BREAKING Donald Trump picks former U.S. congressman Pete Hoekstra as ambassador to Canada
U.S. president-elect Donald Trump has nominated former diplomat and U.S. congressman Pete Hoekstra to be the American ambassador to Canada.
Donald Trump's impending return to the White House has cast a spotlight on Canada-U.S. economic ties amid worries that the president-elect's protectionist stance could complicate the vast levels of trade between the two countries.
Some Canadian business leaders have expressed uneasiness over Trump's promise to introduce a universal 10 per cent tariff on all American imports.
A Canadian Chamber of Commerce report released last month suggested those tariffs would shrink the Canadian economy, resulting in around $30 billion per year in economic costs.
Canada's manufacturing sector faces the biggest risk should Trump push forward on imposing broad tariffs, said Canadian Manufacturers and Exporters president and CEO Dennis Darby. He said the sector is the "most trade-exposed" within Canada.
"It's in the U.S.'s best interest, it's in our best interest, but most importantly for consumers across North America, that we're able to trade goods, materials, ingredients, as we have under the trade agreements," Darby said in an interview.
"It's a more complex or complicated outcome than it would have been with the Democrats, but we've had to deal with this before and we're going to do our best to deal with it again."
The campaign promise on tariffs comes ahead of talks set to take place about the Canada-United States-Mexico Agreement, which came into effect in 2020 under the previous Trump presidency.
The deal is up for review in 2026 and Trump has vowed to renegotiate it.
American economists have warned that Trump's plans could cause inflation and possibly a recession, which could have ripple effects in Canada.
Its consumers who will ultimately feel the burden of any inflationary effect caused by broad tariffs, said Darby.
"A tariff tends to raise costs, and it ultimately raises prices, so that's something that we have to be prepared for," he said.
"It could tilt production mandates. A tariff makes goods more expensive, but on the same token, it also will make inputs for the U.S. more expensive."
More than 77 per cent of Canadian exports go to the U.S.
There was a total of more than $960.9 billion in trade between Canada and the U.S. in 2022, accounting for close to two-thirds of the more than $1.5 trillion in worldwide trade that year, according to Statistics Canada.
A magnifying glass enlarges the holographic image of Parliament Hill's Peace Tower on a $20 bill issued by the Bank of Canada, shown in a display case at the Bank of Canada Museum in Ottawa, Wednesday, Sept. 4, 2024. (Justin Tang/THE CANADIAN PRESS)
Desjardins head of macro strategy Royce Mendes noted that energy accounts for 30 per cent of Canadian goods exported to the U.S. and it’s "very likely" that Canada’s oil and gas supply would be exempt from future tariffs.
"A potential renegotiation of the (free-trade agreement) could require some concessions, but the integrated nature of supply chains in the two countries offers some room for Canada to escape the coming wave of U.S. protectionism less battered than other nations," he said in a note.
When it comes to energy policy, the U.S. is reliant on Canada's heavy oil, which bodes well for trade prospects no matter who is in the Oval Office, said Heather Exner-Pirot, a special adviser to the Business Council of Canada.
She said the "conventional wisdom" is that the U.S. can't replace Canadian oil unless it imports from elsewhere.
But Trump showed he isn't against Canadian oil during his first term when he approved the Keystone XL pipeline — a project eventually cancelled by owner TC Energy after President Joe Biden revoked a key permit for it on his first day in office. "We're not competing, per se, head-to-head with American production anymore," said Exner-Pirot.
"We've never exported more to them and I think they will need more regardless of what a president does or a policy does."
Beth Burke, chief executive of the Canadian American Business Council, said she was optimistic the strong economic relationship between the two countries would continue, especially given that both sides have previously navigated free trade talks during the last Trump presidency.
"Obviously there are challenges. The talks of tariffs is something that we don't support and we aren't excited about. We don't think that's a road where anyone really wins," she said.
"But we've seen this before. We've lived through a Trump and Trudeau partnership navigating steel and aluminum tariffs and what happened is we got to the right answer, ultimately."
In 2018, the Trump administration imposed a 25 per cent tariff on steel and 10 per cent levy on Canadian aluminum imports after frequently threatening harsher tariffs on Canada that didn't materialize.
BMO chief economist Douglas Porter said Trump's rhetoric could again "be very different from the policy reality."
"Frankly, this is one we just do not know the extent to which these policies will be enacted," he said Wednesday.
"There's this widespread view that the bark is much worse than the bite on this front. That certainly was the case in the first administration of Mr. Trump, but we are talking about a very loud bark here. A 10 per cent tariff on all imports would be quite significant."
Asked about protecting Canadian businesses from such tariff threats, Deputy Prime Minister Chrystia Freeland said Wednesday she takes "everything that President Trump says very seriously."
"I think we need to," Freeland told reporters.
"That's why we have been very, very conscientious, very systematic about maintaining our relationship, maintaining our lines of communication with the Trump team."
She described "some very intensive times together" and "some tough moments" when the Liberal government previously worked alongside Trump's administration from 2017 to 2021.
"But at the end of it, working with President Trump and his team, we renegotiated our trade agreement with the United States," said Freeland.
"The deal that we now have that governs our economic relationship with the United States is Donald Trump's deal. He signed it, he and his team negotiated it. He is proud of it, and I think he's right to be proud of it."
Since the Canada-United States-Mexico Agreement came into effect four years ago, trade between Canada and the U.S. has surged 46 per cent, according to the Toronto Region Board of Trade.
Canadian Chamber of Commerce president and CEO Candace Laing said the federal government "must collaborate effectively with the Trump administration to preserve and strengthen our bilateral economic partnership."
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This report by The Canadian Press was first published Nov. 6, 2024.
U.S. president-elect Donald Trump has nominated former diplomat and U.S. congressman Pete Hoekstra to be the American ambassador to Canada.
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