Q&A: Craig Alexander, the Conference Board of Canada’s chief economist, on what Donald Trump means for Toronto
On Tuesday evening, American voters did what pollsters, forecasters and pretty much everyone else assumed was impossible: they elected a former reality TV star and failed casino magnate to the highest office in the land. While the world (and the markets) recovered from the shock, we spoke with Craig Alexander, chief economist at the Conference Board of Canada and former chief economist at TD Bank, about how a Trump presidency might affect Canadian business interests, and why Justin Trudeau needs to engage with the new American leadership ASAP (even if a bromance is unlikely).
What is the first thing Torontonians need to know about what a Trump presidency means for our city?
If you look back through our economic history, the country has developed along north-south borders, not east-west. We do far more trade with the States than we do across our provinces. Where the U.S. economy goes, so too does Canada and Toronto.
Trump’s platform was basically a commitment to boost the economy by cutting business and personal income taxes. I think he believes that if you make businesses more competitive they will grow, and this will solve America’s growth problem. The problem is that the tax measures he proposed would cause America to run a very large deficit—four and a half or five trillion dollars over the next four or five years. I don’t think that Congress will be supportive of running deficits of that size. Part of the problem that we have in predicting what will happen with the economy is that Trump probably can’t implement a lot of what was in his platform.
Might he really “rip up NAFTA,” as he frequently threatened to do on the campaign trail?
That’s harder to do than the words make it sound, but he could actually open up the trade deal to renewed negotiations. With domestic policy there are a lot of checks and balances. With trade, however, the president actually has more unilateral power. He can provide six months’ notice that America wants to step out of the agreement. What that would do is bring the parties to the bargaining table.
What might those adjustments look like?
There are a few reasons why I don’t think we need to panic. The first one is that there are a lot of American businesses that are in a supply chain with Canadian businesses, so if you put up barriers to trade, that would hurt American companies a great deal. Within America, there are going to be a large number of corporations that are going to be opposed to thickening the border with Canada. The second thing is that the Republican party tends to be pro-free-trade. Even within his own party, Trump may encounter some resistance to large-scale changes.
When can we expect the shape of Trump’s presidency to come into focus?
Between now and when he takes office we’ll get more information about what he thinks about certain issues. We need to know who his advisors are going to be, which will give us a better idea of what kinds of policies to expect. We’ve had successful presidents in the past—Ronald Reagan is a good example—who were not public policy experts, but they surrounded themselves with smart people and they listened to them.
That doesn’t sound like the man we met on the campaign trail.
We really don’t know how much of the maverick persona will still be in place when he becomes president. If his conduct in the White House is identical to what it was during the election, I think there are significant social and economic risks.
Torontonians wonder most about their single biggest investment: real estate. Is Trump good news or bad for homeowners?
Real estate markets are heavily affected by domestic economic conditions and those will be heavily affected by what happens in the States. If Trump proves to be beneficial to the U.S. economy and that helps the Ontario economy to grow, that will be good for Toronto real estate. If, on the other hand, he mismanages the economy, you’ll have the opposite.
The #MovingToCanada hashtag was trending yesterday. Should potential Toronto homebuyers prepare to compete with a new wave of American expats?
I suspect some of the queries we’re seeing about immigration are knee-jerk reactions. We’ll have to see if it translates into the real movement of people. One thing that I will say is that Trump’s platform was very anti-immigration and a lot of the things he has said over the course of the election were very unattractive to prospective immigrants who were thinking of coming to the States. The fact that Canada has taken the path of being open to the movement of people and been highly tolerant of diversity makes us an attractive destination.
Trudeau and Obama could not have been tighter, whereas Trudeau and Trump seem like less compatible bedfellows. Is that a problem?
Well, the relationship could be very important for trade policy, which is why there is an imperative on the Canadian federal government to engage with the Trump administration early on. There are some big differences, but I also think the two governments are grappling with the same sort of issues. The Canadian economy is being affected by globalization and technical change and it’s impacting our labour market just like it’s impacting the United States. A lot of Trump’s supporters supported him because they want better quality jobs for the middle class in America. Doesn’t that sound awfully close to what the Trudeau government wants to see?
Trump is not exactly a green-minded politician. What could it mean for Canada if he pulls out of the Paris Agreement?
I think what we know is that Trump is not going to move the ball down the field as much on the environmental file as Obama has, and as much as Clinton would have. I don’t think we’re going to see America make as much progress on reducing carbon emissions. This presents a challenge for Canada, because putting a price on carbon makes sense to reduce emissions, but we also have to be mindful of competitiveness with American companies. It’s definitely a file that Canada and the U.S. are not aligned on.
Two years ago Donald Trump was the blowhard host of Celebrity Apprentice. Where would you, as a professional forecaster, have put the odds of our current reality?
I would have said the odds were close to zero. And yet it happened. This is part of the problem. If you look at the polls for Brexit, they did not anticipate Britain choosing to leave. People are underestimating the degree of frustration that is present in many individuals across the advanced world about the outcomes they’re having.
In Toronto, it feels like there’s a whiff of similarity to Rob Ford’s victory. Is that a fair comparison?
To the extent that Rob Ford was a candidate who basically said, “If you elect me you’re going to get a completely different outcome at city hall,” there is a parallel there. If we think about Canadian politics, we took a party that was in third place and made them a majority government. That was the Canadian version of radical politics. It just shows you how tame we are.