Following this week’s U.S. presidential election, questions are coming up about what sort of an impact could happen north of the border, particularly here in Saskatchewan. One of the proposed policies President-elect Donald Trump suggested during the election campaign was a broad 10 per cent tariff on all imports no matter the destination. Golden West business commentator Paul Martin outlined some of the potential ripple effects these policies could have on the province, especially with Saskatchewan’s significant annual trade volume with the United States, which is currently estimated at $27 billion.
One thing highlighted by Martin is the negotiation tactics employed by Trump, which often uses an aggressive opening stance to gain leverage in the talks.
“Trump’s one of those guys that... he’s the consummate negotiator, he loves doing the deal,” Martin remarked, pointing out Trump’s previous bold promises that saw mixed follow-through, such as building a wall paid for by Mexico. “Do you remember Mexico paying for anything?”
While the United States could be taking a more protectionist policy south of the border, Martin discussed some of the recent actions taken by Canada and the impacts had there. He referenced the 100 per cent tariff imposed on Chinese electric vehicles. He cited one of the intended consequences of those tariffs being retaliatory measures by China on Canadian canola, which negatively affected Saskatchewan farmers.
However, the spectre of tariffs should be remembered, Martin continued, as they can distort the market both in the nation imposing the tariff and the nations that are targeted. The tariffs would impact domestic consumers in the United States but also hurt some key sectors in Saskatchewan.
“If Trump went through with it, and said he’s going to impose a 10 per cent tariff on all imports, and he also wants to expand the oil and gas industry in the U.S., what's it mean up here?” Martin posed. “Capital is going to flow south. We’ll stop drilling here and they’ll start drilling down there. You’re going to see labour is mobile. It will be attracted to go down there. Capital is mobile. It will be attracted down there, and these are the problems that we need to contend with.”
Promises from Trump to also expand oil and gas drilling could have other impacts aside from the loss of capital and labour, according to Martin. While Trump’s last term saw relatively stable oil prices before the COVID pandemic hit in the spring of 2020, albeit lower than where those prices are now, global factors such as OPEC production adjustments could influence oil prices.
“The price of oil is not something America sets alone,” Martin observed, underscoring OPEC’s influence on the international oil market.
However, there could still be some crunches on the price of oil if the global supply increases due to expanded American drilling, which would impact a large portion of the economy in southeast Saskatchewan.
So what can Saskatchewan do to insulate itself from these issues affecting the economy locally?
When asked what steps the provincial government could take, Martin acknowledged the difficulties of counteracting these forces at the provincial level. He suggested that market adjustments, including the Canadian dollar's depreciation, could offset some impacts of American tariffs by lowering the effective price of Canadian exports. However, he cautioned this approach could introduce inflationary pressures, especially on imported goods like fresh produce.
Despite these challenges, Saskatchewan has been successful in attracting investment in recent years, particularly in mining. Martin credited the province’s favourable regulatory environment, noting it ranks highly among mining jurisdictions globally. With recent resource discoveries and developments, Martin believes Saskatchewan is well-positioned to continue attracting capital, although he warns competition with the U.S. may intensify if Trump’s administration succeeds in reducing taxes and attracting further investment.
Ultimately, any potential impacts would still be a few months away as Trump won’t be inaugurated until January, and even then, it could be a period of time after that.
“It’ll take at least a year to get all of this stuff in place, and get it rolling,” Martin said. “We probably have a fair bit of time to assess the landscape and figure out what’s really going to happen, and then to make our game plan adjustments as we’re going.”