first reading: how to actually trump-proof the canadian economy
it's going to take a lot more than 'buy canadian' campaigns
9 minute read
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seemingly overnight, the canadian political establishment has become laser-focused on the idea of shoring up the economy against tariff threats from the u.s. president donald trump. after years of worrying mostly about emissions, equity or “fairness,” the goal now is seemingly to make as much money as possible, and to do it through means that don’t involve the united states.
b.c. ndp premier david eby posed in a hard hat and safety vest and pledged to start fast-tracking mining projects. industry minister françois-philippe champagne has started talking about the need for new pipelines. quebec premier françois legault said canada needs “diversification of markets,” and vowed to work “better with other provinces.” and the conservatives have been hammering hard on a “canada first” strategy to pivot away from u.s. markets.
but canada has spent nearly 100 years orienting its economy and infrastructure towards selling raw materials and niche manufactured goods to the united states. any shift away from that is going to involve much more than some “buy canadian” campaigns at the grocery store.
below, a cursory review of what a trump-resilient canadian economy would actually look like.
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detonate supply management and run a plough over the ashes
in 2023, canada was in talks with the united kingdom to ink a free trade agreement until the deal fell apart over the issue of cheese.
canada runs its entire dairy system through what is essentially a state-sanctioned price-fixing cartel; dairy farms are limited in how much they can produce in order to create artificial scarcity and drive up the price. and a big part of that requires shielding domestic dairy farms from outside competition. any milk or cheese entering canada is restricted by tight quotas, with any “off-quota” dairy products slapped with tariffs of up to 300 per cent.
and situations like the u.k. trade breakdown happen all the time; canada opens free trade negotiations only for the talks to be derailed once the other party learns that ottawa intends on treating dairy imports like a controlled substance.
the system is known as “supply management,” and it’s a perennial stumbling block when it comes to canada’s trade with australia and new zealand. it was a huge sticking point when former prime minister stephen harper’s government was trying to negotiate the trans-pacific partnership a decade ago. and the policy frequently comes within the crosshairs of any u.s. politician with a dairy farm in their jurisdiction. “canada … treats our dairy farmers horribly. that’s got to end,” howard lutnick, the new u.s. commerce secretary, said at a hearing last month.
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not only does supply management constantly throw a wrench into canada’s attempts to trade with the wider world, but it’s very obviously imposing a cost on canadian consumers. the whole point of the system is to artificially raise prices, and according to a 2014 university of manitoba study, this hikes household grocery prices by between $400 and $700 per year.
it would be nice if there was a better explanation for supply management than raw cronyism, but that’s effectively it. the dairy farmers of canada and its affiliates are the most powerful lobby group in ottawa and it’s not even close. and that’s part of why even while politicians are making sweeping pledges about economic reform, supply management is being conspicuously exempted. trade minister mary ng told ctv last week she would not be making any concessions to the americans on supply management.
in the words of one economist, the university of calgary’s trevor tombe, “no political statement about commitment to economic growth means anything if it’s from a politician who supports supply management.”
go hard on nuclear power
this is one that almost everyone agrees on (except elizabeth may). canada is extremely good at nuclear power, it has lots of experience exporting nuclear technology worldwide and we happen to be the world’s second-largest producer of uranium after kazakhstan.
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eastern european countries looking to adopt nuclear energy as a substitute for russian oil have been extending feelers to canada in this regard. and unlike any number of countries who have similarly approached us about importing natural gas, they’ve gotten a welcome reception. a just-released report from the macdonald-laurier institute noted that if canada hopes to capitalize on a global trend towards expanded nuclear power generation, the country is going to have to focus on enriching its uranium, in addition to mining it.
obviously way more pipelines
as of this writing, canada was one of the world’s top five largest oil exporters, along with iraq, russia, saudi arabia and the united states. where we differ sharply from any of those exporters is that virtually our entire petroleum industry is geared towards selling our product to a single customer: 98 per cent of canadian oil exports go to the u.s.
aside from a few newfoundland offshore oil platforms, most of the country’s oil is in alberta, and if alberta wants to export its oil to someone who isn’t the united states, there is precisely one canadian port where they can do so: westridge marine terminal in burnaby, b.c., the end point of the trans mountain pipeline. canada even struggles to sell its own oil to itself. with no pipeline connection between alberta and the atlantic coast, refineries east of quebec city are often forced to import foreign oil.
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naturally, this is an unthinkable state of affairs for any other major oil producer. even russia — which has been subject to an avalanche of sanctions following its invasion of ukraine — continues to have more flexible access to the global oil market than canada. russia has three oil export ports, and active pipeline connections to more than a dozen countries.
as with supply management, however, pipelines may also be left out of canada’s supposedly new era of economic liberalization. much of quebec’s political spectrum has been quick to say that while “diversification” is important, it may not be important enough for them to tolerate an export pipeline. premier legault said quebec would look at any pipeline proposals, but they’d have to have “social acceptability.”
national public opinion is similarly mixed. although there’s renewed support for building the energy east pipeline to connect alberta with atlantic canada, an angus reid institute poll published this week found that the share of canadians who think the federal government is doing “too little to build pipeline capacity” (49 per cent) is slightly less than it was in 2019 (50 per cent).
build ports, roads and railways
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it’s not just canada’s pipelines that primarily serve to funnel product into the united states. our road, rail and shipping networks are similarly oriented towards getting materials over the border where they can then be handled by americans.
this is most conspicuous when it comes to shipping. strictly speaking, canada has just one major port that can operate independently of the united states: the vancouver fraser port authority. this is the only port in canada that operates at a level equivalent to a tokyo, a long beach or a bremen. and a newly published assessment by the world bank and s&p global market intelligence ranked it as one of the world’s least efficient.
meanwhile, any great lakes ports (including windsor, sault ste. marie, toronto and hamilton) have to send vessels through the saint lawrence seaway, which is partially controlled by the united states.
after vancouver, our next-busiest port is montreal, which handled 35.6 million tonnes of cargo in 2024. that may sound like a lot, but it pales in comparison to the 132 million tonnes of cargo that flowed over the u.s./canadian border in the same period — and that’s just by truck and train, the figure is much higher when factoring in barges, pipelines and short-haul freighters.
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as for rail, there’s only two main east-west rail networks. and canada has an unfortunate habit of letting the entire network go into shutdown for days on end if so many as a few dozen activists stage a blockade.
on roads, canada has the most per capita of any country on earth, but as noted by one u.s. critic, large swaths of the country are knitted together by two-lane blacktops that would seem “1920s-era” by the standards of the u.s. interstate system.
this is probably where we should mention that it was only a year ago that environment minister steven guilbeault was talking about never building another federally funded road again. as guilbeault said in comments published by the montreal gazette, canada’s existing road network “is perfectly adequate to respond to the needs we have.”
stop actively scaring away business (so, less taxes and regulation)
it was only a few months ago that the trudeau government introduced a hike to the capital gains tax which immediately prompted dire warnings from the tech sector that the effect would be a tidal wave of capital flight. in response, then-finance minister chrystia freeland delivered a lengthy soliloquy about how such critics were endangering their own safety by seeking a canada where “the public sphere is so degraded and the wrath of the vast majority of their less privileged compatriots burns so hot.”
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any kind of pro-growth strategy for canada would naturally have to avoid policies that actively scare away investors, capital and entrepreneurs. and canada has a lot of them. as a result, the amount of business investment per canadian worker has been in freefall since 2015. each passing year, the average canadian worker is producing less than what they produced the year before.
bmo financial group used the current spat with the united states to point out just how uncompetitive canada has become as compared to its peers. in a feb. 5 op-ed, ceo darryl white pointed to the capital gains hike as a sign of just how bad it’s gotten, and said the country needs “public policy and taxation that rewards smart risk-taking, and regulation that incentivizes business formation and growth.”
bring a federal hammer down on interprovincial trade barriers
throughout the u.s./canada trade fight, almost everyone has noted the absurdity of how it is often easier for canadian businesses to trade with the united states than it is to trade with their fellow canadians.
there’s any number of examples, such as how b.c. fruit needs to meet different packaging standards to be sold in ontario, or how each province has a different licensing body for professionals, or how it’s nearly impossible to legally purchase alcohol from an outside province.
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these “interprovincial trade barriers” aren’t just a headache, they’re a pretty clear violation of the spirit of our country’s founding document, the british north america act. it’s right there in section 91: “the regulation of trade and commerce” is to be an exclusively federal jurisdiction, just like coinage, the postal service and national defence.
and much like supply management, interprovincial trade barriers are one of those things that is pretty obviously a barrier to growth. among the many, many reports examining the issue, the only real point of contention is in how badly it’s damaging the economy. one of the more recent, from the canadian federation of independent business, puts the annual cost at $200 billion.
but they persist because while everyone hates “interprovincial trade barriers” in principle, provincial governments love wielding petty control over everything from accountant certification to alcohol sales to safety standards for passenger vehicles. so, this might be one of those things that doesn’t get fixed unless ottawa runs a steamroller over the premiers.
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