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What would a second Trump presidency mean for Canada-US relations?

While the government publicly frets over a possible second Trump presidency, the last thing we need is another appeasement strategy.

January 24, 2024

4-minute read

Donald Trump’s unsurprising win in the New Hampshire primary all but assures a reprise presidential election battle with Joe Biden this November. Can Trump win? I wouldn’t bet against it. Biden’s approval rating at this point in his presidency is lower than any other president in living memory, though with $120 million to spend on the campaign, that might not matter.

In any case, the results in Iowa and New Hampshire show enough Republican voters are either sympathetic or indifferent to Trump’s anti-democratic impulses, penchant for conspiracy theories, and intense xenophobia. American voters’ opinion of Trump has been steadily—if slowly—improving since July. And it appears that Trump’s brand of fascistic politics are resonating with conservative voters and politicians in Canada.

A Trump win would weigh heavily on the continent (on some much more than others), emboldening hate groups in Canada and the U.S. as we saw after 2016. However, early assessments that Trump 2.0 would be “more dramatic,” more “high risk,” or more chaotic for Canada-U.S. relations are probably exaggerated.

Trump has a posse, and that posse has a plan for America: deregulate government agencies, privatize education, criminalize immigration (let’s remember that Biden built the wall after promising not to), cut public sector and climate spending, and “drill, baby, drill.” This is a classically Republican agenda, one that parts of Canada’s political and business elite, notably in the fossil fuel and extractive sectors, may welcome.

It is therefore important to watch how Canada prepares for the U.S. election, through the Team Canada project announced this week or elsewhere, and what Canada’s business lobbies are asking for.

Trudeau’s integration paradox

After Trump’s win in the Iowa primaries, Prime Minister Justin Trudeau publicly worried about the Republican’s re-election, but claimed that one of Canada’s greatest strengths when dealing with Washington is how integrated our two economies are. Industry Minister François-Phillipe Champagne repeated the paradoxical concept at a caucus meeting this week, while announcing he and Trade Minister Mary Ng would be creating a team of political, business, and labour leaders to devise a Trump 2.0 reaction plan.

For decades, Canadian elites have wielded Canada-U.S. integration as either a magic weapon for fighting off U.S. protectionism (Trudeau) or the dire impetus for relinquishing further independence in economic, regulatory, energy, or foreign policy-making (Mulroney, Chrétien, Martin, Harper). Obviously, integration makes Canada more vulnerable to changes in policy direction in Washington, not less.

To call that a strength is conceit, but economic integration does have real effects. One is that when U.S. governments start doing good things like cancelling cross-border oil pipelines, pushing for stronger worker protections into trade deals, or demanding that Canada deal with far-right blockades on key trade routes, Canadian politicians can be dragged in the same direction.

The opposite is of course also true. U.S. deregulation of rail transportation rules, mimicked by Canada to create a so-called level playing field for private rail operators, led directly to the avoidable Lac-Mégantic explosion that killed dozens in July 2013. The Harper government’s drive to attract investment in the tar sands for export to the U.S. contributed to a drastic fall in manufacturing employment in the late 2000s that has never recovered.

Integration and North American climate policy

In the current moment, where you have a U.S. administration seemingly committed to meeting U.S. climate objectives and scoring significant new investments in microchip, battery, or other kinds of manufacturing, economic integration can benefit Canadian exports and jobs in those sectors. Canada is currently cut into Biden’s subsidies as a trusted trading partner, but this could change under Trump.

We can debate how effective Biden’s climate investments in the Inflation Reduction Act have been. It is not the Green New Deal influential U.S. progressives wanted nor the initial Build Back Better package that would have substantially expanded America’s public services, its social safety net, and its green infrastructure.

Nonetheless, Biden has made a serious effort to decarbonize North American supply chains while attempting to reshore manufacturing lost to low-wage jurisdictions like China. The transition is big enough that the Trudeau government needed to respond with significant investments of its own in EV supply chains to ensure the viability of Canada’s auto sector in this new future.

But Trump, like Poilievre, is blaming government climate action for the post-pandemic inflationary shock, which is only now starting to ease—but at a slow enough pace that it will still be an election issue in November, and probably when Canada goes to the polls. A political disruption to the EV transition in the U.S. could prove disastrous to Canada’s auto sector while further empowering a fossil sector that needs to be scaled down under any responsible climate plan.

It’s complicated, because the Trump team remains very, very anti-China. You’d expect them to want to retain Biden’s tools to catch up with the runaway success of the Chinese EV industry and clean tech sectors, as the U.S. is currently doing through restrictive subsidies and restrictions on outward investment in China. Both Republicans and Democrats see China’s manufacturing dominance as a security threat.

However, Republicans have already come after those Biden subsidies in the Inflation Reduction Act in a vain attempt to pay down debt. If they were to succeed in the future, it would lower incentives for Americans to purchase home-made EVs and heat pumps or install renewable energy. Since most of Canada’s automobile production services the U.S. market, this would cut the knees out of our own transition to EVs.

Then again, Trump could keep Biden’s subsidies but make them even more restrictive (more exclusively Made-in-America). Even threatening to do so could potentially encourage firms like Northvolt or Honda, which have made huge commitments to build gigafactories in Canada to supply batteries for the EV supply chain, to rely on U.S. manufacturing hubs instead.

The Team Canada agenda

In the early days of the first Trump presidency, Trudeau painted his government as a bulwark to protect liberal values and the rules-based international order. But in Washington the priority was always U.S. market access for Canadian corporations, for which Canada, as usual, offered cooperation on Trump’s cybersecurity, defence and immigration priorities.

The Trudeau government welcomed Trump’s deregulatory agenda as an opportunity to promote “business-friendly” rules on the continent. The re-approval of the Keystone XL pipeline after Obama’s initial cancellation was celebrated by official and corporate Canada. Kneejerk Canada-U.S. cooperation on China under Trump severed Canada’s political relationship with its second largest trading partner.

For all these reasons, we should be wary of “all of Canada” approaches that go all-in on America—regardless of who wins the next U.S. election. The future of the EV and renewable energy transition is vital to Canada and must be managed carefully, whoever is president. Hopefully we won’t ever find out how a second Trump presidency will play it because there won’t be one.

Other priorities already being pushed by Canadian business as U.S. appeasement measures (e.g., increased defence spending, speeding up contested mining projects, killing long-overdue digital services tax) are futile and should be resisted. Canada’s political and economic options in North America are constrained by the integration paradox but needn’t be confined by it.

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