The election of Donald Trump has produced a reflexive revulsion in Canada. Comfortable in our sanctimoniousness, we ask how it is that Americans could elect such a narcissistic bully to lead the free world. As our critical trading partner, it behooves us to try to understand what would lead a plurality of Americans to choose such an awful candidate.
To be sure, Trump’s policy positions can be inconsistent and contradictory, but he has spent four years developing a fairly coherent broad narrative about what is wrong with America. If we distill the essence of “Make America Great Again,” in my view it would boil down to a belief that the United States has been taken advantage of by the rest of the world. This applies in many ways but four stand out:
1) Rejection of globalist trade policies. Globalization has led to the hollowing out of the U.S. manufacturing sector, the loss of hundreds of billions of dollars in intellectual property without compensation, and the holding of trillions of dollars of USD in the hands of unfriendly countries. A massive trade surplus is inevitable when you have the world’s reserve currency, but over time, it creates a loss of competitiveness and growing inequality. Trump’s central goal is to reduce U.S. reliance on foreign supply chains, especially China.
2) Fatigue with being the world’s policeman. The U.S. spends 3.5 percent of its GDP on defence, almost as much as the rest of the world combined. This massive expenditure has benefited the rest of the world disproportionately. NATO countries including Canada have been free riders for decades. Chinese manufacturers have benefited tremendously from the security that the U.S. Navy brings to shipping lanes. We’ve seen that withdrawing from confrontation, such as what the Biden administration did in Afghanistan and Iran hasn’t made the world safer. It is understandable that many Americans are tired of doing all of the heavy lifting.
3) A general repudiation of globalization and a rejection of wokeness, collective self-hate, and bowing to hypocritical and corrupt international organizations such as the United Nations, the International Criminal Court, and the World Economic Forum. These organizations are not compatible with the idea of American exceptionalism.
4) A waning sense of trust in some American institutions, both generally and amongst partisan tribes, including the intelligence community, mainstream media, national institutes of science and public health, universities, and the office of the president itself which appear to have been corrupted over the past several years. Civilizations collapse when trust in institutions fails.
Viewed this way, from an American point of view, Trump’s positions on immigration, foreign policy, tax policy, climate policy, energy policy, etc. all make much more sense than those of the Democrats who have focused on more peripheral issues such as abortion rights, joy, and inclusion. We need to recognize this.
The last time Trump was president there was a reluctance to implement bold change. No longer. He is about to change the global economic order, and his selections of cabinet postings heavily favour loyalists who want to enact profound changes in their new departments. So, what does this mean for Canada?
Tariffs are getting most of the attention at the moment. Scott Bessent, the incoming secretary of the Treasury, says that Trump’s maximalist tariff views are designed to achieve foreign policy goals. In short, the Trump team will divide the world based on how closely countries are willing to cooperate with U.S. objectives.
Tax reductions and the work of Elon Musk’s Department of Government Efficiency will make Canada even less competitive, leading to continued erosion in GDP per capita and continued capital flight from Canada. Interest rates will likely continue to diverge, since the U.S. economy is much stronger than Canada’s. This will mean the Loonie is likely to continue to weaken, perhaps to something like $0.65. Inflation may re-emerge. On the whole, Canada is in a tough spot.
Last weekend, The Hub’s Plan B outlined a series of pro-competitiveness policies including corporate tax reduction, capital tax reduction, creation of opportunity zones, competitive reform of Laurentian Capitalism, and deregulation. It is hard to argue with any of this, though I would add immigration control, increased spending on defence, and tackling crime and money laundering. We should do these things however, not only because they align with the objectives of our largest trading partner, although they will, but also because they would be good for us.
A pro-growth, pro-competitiveness agenda would be a massive U-turn for Canada after the past decade of growth-inhibiting, redistributive policies. This would be a heavy lift for the current Liberal government as it would mean repudiation of their entire platform, yet they may conclude they have no choice in the face of such sweeping change. It could be that the greatest reason for hope of future prosperity in this country stems from the election of the orange man that Canadians love to hate.
Derrick Hunter is the CEO of Bluesky Equities Ltd. a private diversified investment management company. He was named Canadian Angel Investor of the Year for 2019. He is also a trustee of the Hunter Family Foundation, which underwrites The Hunter Prize for Public Policy at The Hub....
