After Trump election, “everything is negotiable”

Donald Trump shocked observers with his unexpected win in the U.S. Presidential election tonight, upsetting traditional voting patterns. Given a GOP majority in the House and likely in the Senate, Trump will be in a strong position to pass legislation. Only the Constitution, filibusters by Senate Democrats and tensions in his own party limit the legislative reach of the apparent President-elect. Combined with executive order making powers, a pending Supreme Court nomination and a relatively unfettered hand in foreign policy, Trump will be in a commanding position to drive American history for years to come.

What will that history entail? It is very difficult to say. Donald Trump is a uniquely flexible politician, one who has adopted and cast off multiple conflicting policy positions on multiple issues. Only a handful of core themes have remained stable throughout his campaign: a wall on the Mexican border, an antipathy to trade agreements, a dislike of immigration, hostility to Islam and an interest reducing America’s role as the world’s policeman. Other than that, as Trump himself says, “everything is negotiable.”

The New Yorker magazine gave this important insight to Mr. Trump’s character: “He is governed, above all, by his faith in the ultimate power of transaction—an encompassing perversion of realism that is less a preference for putting interests ahead of values than a belief that interests have no place for values.”

A person who changed party five times between 1999 and 2012 will remain volatile in office, even if that office is the Presidency. Do not expect that Mr. Trump will govern as a traditional Republican, or that his position on Thursday will hold relevance on Tuesday.

Mr. Trump is someone looking to make a deal, and the other party could have an outsized role in shaping its outcome because he is more interested in getting the deal than the result.

Trump Platform

President-elect Trump’s platform identifies several major themes that could impact Canadian businesses and organizations:

Immediate renegotiation of the North American Free Trade Agreement (NAFTA) – This measure is mostly aimed at Mexico but creates significant uncertainty for Canadians. If Canada and/or Mexico did not agree to renegotiation, Trump has pledged to then withdraw the United States from NAFTA. The only specific element singled out for renegotiate is to eliminate a set of value added tax tariffs that Mexico imposes and “end sweatshops in Mexico that undercut U.S. workers.”

Increased border security including bio-metric visas – There are significant costs to biometric entry-exit visas that could greatly complicate the porous Canada-US border. Maintaining open access to US markets for goods and talent will be a top priority for the Canadian government.

End of Trans-Pacific Partnership (TPP) – The Trans-Pacific Partnership was presumed to be in deep trouble under a Clinton regime. Under Trump, it is likely dead. This will greatly increase pressure on Canada to secure access to additional markets through the Comprehensive Economic and Trade Agreement (CETA) between Canada and the European Union.

Pressure to increase defence spending to retain NATO – Mr. Trump’s election has made the long-standing policy of shared defence negotiable. Trump has been explicit that countries that fail to pay into NATO will gain no protection. As Canada spends less than half the suggested 2% of GDP on defence that is the NATO guideline, there could be increased pressure on the federal budget for defence spending.

Ending dependence on OPEC oil or oil from any nation “hostile to our interests” – Mr. Trump has pledged to proceed with the Keystone XL Pipeline, an opportunity to export Canadian oil to the United States. Mr. Trump has also pledged to Unleash America’s $50 trillion in untapped shale, oil, and natural gas reserves, plus hundreds of years in clean coal reserves.

Backing out of the Paris Climate Change agreement – Mr. Trump has pledged to tear up any regulation that can cost the American economy jobs and productivity. Canada will have an acute challenge with businesses potentially facing higher input costs with a price on carbon that they will likely not have south of the border.

There are additional areas of opportunity and challenge that a Trump election will create for Canadians:

  • Canadian Post-Secondary Institutions could see a massive increase in foreign applications
  • Immigration demand for Canada could increase sharply, particularly from countries and communities to which the Trump regime has pledged “extreme vetting”
  • There are likely to be huge challenges shipping Canadian goods to Mexico, our fifth largest trading partner. Road and rail shipping from Canada to Mexico will quite possibly become more difficult and expensive given increased security and decreased liberalization of trade
  • The Keystone XL pipeline increases Canadian dependence on the US oil market at time Trump is promising to open-up every oil opportunity in US
  • A looming trade war between China and the United States will certainly complicate Canadian efforts to gain trade access to Chinese markets. Trump will quite possibly demand a “you are with us or the Chinese” approach in Canadian trade policy

Canada’s opportunity

Canada can become the best friend of the United States if it negotiates with Trump.

This is counter-intuitive, given the public bro-mance between Prime Minister Trudeau and President Obama. It is further complicated by the antipathy of the majority of Canadians for Mr. Trump’s positions on issues. However, access to American markets and shared defence are the must-have preconditions of any Canadian government – even a moment of denial of that fact would be too long for Ottawa.

Absent any hard policies and only a handful of meaningful intentions, the opportunity is available for a determined Canadian government to engage aggressively with the incoming regime. At a time when the United States reassesses its approach to the world, Canada can become the stable, reliable market next door.

Most other countries will be in denial this evening. They will wring their hands at what President Trump will stand for.  Canadians need to know that President Trump stands for very little, and if Canada and Canadian businesses engage and negotiate, they can find themselves in a stronger position with our powerful neighbour.

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