Residential Market Commentary - Loosening trade ties to the U.S.

  • First National Financial LP

U.S. trade turmoil and the American administration’s threats against Canadian sovereignty have triggered a rise in nationalism and patriotism that is out of the ordinary for this country.

With a federal election campaign in full swing there are calls from across the political spectrum for a stronger, more united country that does not have to rely on the United States.  It makes sense given the management-by-mayhem coming out of Washington D.C., but it will not be easy and it will not be fast.  And one well-known economist warns it is unlikely to happen at all.

In an interview with the Financial Post Benjamin Tal pointed to history as the main support for his argument.  He says Canada has been trying for years to loosen ties to the U.S.

"To diversify our export machine away from the U.S., we have the 15 free trade agreements with 51 countries, and our dependence on the U.S.A. went up despite all that," Tal said. "It's very difficult to break."

Tal believes the current interconnectedness of the two economies, the common infrastructure, and simple proximity will see Canada sourcing more, not less, from the U.S.  The current Canada-United States-Mexico trade agreement (CUSMA) is coming up for re-negotiation and Tal predicts Canada will be pressured to purchase more American defence and energy products. 

"Five years from now we will wake up and realize that our dependence on the U.S. has risen, not fallen," Tal said.

Tal also points out that in the current trade war, which is now clearly aimed at China, Canada has little choice but to side with the U.S.

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