Donald Trump’s continued outsized influence on Canada

Donald Trump sucks the oxygen out of every political maneuver and debate in the United States. Now, it’s possible he might do the same in Canada, as we head towards a federal election on October 21st, just over nine months from now.

Certainly the American President was a dominant figure in our politics for much of 2018. Not quite as dominant as in the United States, but an ominous one here nonetheless. And most of that had to deal with the renegotiation of the North American Free Trade Agreement.

After branding NAFTA “the worst trade deal ever signed,” at Trump’s behest Canada and Mexico were locked in a thirteen month renegotiation with the United States of the twenty-five year old deal. After all the Trumpian threats to tear up the agreement and slapping duties of twenty-five per cent on Canadian steel exports and ten per cent on Canadian aluminum exports and other gratuitous threats, what emerged from the negotiations was a renamed treaty called the United States, Mexico, Canada Agreement that is not too much different from the original NAFTA. Dairy Farmers have to give up a small portion of their protected market in Canada, and the steel and aluminum duties remain as trade irritants still waiting to be removed, but aside from those problems the NAFTA talks turned out a lot better than they might have.

While the new agreement still has to be ratified by each of the three countries, there was a palpable sign of relief when the negotiations concluded. But that wasn’t the end of the Trump influence in Canada.

In his fiscal update on November 21st last fall, Finance Minister Bill Morneau did not wait for the budget this coming spring to announce major corporate tax cuts. Instead, responding to pressure from the business community to stay competitive with tax cuts enacted at the end if 2017 by Trump and the Republicans in Washinton, Morneau announced $16.5 billion in corprorate tax cuts‎ allowing business write-offs on manufacturing and clean energy equipment.

This foregone revenue will increase the deficit over the next few years, but because of Trump the Liberal Government had little choice.‎ Whether Morneau follows that up with further tax cuts this spring remains to be seen. But whatever Trump does next will likely have a bearing on it.

With NAFTA more or less out of the way, Trump is now engaged in a major trade war with China. And that is having an impact on Canada too. First a trade war between the world’s two biggest economies ‎catches everyone in the cross fire. The shock to stock markets around the world, including Canada in December, is but one example of that.

But Canada is being effected in another way as well.‎ Canada is now caught up in a dispute between Beijing and Washington over the detention of a high placed executive with the Chinese telecommunications giant Huawei.

Meng Wanzhou is out on bail in Vancouver pending an extradition hearing that could see her transferred to the United States to face fraud and other charges in connection with American sanctions on Iran. Under the extradition treaty between Canada and the U.S., she was arrested after she deplaned in Vancouver and is now out on bail pending a hearing to see if she will be sent on to the U.S.

Not surprisingly, the Chinese Government is furious. But instead of taking out its anger on the Americans, who are big and can strike back, it is taking its anger out on Canada. It is demanding the release of Meng Wanzhou and in retaliation, has detained two Canadian citizens in China.‎

Canada says it is acting according to international law and the extradition treaty it has‎ the U.S.  But China doesn’t care for that explanation, and the waters were muddied when President Trump implied that the Meng situation was really part of his negotiating strategy in the trade war with China.

At the moment the situation is at a stand-off. ‎Meng Wanzhou is out on bail but detained in Vancouver. Two Canadians are detained in China, and Donald Trump is waging his trade war.

How this China chapter plays out ‎has the possibility of becoming a major political issue in Canada, with Donald Trump right in the middle of it.

Whether he thinks about it or not, so far the American President is managing to reach across the Canada – U.S. Border and have an outsized influence on issues that will help shape the Canadian election. And hold on to your hat, he is probably not done yet. There are still nine and a half months to go.

Don Newman is Senior Counsel at Ensight and Navigator Limited, a Member of the Order of Canada, Chairman of Canada 2020 and a lifetime member of the Canadian Parliamentary Press Gallery.