Former U.S. ambassador to Canada Bruce Heyman, who is a Democrat, says Donald Trump’s return to the White House raises questions about free trade between the two countries.
On Wednesday, Bloomberg News reported that Trump was elected the 47th president of the United States. Before the election, economists noted that Trump’s proposed tariff policy could present some downside risks to the Canadian economy.
“If he imposes tariffs, as he has said that he will do across the board on all imported goods, I don’t think that the new USMCA or…whatever we want to call this is actually in effect anymore,” Heyman said in a Wednesday interview with BNN Bloomberg.
“I don’t know what a free trade agreement looks like when you have blanket tariff across the board.”
TD Economics published a report Wednesday delving into Canadian implications from the U.S. presidential election. It noted that since 2020 when the United States-Mexico-Canada Agreement (USMCA) came into effect, trade between the three countries “has flourished.”
“Our research shows that a full-scale implementation of Trump’s 10 per cent tariff plan could lead to a near five per cent reduction in Canadian export volumes to the U.S. by early 2027, relative to our current baseline forecast. Retaliation by Canada would increase costs for domestic producers, and push import volumes lower in the process,” the report said.
Wendy Wagner, a co-leader of Gowling’s National Cybersecurity and Data Protection Group, said in a statement to BNNBloomberg.ca Wednesday that a key concern to Canada “will be the new administration’s positioning within the upcoming first scheduled joint review of the USMCA in 2026.”
She noted that this review will determine if the agreement is renewed for another 16 years.
“If consensus is not reached in the joint review, there will be annual reviews until 2036, which will perpetuate the uncertain environment,” Wagner said.
Heyman also noted that Canada could be caught between the U.S. and Mexico during negotiations.
“There are a lot of problems that the administration coming in will have with Mexico. And they may use this trade agreement as a means of exerting pressure on Mexico, which Canada may actually unfortunately feel the pressure from,” he said.
TD Economics also highlighted in the report that potential tariffs could create a “negative income hit to Canadians” through a “temporary and modest” resurgence of inflationary pressures around the 2.5 to three per cent annual range. The economists said if this happens, inflation would likely revert back to the Bank of Canada’s two per cent target by 2026.
According to TD Economics, tariffs on Canadian goods, and the resulting impact on growth, could force the Bank of Canada to lower its key policy rate by about 50-75 basis points more than TD Economics’ current forecast.