Trump, Europe and Canada’s treacherous trade waters

For anyone who didn’t see 1985’s Back to the Future, here’s a key scene:

Dr. Emmett Brown: Then tell me, future boy – ha! - who’s president of the United States in 1985?

Marty McFly: Ronald Reagan.

Doc: Ronald Reagan? The actor? Ha! Then who’s vice-president? Jerry Lewis? I suppose Jane Wyman is first lady?

Marty: Whoa! Wait, Doc.

Doc: And Jack Benny is secretary of the Treasury. Ha!

Canada is suddenly in treacherous trade waters.

It’s not just because of Donald Trump's ascension to the White House, though that’s a big part of it. His victory comes as protectionism is sweeping key regions of the globe.

It’s true that Canada has a depressed currency that should help juice exports. It’s also true that Canadian exports don’t appear to be one of Mr. Trump's targets.

But if anyone thinks his conciliatory acceptance speech and his focus on stimulus rather than trade means the latter is on the back burner, they’d best think again.

As my colleague Barrie McKenna reports, this is a worst-case scenario for an economy so dependent on trade.

Canada certainly stands to benefit from some of the president-elect’s policies, as it always does when the U.S. economy is strong. We could also benefit if the Keystone XL pipeline suddenly is back on the agenda.

But economists believe Canada risks being caught up in Mr. Trump’s protectionist plans, depending on how he approaches negotiations on the Canada-U.S. free-trade agreement, which he wants to redraw.

The bell is now tolling for the Trans-Pacific Partnership deal, as well. And, overseas, economists warn that Trump-like fervour also threatens the Canada-EU trade pact.

“For the progress of the Canadian economy, with its limited upside for domestic demand after the debt binge and housing surge of recent years, much is riding on exports,” said National Bank chief economist Stéfane Marion.

“Canada has benefited enormously from access to the U.S. market, exports to which have more than doubled since 1993 [the year before NAFTA was implemented].”

Indeed, Mr. Marion noted, Canada now boasts an annual trade surplus of about $117-billion with the U.S., up from just $37-billion in 1993.

“With the U.S. taking more than 75 per cent of Canada’s goods exports, a push by President Trump to let air out of NAFTA tires would be bad news for Canadian growth,” Mr. Marion said.

Laurentian Bank was harsh in its look at Mr. Trump’s policies and his potential impact on the world.

“Although we wish Mr. Trump the best of luck and certainly hope that he will succeed, our impression, until we can be convinced otherwise, remains that his apparent lack of knowledge and competence and his inability to listen to sound advice will likely prove to be a disaster in the long run for the U.S. economy and for the world,” said Laurentian chief strategist Luc Vallée, chief economist Sébastien Lavoie and senior economist Éric Corbeil.

“The presidency of Mr. Trump could thus mark the end of the world as we know it and spell the decline of the U.S. dominance in the world.”

They were less harsh as to the potential impact on Canada, though they warned that “under the worst-case scenario of a broad-based tariff plan on all U.S. imports or a reinforcement of Buy American policies, Canadian exports would fall significantly and several workers would lose their jobs.”

The “good news” on that front, however, is that Mr. Trump’s comments to date have been aimed at Mexico and China.

But Canadian trade isn’t just threatened by America alone.

As our European correspondent Eric Reguly writes, populist parties across the continent have been buoyed by Mr. Trump’s victory, which, of course, followed the successful Brexit vote in Britain.

Remember, we’ve already had troubles with the Canada-EU Comprehensive Economic and Trade Agreement.

“The one-two punch of the Brexit and Trump victories could further increase the popularity of anti-establishment parties in Europe,” said National Bank’s Mr. Marion, citing upcoming elections or referendums in Austria, Italy, the Netherlands, France and Germany.

“If the U.S. were to erect trade barriers, could Canada find other takers for its goods?” Mr. Marion said.

“It’s unlikely exporters could promptly reduce their exposure to the United States,” he added.

“Trump’s victory leaves the Trans-Pacific Partnership effectively dead in the water. Even the Comprehensive Economic and Trade Agreement provisionally approved by the Europeans may be in jeopardy if a similar wave of populism runs through upcoming European elections.”