In the week that Donald Trump’s inauguration ushered in a new world order, John Ivison is joined by Robert Asselin, senior vice-president at the Business Council of Canada and a former adviser to ex-finance minister Bill Morneau, to talk about the policy implications for Canada.
Asselin said that, while Trump did not impose 25 per cent tariffs on Canadian exports to the U.S., the idea of rebalancing trade remains at the core of his agenda.
“He spoke to it in the inauguration speech. It’s really interesting the way he framed it in his speech, saying it’s time for foreign citizens and foreign countries to be taxed as opposed to Americans, which is obviously an economic falsehood when you think about tariffs. American citizens will pay them. But the way he framed it was really interesting. So for me there’s no doubt that the philosophy behind it is there.
“What was less clear is, what’s the execution of it? How is it going to be implemented? It is clear to me that he’s really thinking about implementing these tariffs. There might be carve-outs, there might be exemptions, but I think they’re coming,” he said.
Asselin suggested that Trump is likely being cautioned by senior members of his administration that there are consequences in the real world for hitting allies with tariffs.
“There are smart people around him, his new treasury secretary (Scott Bessent), for example, and people like (Secretary of State) Marco Rubio that are telling him: ‘Look, this is the real stuff. We have to be careful how we roll this out. America cannot be isolated in the world. The way we treat our partners is consequential.’
“But my sense is that Trump is a bit unhinged at the moment. This is his last mandate. He knows he has probably a year to get the ball rolling on most of the consequential stuff he wants to achieve. And at the centre of it, I’m convinced, is the rebalancing trade, which is really at the core of his agenda. So I have no doubt that we’ll see a manifestation of it (in the form of tariffs).”
(Trump) wants everything. That’s the starting point
Asselin said it is fundamental for Canadians to understand that this is all about China and economic security.
“China has dominated manufacturing, and is now producing about 40 per cent overall manufacturing in the world. By the way, (former president Joe) Biden also had this agenda, even if he had a very different way to go about it using incentives as opposed to sticks, which is the Trump approach. But it was the same objective – rebalancing the production of things to the U.S. The problem with that is the reason why things are being made in China is because they’re more efficient than the Americans are at producing things. They have advanced very rapidly. They have a long-term plan, long-term vision in key sectors. And so there is a lot of catching up to do. (But) I’m not convinced that tariffs will be the right tool over time to solve this problem,” he said.
Asselin said that Trump will use the threat of tariffs as leverage in any early renegotiation of the United States-Mexico-Canada trade agreement. Ivison asked what the president wants.
“He wants everything. That’s the starting point. He wants all the concessions. And the way he looks at it is, if he can leverage all his strengths to get the maximum for (American) workers, this production agenda I was referring to, he’ll do it. So everything will be on the table, I assume: defence spending, the digital service tax, our dairy protectionism, obviously the border. And so on and so on. We’re vulnerable. They have a lot of leverage on us. Our economy is absolutely integrated with the U.S. They know it. And the few things that we have that they don’t have – uranium, oil and gas, heavy oil, crude oil, critical minerals, all that stuff, we have to leverage to our advantage in this discussion,” he said.
Asselin said partisan, nationalistic rhetoric is not helpful.
“We have to understand that the U.S. economy is modeled on U.S. domestic consumption. It has a big enough economy that it can sustain a (trade war). They can sustain that because of the strength of an internal consumption-driven economy. We are not in a position to sustain tariffs in such a way because our economy is driven by exports, 80 per cent of which goes to the U.S. And so I’m worried about this rhetoric because it sounds good, it sounds nationalistic, but in practice, you’re not going to win a trade war.”
Asselin penned an article in the Globe and Mail this week saying that recent events have shattered Canada’s complacency and he called for a “transformational response,” similar to the U.S. reaction to the Soviets launch of Sputnik in 1957.
“It’s like you’re going to your routine doctor visit and he tells you that if you don’t change your daily habits, you’re going to die because you have this chronic illness. This is the kind of shock that we have in front of us – everything we assumed was in the bank is not there.
“So there are two things: the first is really for our policymakers to refocus on economic growth. We have not in this country focused on economic growth, both federally, provincially, I would argue, for a while. We have taken for granted our trading partner in the U.S. We have assumed that our natural resources will get us through. If you look at Canada, we’re spread geographically. We’re all trying to be everything to everyone. What I’m saying essentially is now we have to have a clear economic strategy. What do we want to be? Where do we want to compete in key advanced sectors? And what’s the strategy to get us there? We certainly have talent, but talent is not being translated, and our ideas are not being translated, into our economy. And you need institutions to do that. You need a deliberate strategy.
“(Second) there are obstacles – we have scored goals in our own net. Regulation is one of them. We have endless discussion on inter-provincial trade. I know a lot of provinces don’t want to talk about it because they have pressures such as union resistance, but we’re going to have to get serious on this stuff because at this moment of crisis, we just can’t avoid it. We have a lot of energy we can deploy. We have a mix of energies, not just oil and gas. We need to develop it. Canada needs to think about itself from a technical point of view in all these sectors. Technology drives growth, technology drives innovation, innovation drives productivity. So just exporting raw commodities will not get us where we need to go.”
Sure, we’re not going to become Argentina. But the path we’re on right now is really, really worrisome
Asselin issued a stark warning about the prospect of relative decline in the standard of living enjoyed by Canadians.
“Canada is a great country. Sure, we’re not going to become Argentina. But the path we’re on right now is really, really worrisome. GDP per capita has been down eight of the last nine quarters. Our business investments are low. We don’t have scale in the economy. There are way too many SMEs (small and medium enterprises) versus large firms. And there is no strategy in real key advanced industries.
“We can dominate on energy technology. We can dominate on agricultural technology. We can have a biotech strategy, but we need to get this going. And I’m a bit worried about even Mr. (Pierre) Poilievre’s thinking on the economy. I agree that removing regulatory barriers is really important, as is being more fiscally disciplined. But it seems to me these things in themselves will be insufficient.
We do need a science and technology strategy to get Canada competing where the world is competing.”
“The (good news) is the world wants what we have. We have ample of it. This is a moment of energy security. If we give up our market share to countries who don’t care about climate, who don’t have a climate strategy, we are making things worse. We need to work on these technologies that will make our resources less carbon intensive but this kind of black and white framework about no resources or full resources seems to me is not the right one. Of course we have to export our resources but we have to double down on the technological aspect of it – CCS (carbon capture and storage) and nuclear.
“Canada can own the nuclear file in the world right now. We have the best reserves of uranium in the world. We have the technology, SMR (small modular reactors) are very promising. Let’s double down on that and kudos by the way to the Ontario government for understanding this. They seem to be doubling down on nuclear. And geothermal will probably be next. Hydro-electric, we can do much better. Let’s use the fact that we have a clean (electricity) grid, relative to other countries, and make it a competitive advantage.”
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