By Jean-Michel Demetz (in Montreal)
Justin Trudeau has a way with understatement. On his return from a courtesy visit to Mar-a-Lago (Florida), Donald Trump’s private club, a few days after the latter’s election last November, the Canadian Prime Minister conceded in front of an audience of worried businessmen: “It will be a little more difficult than last time. » Not content with raising the threat of 25% customs duties on all Canadian products, upon his inauguration on January 20, the next tenant of the White House had suggested to the head of the Ottawa government, relegated to the title of “governor of the great state of Canada”that the northern neighbor simply becomes the 51e American state… A joke? Not sure. On January 6, the American reacted to the announcement of Justin Trudeau’s resignation with a call for the merger of the two countries and the erasure of the border, “this artificially drawn line”.
The Canadians, placid and not inclined to quarrel, learned to cohabit with their large neighbor to the south, who became their best ally after the latter failed, in 1812, to invade the English colonies of Canada. But it is always with a slight apprehension. “Being your neighbor is like sleeping with an elephant, Pierre-Elliott Trudeau told Richard Nixon in 1968. However gentle and placid the beast may be, we submit to its every movement and grunt. »
It is an understatement to say that Trump’s trumpeting has shaken Ottawa, as national wealth depends on the market American. “High tariffs would be devastating for the Canadian economy,” admitted Justin Trudeau. Exports to the United States represent 18.7% of national GDP, but between 25 and 36% for provinces like Alberta, rich in oil, Saskatchewan (oilseeds, uranium), New Brunswick (fuels, paper ). “Duties of 25% could reduce our growth by 2 points and weigh on the loonie [le surnom du dollar canadien, en chute depuis l’élection de Trump]but our monetary and budgetary policy would also be impacted,” warns Douglas Porter, chief economist at BMO Economics. Recession guaranteed in 2025, unemployment rate increased to 8%, public deficit out of control…
“Knock back”
Officially, Donald Trump is raising the protectionist threat to force Ottawa to better control its border, considered permeable to illegal migrants and drug trafficking, such as fentanyl. But, in the medium term, he also wants to correct the free trade agreement scheduled for negotiation from 2026: the current trade deficit between the two countries, to the disadvantage of Washington, is unbearable for him. During his first term, Trump obtained a symbolic victory: the North American Free Trade Agreement (NAFTA), which entered into force in 1994, was replaced in July 2020 by a Canada-United States-Mexico Agreement (Aceum ), a little more favorable to the interests of the hyperpower.
At the beginning of December, Trudeau unveiled his response strategy to the demands of the new administration at the Halifax Chamber of Commerce (Nova Scotia). Canada, he asserted, can “strike back so that Americans feel the blows”. Ottawa knows how to do it. During Trump’s first term, the country threatened tariffs on a whole range of products from Republican states, from playing cards (printed in Minnesota) to Harley-Davidsons (assembled in Wisconsin and Pennsylvania), through Kentucky bourbon. Washington ended up lifting duties on Canadian steel and aluminum. For months, Ottawa negotiators have been listing new products made in America who could be targeted and remind lobbyists on Capitol Hill of this precedent.
Saving Canada’s attractiveness
For their part, the Prime Ministers of the Canadian provinces activate their networks with the governors of Republican states, arguing, each time, that the cross-border interweaving of production chains is such that no party has an interest in a trade war. . “We are by far the largest customer of American exporters”the ambassador to Washington, Kirsten Hillman, a lawyer specializing in trade negotiations, recently reminded an American television channel. And to underline that his country represented the first market for 36 states out of 50. A Canada which suffers also means a United States suffering in the wallet. An increase in the prices of Alberta beef or Prairie canola (Canadian rapeseed), hit by « tariffs », would ultimately be borne by the American consumer.
-Less diplomatic, the truculent Prime Minister of Ontario, Doug Ford, is playing Trump: “We will go so far as to cut off their power if necessary”in reference to electricity sold to neighboring states. Not intimidated, he even proposed the repurchase of Alaska… Waving the stick but also showing the carrot. The Ottawa government has already promised to spend 700 million Canadian dollars to further secure its 9,000 kilometer border. He also mentioned an increase in his military budget, one of the lowest in NATO in percentage terms, at 2%, by… 2032.
Will this be enough? Probably not. But Trump’s America poses another challenge. Oddly enough, no one mentions it. Yet it is real. A massive shock of deregulation in the United States would have major repercussions on the attractiveness of Canada. Fewer rules, fewer taxes, less bureaucracy: how could the country’s businesses align? How could capital, better remunerated, not jump the border? How could the brain drain to the United States, a recurring Canadian problem, not get worse? Ultimately, an entire distinct social model is under pressure.
After Trudeau, a disorderly transition
“Trudeau leaves power as he lived, without worrying about the consequences for others. » Howard Anglin, the former chief of staff of former Prime Minister Stephen Harper (Conservative), expresses cold anger, in unison with many Canadians. Unpopular, without a majority in Parliament, contested by the deputies of his party, Justin Trudeau could, after nine years in office, resign months ago and initiate a smooth transition.
Announcing his departure a few days before the inauguration of Donald Trump, while remaining in office until the Liberal Party, his party, has chosen a successor at the end of an internal vote, adds to the disorder: how his ministers will they be able to campaign while dealing with the American issue? And what is the horizon for the next Liberal leader – will it be former Finance Minister Chrystia Freeland? Former Bank of Canada Governor Mark Carney? Another ? –, if not that of new elections, in the spring? The conservative opposition, led by Pierre Poilievre, is the favorite.
