British Columbia

Canadian economists watch Trump closely

Canadian economists consider the impact of a Trump presidency of Canada's economy.

'We are very, very dependent on the U.S. — as they go, so we go'

President-elect Donald Trump has said in the past he would rip up trade agreements like NAFTA. (Pablo Martinez Monsivais/Associated Press)

President-elect Donald Trump will soon be leader of the world's largest economy — and that has serious consequences for Canada.

Ian Lee, an associate professor at Carleton University's Sprott School of Business, said the Canadian economy is entirely dependent on the U.S. economy.

"The Canadian economy tracks almost perfectly the U.S. economy. If the U.S. economy grows five per cent, we go up five per cent," he said.

"We are very, very dependent on the U.S. — as they go, so we go."

On election night, international markets dropped drastically. After that initial wobble, markets recovered and closed near an all-time high.

Lee said that flip-flop can be attributed to the fact some of Trump's policies could lead to economic growth.

"There's a whole bunch of things [the market] likes that Trump was promising, including a corporate income tax reduction of 35 per cent to 15 per cent. He's promising significant deregulation of several business sectors including financial services, pharmaceuticals, healthcare, and of course the energy oil and gas sector."

Trade question looms

The big question, however, is where Trump stands on trade. He has pledged to renegotiate the North American Free Trade Agreement and back out of the Trans Pacific Partnership.

"If he does do what he promised to do, that will be a negative drag on growth if he starts ripping up trade agreements ... we know this from 300 years of theory and practice."

But Lee said Trump won't target Canada specifically, and it's a belief shared by Jock Finlayson, an executive vice president and chief policy officer at the Business Council of B.C.

"I couldn't see a single mention of Canada in anything that he talked about when he talked about the unfairness of trade agreements and the practices of unfair trade practices ... Canada never figured in the discussion," Finlayson said.

President-elect Donald Trump and Mexico's President Enrique Pena Nieto met in August during the lead up to the election. (Henry Romero/Reuters)

Lee said it is more likely Trump will force Mexico — the other member of NAFTA — into accepting new measures.

"I think he's going to intimidate Mexico because they have no leverage with the U.S. ... We may duck the bullet," he said.

But Finlayson said nothing is certain.

"He's not really aligned with his party completely with some of the big policy files ... How he will implement and move in the direction of the campaign with his Republican colleagues who have both control of the Chamber and Congress, that is the biggest unknown at this point."

With files from The Early Edition and Daybreak South

To hear the interviews, click on the links labelled Will Trump's unconventional views help the Canadian economy? and Canada's economic relationship with the U.S.