With his election as US president, Trump is in a position to act on protectionist rhetoric he expressed during the campaign. But while that spells bad news for NAFTA and Mexico, Canada could stand to benefit, according to an article on Huffington Post Canada
Citing a note to clients from CIBC economists Avery Shenfeld and Royce Mendes, the report explained that it’s possible for Canada and the US to revert to a bilateral relationship similar to one that preceded NAFTA’s ratification in 1994.
“That might help Canada reap market share stateside, but there are also risks that protectionist sentiments could extend to restrictions on some Canadian shipments to the US, given the political tide in that direction,” said the economists.
Given that Trump’s protectionist pronouncements have largely been directed against low-cost producers like China and Mexico, Canada has an opening to maintain free trade with the US. As Mexico recently overtook Canada as top auto exporter to the US, a shutout of Mexico would almost certainly be beneficial.
However, Shenfeld and Mendes noted that Trump’s protectionist agenda may not fully materialize. “Congress and his advisors could try to water down Trump’s protectionist plans,” they wrote, adding that “the US constitution gives [Trump] the power to unilaterally undo existing trade agreements.”
“Overall, while the changes in policy might not be as drastic as the platform he ran on, this was an unexpected outcome and will likely lead to sharp movements in asset prices,” they said.
Regardless of what Trump’s trade policy turns out to be, Canada has extended an open hand via a brief congratulatory statement from Prime Minister Justin Trudeau.
“We look forward to working very closely with President-elect Trump, his administration, and with the United States Congress in the years ahead, including on issues such as trade, investment, and international peace and security,” he said.
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