Donald Trump has been elected as the 47th President of the United States and at least one expert is warning that the result could be ‘overwhelming negative’ for Canada’s economy.
Ian Lee, who is an associate professor at the Sprott School of Business at Carleton University, told CP24 on Wednesday morning that Trump’s victory south of the border will present a number of challenges to Canada, particularly when it comes to cross-border trade.
“I think the outcome is going to be overwhelmingly negative and I say that analytically and empirically. First off he has said he will put a 10 to 20 per cent tariff on goods from Canada to the United States. We export one third of our GDP, roughly $800 billion, and about 70 per cent of that goes to the U.S. So that would be catastrophic,” Lee said. “But it doesn’t stop there. He (Trump) has also said that he is going to reduce the corporate income tax rate from 21 per cent to 15 per cent. Our high-end combined federal and provincial corporate income tax rate is 38 per cent. He is talking about going to 15 per cent. All of these factors are going to pull investment capital from Canada into the U.S. which is going to drive down the Canadian dollar.”
He said that while some Canadian politicians could see another Trump presidency as a chance to implement “serious reforms” to long-term policies based on the principles of “subsidize and protect,” the short-term future is likely going to be challenging for Canadian consumers as well as the country’s GDP.
“It is going to reveal itself through the dollar. We not only export one third of our GDP, we import one third of our GDP. We import huge amounts,” he said. “When that dollar tanks, as I am predicting it will, that is going to drive up the cost of food we import along with John Deere tractors, computers, et cetera.”
The Canadian dollar is currently trading at approximately 72 cents against the U.S. dollar but Lee said that it could slide to 65 to 66 cents, if Trump goes ahead with his tariff proposals and other policies.
The Canadian Chamber of Commerce has previously suggested that if Trump’s proposed tariffs are implemented in full it would result in around $30 billion per year in economic costs for Canada’s economy.
TD has also estimated that Trump’s tariffs could ultimately lead to a five per cent reduction in Canadian exports to the U.S. by early 2027, compared to the current forecast.
“I think it is a direct challenge to what we have done and adopted as a philosophy over many years,” Lee said.
Speaking with CP24 on Wednesday, political analyst Scott Reid said that while the full impact of a Trump presidency north of the border is still unclear, Canadians should “ready themselves for profound unpredictable change.”
“There is going to be profound political change in the United States and profound political change all around the world,” he said. “Our bilateral relationship which is so profoundly important to us here in Canada – economically and culturally – is about to shift in dramatic ways.
To watch the full interview with Lee click the video in the player above.
With files from The Canadian Press