This article originally appeared in The Globe & Mail.
As the incoming U.S. administration seeks to reorder the international economic landscape, Canada didn’t expect to be first in line for the firing squad. But Monday night, a shot was fired, and it wasn’t a warning. U.S. president-elect Donald Trump announced he will impose a 25-per-cent tariff on all products coming into the United States from Canada and Mexico.
There’s a lesson here for Canada and it’s going to be a painful one. For too long we’ve been complacent on all manner of policy, depending too much on our relationship with the U.S. And our friends, allies and foes have taken note.
The U.S. has been sending signals for some time. President Trump’s first term, during which he tore up the North American Free Trade Agreement, was a warning for what was to come. President Joe Biden’s Inflation Reduction Act, which threatened to siphon away investment from Canada, demonstrated an eagerness to play hardball.
We need to get our act together. With this latest move, Mr. Trump is taking advantage of our lax policies on the border, immigration, our economy and productivity.
As with anything Mr. Trump says, it’s important to consider the facts and the context.
First the facts.
For decades, NAFTA and now the Canada-United States-Mexico Agreement have been a win-win for Canada and the U.S. Total trilateral trade between Canada, the U.S. and Mexico hit $1.93-trillion in 2023. This partnership, under CUSMA, supported 17 million jobs in 2022 – a 32 per cent jump since 2020.
Canada is the top export market for more than half of all U.S. states. U.S. trade with Canada is valued at more than $950-billion annually – that’s almost $2-million a minute moving across our border. As Deputy Prime Minister Chrystia Freeland said: “Today, Canada buys more from the United States than China, Japan, France and the U.K. combined.”
Source: The Globe and Mail
The automotive sector exemplifies our shared prosperity. Ontario and Michigan alone generate 22 per cent of North America’s auto output. Parts cross the border up to eight times before a car rolls off the line.
Now the context.
Mr. Trump’s rhetoric has changed over the past eight years, as made clear in Monday’s statement:
“This Tariff will remain in effect until such time as Drugs, in particular Fentanyl, and all Illegal Aliens stop this Invasion of our Country!” and “Both Mexico and Canada have the absolute right and power to easily solve this long-simmering problem,” Mr. Trump said in a post on Truth Social.
In his first presidency, Mr. Trump touted the unfairness of NAFTA, calling it a disaster for U.S. manufacturing, and he railed against trade deficits. His first-term efforts aimed to rebalance the economic playing field – at least as he saw it. Now, he’s holding Canada and Mexico’s economic interests hostage this time to further his commitment to address a suite of social and immigration challenges.
What should Canada do?
First, where appropriate, we need to take Mr. Trump’s concerns seriously. Not only because of the precarious economic position he is placing us in, but also because our own national security and long-term prosperity need attention.
A few months ago, Royal Bank of Canada chief executive officer Dave McKay remarked that senior people in the U.S. believe we are unserious about dealing with the issues facing our two countries. He stressed that we must realign our thinking and focus on our largest trading partner’s priorities. That means expediting our energy and natural resources projects (such as critical minerals), greater spending to defend the Arctic and the Canada-U.S. border and better co-ordination with our partners on multinational policies to avoid challenges such as the one Canada currently faces with our digital services tax.
Second, our Team Canada approach can’t wait until January. We must connect with friends and allies of Mr. Trump today and do so with a united front aligned on a central message: Canada is a serious partner focused on addressing Mr. Trump’s concerns.
Third, while some countries can absorb these tariffs – China and Mexico for example – owing to their low cost structures, Canada is a high-cost jurisdiction that will struggle to compete. Investments in productivity-enhancing technology and machinery are essential, and we’re far behind right now. Businesses need to address this immediately and urgently, potentially with broad-based support from governments.
We haven’t been good at making tough decisions in the past, but we’re going to need to make them now. The clock is ticking.
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Giles Gherson
President and Chief Executive Officer, Toronto Region Board of Trade
Giles Gherson is the President and Chief Executive Officer of the Toronto Region Board of Trade, one of the largest and most influential business organizations in North America. Giles leads the Board’s efforts to advocate on behalf of our members and enhance the business competitiveness of our Region. He is charged with leading the implementation of the Board’s new strategic plan to renew our mission as a catalyst for a vibrant, globally competitive Toronto Region business community.
Prior to joining the Board in 2022, Giles spent over 25 years in the private and public sector in progressively senior roles. He spent 15 years with the Province of Ontario, where he held multiple influential Deputy Minister roles – most extensively and recently as Deputy Minister, Economic Development. Previously, Giles has led the government’s economic growth and competitiveness policy, overseen the recent creation of two new agencies, Invest Ontario and IP Ontario, and worked to attract a wave of technology and manufacturing investments, including the retooling of the province’s auto sector for next generation battery electric vehicles. He currently sits on Ontario’s Advanced Manufacturing Council, working to boost the long-term competitiveness and resilience of this sector by attracting key investments and creating opportunities for businesses across the province.
Prior to his role in government, Giles worked as editor-in-chief of the Toronto Star, political editor of the National Post and editor of the Globe and Mail’s Report on Business. Giles is the immediate past President of the Board of Directors at the Institute of Public Administration of Canada, the country’s leading professional organization supporting excellence in the public sector.
