Reply to Trump’s tariffs | Energy and snowbirds

There has been talk of taxing American orange juice, Jack Daniel’s whiskey and now Canadian energy as a response to Donald Trump’s tariffs. What if Canadians also decided to stick together by refusing to go to the United States for their vacations?

Canada is seeking by all means to respond to the feared tariffs, as we saw during the meeting of the prime ministers of the Canadian provinces on Wednesday.

Before talking about “snowbirds” and their lucrative spending in Florida, let’s take a look at trade between Canada and the United States, to see which sectors Canada could target.

First, energy. Several provincial premiers, including François Legault, support the idea of ​​limiting energy exports to the United States, with a special tax or otherwise.

Alberta did not support the final communiqué of the meeting – where there is no question of limiting energy – but we understand that this essential good could be part of the response.

In 2023, Canada exported $166 billion in energy products to the United States, which represents 30% of our total exports of goods, far ahead of vehicles and automobile parts (82 billion) or metals and minerals (56 billion), which include aluminum.

Alberta’s opposition is not surprising, considering that this province is the source of three-quarters of energy exports to the United States, according to Statistics Canada data.

In Quebec, revenues from these exports represent only 3% of the Canadian total for energy – mainly coming from Hydro-Québec – and in Ontario, 1.6%.

This type of tariff would contravene the free trade agreement (CUSMA), as well as the rules of the World Trade Organization (WTO), lawyer Bernard Colas, of Affilia Légal, told me.

Challenges are expected, but the United States is slow to appoint independent judges to the WTO and sometimes to the CUSMA who could decide these kinds of cases. And there is talk that Trump will invoke national security to circumvent the rules.

Disputes could also arise between Canadian and American private parties linked by contract, often over the long term, particularly for energy. However, most of these contracts have clauses for changes in economic conditions (hardship) and force majeure which could lead to the termination of such contracts, if applicable, Mr. Colas explains to me.

In short, a lot of trouble ahead.

In fact, Donald Trump’s observation about our trade is not unfounded, although it is absolutely not a question of subsidies. For 10 years, the current account balance (exchanges of goods, services and investments) has been constantly favorable to Canada, and has been growing strongly for three years.

Overall, Canada pocketed $824 billion in 2023 with its products, or $82 billion more than the United States’ $742 billion, according to Statistics Canada data. The $82 billion gap is approximately equivalent to Ontario’s health care budget.

This balance of 82 billion is explained by our surplus in the exchange of goods (102 billion), which is however reduced by deficits of nearly 14 billion in the exchange of services (legal, IT, etc.) and some 12 billion in investment income and others (stock market shares, bonds, government loans, etc.).

To better understand and, above all, better see which sectors could serve as a response to Donald Trump, I extracted the main subcategories from the current account. Goods, services and investments were amalgamated, and in doing so, the share of energy fell from 30% to 22% of Canada’s total trade with the United States.

Should we consider a tax on Netflix or Amazon services, or even a withholding tax on royalties from Microsoft software and other American patents?

“Snowbirds”, a cash cow

Which brings me to talk to you about Canadian travelers to the United States, particularly “snowbirds” from Quebec and Ontario, who spend a good part of the winter in Florida.

They constitute a real cash cow for the United States, in particular for a state dear to Donald Trump, Florida. In 2023, some 3.2 million Canadians visited Florida, about 8% of them to spend the winter, leaving billions of dollars in revenue in the local economy^⁠1.

It is not for nothing that Senator Marco Rubio introduced a new law in 2023 to allow Canadian “snowbirds” aged 50 and over to stay in Florida for eight consecutive months rather than six.

Over the past 25 years, spending by Canadians in the United States for their travel – most of it leisure – has experienced very significant growth. They even reached a record level of $30 billion in 2023 (last full year of data available). These expenses include costs for housing, food or transportation, for example.

However, Americans do not spend as much in Canada when they visit the country, which creates a significant deficit (nearly 16 billion in 2023) and which has been growing strongly for 20 years, according to Statistics Canada data.

Hence my question: in response to the 25% tariffs on goods, couldn’t Canadians limit their travel to the United States? Should the authorities consider a tax, as for energy?

This is what international relations professor Fen Osler Hampson, of Carleton University, suggests.

“Ottawa could impose a travel tax in the United States that would discourage Canadians from vacationing in places like Florida, Nevada or California, which would hit hard the local economies of these states,” writes the professor with the expert Tim Sargent^⁠2.

Of course, the measure would be a politically difficult sell. But after all, if Canada is willing to deprive Canadians of their jobs by taxing exported energy or other crucial goods, why would it be any different with sun worshipers? Are we not in an economic showdown, as Trump says?

That said, the fall of the loonie against the American dollar – which could drop to 65 cents with the turbulence – could already encourage many to avoid the United States for their stays, which have become too expensive.

What an upheaval, all the same…

1. Read the article from Florida Sunshine

2. Read the text published on The Hub (in English)