In a recent interview, Dr. Joel Bruneau, department head of economics at the University of Saskatchewan, shared his insights on two recent economic developments: China’s canola tariffs and escalation with Trump, and the release of the provincial budget.
“I’d say two things about China: It’s not reliable, because I think they’re willing to use trade, to weaponize trade for political gain,” explained Dr. Bruneau, who specializes in the study of international trade relationships and resource economics.
“The second is, in many cases their view of international trade is very much in sync with President Trump’s view of international trade — imports are bad, and exports are good.”
That current shared belief between the two nations complicates efforts to resolve trade imbalances, because they can’t both run a trade surplus at the same time.
Saskatchewan is caught up in this because Canadian canola meal and oil are currently under a 100 per cent tariff by the Chinese government. China is accusing Canada of unfair trade practices revolving around their trade deficit of canola.
"So, China is running this huge trade surplus and they seem entirely unwilling to rethink that strategy," Dr. Bruneau stated.
Unlike the US, which has a constant and ongoing need for Canadian resources that makes long-term tariffs unlikely, China has a totalitarian government and massive savings rate on global trade dynamics. That means their government is both willing to sacrifice the priorities of its citizens and is able to sustain a trade war for longer.
"Those savings have to go somewhere. They're going into assets offshore and that means that China will run a trade surplus and the United States will run a trade deficit — they’re playing from the same deck, they just have different hands," Bruneau explained.
Taken in context, that likely means trying to strike deals with China while they’re engaged in a bitter trade war with Canada’s much larger southern neighbour could be a no-go. Moreover, China has never had a problem going back on deals in the past, so there’s nothing to say they would honour any such commitment independent of global dynamics.
That might be why the Sask Party has chosen a provincial budget that seems to be all "business as usual" with no bold policies but a cautious approach to maintain capacity for future intervention, Bruneau said. He noted that the provincial government has kept spending as a share of provincial GDP relatively constant over the past decade, which he views as a prudent strategy given the current economic uncertainties.
"The share of GDP government spending really hasn't changed in about 12 years with the provincial government spending as a share of provincial GDP pretty constant."
This stability, according to Dr. Bruneau, allows the provincial government to intervene if necessary, particularly in response to potential economic disruptions caused by international trade issues.
"Not being bold and keeping your powder dry is probably a really useful thing to be doing," he added.