Campaigning in Chicago in October, Donald Trump, then the Republican presidential nominee, told the Economic Club the central role tariffs played in his trade policy for the United States.
“To me, the most beautiful word in the dictionary is ‘tariff,’” he told an audience of about 600 business executives and others during an interview with Bloomberg editor-in-chief John Micklethwait, as reported in the Wall Street Journal.
And so now that Trump will be sworn in as the 47th U.S. president on Jan. 20, 2025, what will his trade policy mean for the Canadian economy, generally, and for the country’s property and casualty industry, specifically?
“Regulation and trade policies are going to be critical,” Matt Campbell, vice president of finance, claims and strategy at Sovereign Insurance, said during a Canadian Underwriter webinar last Thursday. “Who knows if the regulations under which we operate today, with all of the cross-border rules — does that stay? Does that change? Is it stricter from a tariffs perspective?
“We’ve heard Trump talk about the number of tariffs that he wants to put on goods. That’s going to impact the Canadian economy and the markets, as well as the timeliness of getting materials as well.”
All of this is coming at a time when Canada’s economic productivity is slower than in the United States, Campbell added.
At the moment, much is still conjecture, because Trump’s team has not produced any formal policy documents, and people have had to rely on statements made during the campaign, said New York-based Swiss Re chief economist James Finucane, a CU webinar panellist.
“There’s a potential for a Day 1 tariff of 60% on China, and 10% to 20% on the rest of the world. And I think, just given the tight links between the U.S. and Canada, of course this will have a big effect on both countries.”
The incoming president has called for a minimum tariff of 10% on all imports entering the United States, including Canadian goods. Seventy-seven percent — or $439.6 billion — of Canadian goods were shipped to the United States in 2023, per Investopedia. And about one-third of the country’s $2.1-trillion gross domestic product (GDP) is based on exported goods.
As such, economists are making dire predictions about the impact tariffs may have on the Canadian economy.
Related: What Trump’s victory means for Canada’s insurance sector
But will Trump follow through on the tariffs?
Alister Campbell, president and CEO of the Property and Casualty Insurance Compensation Corporation, put the question to former CNN White House Correspondent Jessica Yellin at the National Insurance Conference of Canada, held in Vancouver in September.
“We have learned that even when he says things that seem like they’re dramatic and for attention…he likes to deliver on what he said,” Yellin responded. “And he has vowed very clearly to impose these tariffs. Now, is there a scenario in which our close neighbor Canada could be exempt? I don’t know….
“One thing I’ve heard in politics my whole life [is]: ‘Trust what they say.’ I’ve been told [some] version [of], ‘Oh, they’re just saying this in the campaign to get elected, they won’t follow through.’
“They try to follow through because they want to get re-elected, and they are called out on their policy. Now, Trump arguably can’t run again, who knows, but he does like to follow through.”
Canada previously dealt with Trump’s tariffs during his 2017-to-2021 presidency. Back in 2018, Trump slapped a 25% tariff on steel imports and a 10% tariff on aluminum.
Canada responded with retaliatory tariffs on U.S. goods. About one year later, Canadian negotiators convinced Trump to grant Canada an exemption. Canada is one of the only countries to have negotiated such a break, CBC reports.
Finucane asked during the webinar what impact negotiating yet another break may have on Canada.
“I think the final question is: What concessions would both sides, or if we’re thinking about Canada, what concessions would have to be in place for a deal? Some people talk about the 2% military spending for NATO.
“I think maybe a more significant one is: there would be a chance that Canada may have to raise tariffs externally to avoid other countries sending goods to Canada on the way to the U.S.
“Once there’s more clarity around [Trump’s tariff] policy, there will be a lot of complicated analysis to figure out the best arrangement.”
Regardless of how it plays out, the a second Trump administration will likely have a much greater impact on the commercial insurance side of the business in Canada than on the personal lines side, predicted Paul Kovacs, the executive director of the Institute for Catastrophic Loss Reduction.
“On the commercial side [of the P&C insurance business], the U.S.-Canadian border has been pretty absent for a lot of the important commercial [activity]. The ability of your customers to work across the border is maybe going to get harder….
“Where the impact of the U.S. election will be felt more in Canada will be in the large commercial [segment], and those people in that [commercial brokerage] space trying to understand what [their] clients are going through. It’s not going to be straightforward….It’s complicated.”
Feature image courtesy of iStock.com/Devonyu
