What Is the Impact of the Trump Effect On the Canadian Economy?

The “Trump Effect” has multiple definitions attributed to everything from racial relations, stock market behavior, and economic environments. President Trump adopts an unpredictable style of negotiation augmented by unpredictable rhetoric in both domestic and international issues (MacPhee, 2018). His willingness to employ extreme measures such as tariffs and revocation of existing trade agreements put economies at the mercy of his actions.

Why We Chose the Topic

When it comes to fallouts between Trump’s policies and Canada, trade has been the most visible area. Trump has advocated for protectionism targeting both allies and adversaries. Since taking office, he has spearheaded exits from the North American Free Trade Agreement (NAFTA) and the Trans-Pacific Partnership (TPP), all of which Canada was a key member. Therefore, his presidency spells a cloud of unpredictability on the Canadian economy.

Research Questions

  1. How will the “Trump Effect” affect the Canadian motor industry?

Trump’s fuel efficiency war with California could hurt the Canadian vehicle industry. While California implemented new regulations on energy efficiency, president Trump championed for a reversal of the guidelines introduced by Obama. The motor industry in Canada employs approximately 5000 people directly and another 400,000 indirectly (Liwanag, 2018). Canada faces a dilemma on whether to follow the California standards or revert to the low federal standards spearheaded by President Trump.

  1. How is the “Trump Effect” affecting Canada’s multilateralism?

Canada relies heavily on the U.S. for security. Consequently, security became a sledgehammer in the NAFTA debate. Being in a stronger position compared to Canada, the Trump administration has put pressure on Canada to reject China’s Huawei or risk losing out on 5G infrastructure. If Canada rejects Huawei, it might start a cycle of trade wars with China. On the other hand, by exiting NAFTA and TPP, Canada has been left to spearhead multilateral trade agreements without the U.S, as a member.

  1. Will the Canadian dollar survive the “trump Effect”?

President Trump’s economic policies are erratic. Consequently, the fate of the Canadian dollar is unpredictable because of reliance on the U.S. for trade. Uncertainties over NAFTA and TPP also increase its volatility (Liwanag, 2018). On the other hand, environmental regulations and energy regulations in the United States may affect the Canadian oil industry, thus having a direct hit on the country’s currency.

References

Liwanag, R. (2018, October 04). 4 Things That Can Happen to Canada Under a Donald Trump Presidency. Retrieved July 17, 2020, from https://www.readersdigest.ca/home-garden/money/donald-trump-change-canadian-economy/

Murphy, J. (2018, May 03). Where does Trump’s ‘America First’ leave Canada? Retrieved July 17, 2020, from https://www.bbc.com/news/world-us-canada-43786775

MacPhee, G. (2018). The Transatlantic Trump effect. Foreign policy in focus. Retrieved July 17, 2020, from https://digitalcommons.wcupa.edu/eng_facpub/63

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