so that if former President Trump is reelected, we have a base of knowledge and supporters who can work with us to make the case that this policy, if it is going to be applied, should not be applied to us. Okay. Kirsten Hillman, thank you so much for this. Thank you. Kirsten Hillman is Canada's ambassador to the United States. In 2017, it felt like drugs were everywhere in the news. So I started a podcast called On Drugs.

We covered a lot of ground over two seasons, but there are still so many more stories to tell. I'm Jeff Turner, and I'm back with season three of On Drugs. And this time, it's going to get personal. I don't know who Sober Jeff is. I don't even know if I like that guy. On Drugs is available now wherever you get your podcasts. Carlo Dade is the director of the Trade and Investment Centre

at the Canada West Foundation in Calgary and joins us now. Good morning. Good morning. Carlo, what's your reaction to what you just heard? It's good statements by the ambassador. Her job, in addition to advancing and protecting Canadian interests in the U.S., is to reassure Canadians. Her comment that we need to not panic and prepare, or I think she said worry, work instead of worry, is spot on. work instead of worry is spot on. The dangers that are present, clearly present, in the Trump proposals of the think tanks developing the proposals that Trump is using are severe.

I do think she, again, continued a recent trend in Canada of mischaracterizing and misidentifying the global tariff. It's actually a bit worse. So I'll read from the think tank, the populist think tank, the J.D. Vance-affiliated think tank that put out the proposal. It's a tariff that starts at 10% a year. It is not the Nixon shock tariff when we woke up one Monday morning in August to discover that there was a 10% a year. It is not the Nixon shock tariff when we woke up one Monday morning in August to discover that there was a 10% tariff. What's being proposed now is a tariff that starts at 10% on top of existing tariffs, if there are any. And for every year that America continues to run a trade deficit, the tariff increases by five percentage points for the following year. For any year when the trade is in balance or surplus, when the Americans

export more than they import, the tariffs can decline by 5%. So what this is, it's something that's incredibly difficult to model, but it's a tariff that's 10, 15, 20, 25, or could go down each year. They've weaponized uncertainty with this tariff. You know, the ambassador didn't want to talk too much about why Donald Trump might be pursuing this, but I am interested in what you believe the ultimate goal is. What is he trying to achieve in imposing these kinds of tariffs? Oh, it's absolutely clear. And the think tanks behind the proposal, again, supported by the left and right, it's to, as the ambassador said, repatriate jobs to the U.S. Products that foreigners make in foreign countries should be made by Americans in the United States. They're very

clear in the purpose. So this differs from our traditional use of tariffs. We have a problem with softwood lumber. We'll impose a tariff to get the Americans to correct their behavior. We have a problem with aluminum and steel. We'll impose a tariff to get the Canadians to change their behavior. This is a completely different use of tariffs. It's a systemic change in trade to force jobs back to the U.S. Any sign, do you believe that would work? Well, the Americans have done this before, as the ambassador referenced, the Nixon shocks. In the 1980s, with the auto industry,

the Americans imposed tariffs and basically beat up the Japanese and the Europeans to move production back to the US. And if you look at the forestry industry in Canada, it's kind of working. It's the tariffs on software lumber that have been a significant contributor to the fact that Canadian forestry companies now invest more in the U.S. We're closing mills in Canada, and they're opening them in the U.S. I mean, the forestry industry's got deep problems. It's not just tariffs, but the Americans weren't trying to use this tariff policy to move jobs to the U.S., and it's moving forestry jobs. And so if this were to go ahead, this 10%, and then who knows how much more it grows to, this tariff were to go ahead, which provinces, which region would suffer the most? Which

industry do you think? So you've really got to do a careful line item by line item analysis. Obviously, if you're talking the provincial level, the provinces that would take the largest hit to their largest exporters, so in Alberta, say, or even New Brunswick, energy, oil and gas, oh, sorry, oil, not gas. Sorry, yes, oil and gas. We're talking about the Trump tariff, not the end of NAFTA, oil and gas would cause significant drops in provincial revenue. But even there, New Brunswick could potentially face a larger loss if we're talking about the ending of NAFTA versus the Trump tariff. But you would see the results there. But for most people, look what, 20% of Canadians work in the goods sector, so agriculture, mining, manufacturing. 80% to 75% in most provinces work in services.

Those folks in the service side would agriculture, mining, oil and gas, manufacturing, they would feel the first impact. And those would be hit problem by problem. You can figure it out. You know, we talked about it a little bit with the ambassador as well, but she talked about Kamala Harris is also protectionist. I know she's not talking about a 10% incrementally going up kind of a tariff, but she's certainly talking about

re-evaluating the U.S.-Mexico-Canada agreement. So what are your thoughts on, I mean, are we facing, and I asked the same question to the ambassador, but are we facing a protectionist either way? Yes, we are. This is the new U.S. where you have a right-wing variant of populism and a left-wing variant. Think of a horseshoe shape. Where the two variants meet, the right populism and the left populism, is a deep distrust of trade. So the favorability for tariffs is shared by Elizabeth Warren, though not to the same extreme degree as Trump. She still feels favorably about terrorists. But this makes her job harder in the U.S. If the populist movement is convinced that trade is responsible for job losses, trade is responsible for the hollowing out of the

American middle class, going to these people and saying, hi, we're your largest trade partner, may not be the best introduction you can make for Canada. And so what is the best line of defense then for Canada? We export jobs to the U.S., not increasing economic dynamism, as the ambassador said, or shared prosperity. It's about creating jobs. Take the oil and gas industry. When we export oil and gas, we export jobs to the U.S. Gas exports directly tied to 7,000 good middle-class jobs in the U.S., a billion dollars. We have to get specific about how our exports create jobs. MAGA does not mean make North America great again.

It's not about shared prosperity. We have to make the case to Canada that we're different than China. We create good middle-class jobs, not jobs stocking shores and dollar stores. I know the message is for the American side to hear, but will Canadians like that message? Well, they're supporting this. The loss of forestry jobs is tied not just to hear, but will Canadians like that message? Well, they're supporting this. The loss of forestry jobs is tied not just to tariffs, but to economic policies in the provinces that have forced the industry to move. We don't support the oil and gas industry. Instead, having those jobs in Canada, we have those jobs refining petroleum in the U.S., producing LNG to sell to Asia is done in the U.S. instead of Canada.

So they may not like the message, but it's not just the terrorists that are contributing to the job loss in this country. Okay. Carlo Dade, we'll leave it there. Thank you for your time this morning. Good to speak with you, Rebecca. Carlo Dade is the director of the Trade and Investment Centre at the Canada West Foundation.

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