A truck dumps soybean meal in a dockyard in Nantong in east China’s Jiangsu province.
Barcroft Media via Getty Images
Something glaring has been lost in the media’s headlines and in the carefully detailed analysis by many of my fellow trade economists in the wake of the White House announcement in December 2019 that China and the U.S. have come to an agreement on “Phase One” of a hoped for grand trade détente between the world’s two largest economies.
It is the recognition that under the Trump Administration, American policy toward international commerce has pivoted markedly toward a greater role for the U.S. government, rather than businesses, to engage directly in commercial cross-border transactions.
The centerpiece and seemingly the most tangible component of the Phase One agreement—at least as much as anyone can tell, since as 2019 comes to a close neither side has yet to issue a formal text—is a commitment by the Chinese government, through its state owned enterprises, to procure perhaps as much as $50bn worth of agricultural products from the U.S. over several years.
The irony that the President Trump’s trade team is relying heavily on state-to-state procurement transactions to ease trade frictions has not been lost on Xi Jinping according to friends of mine very well placed in Beijing.
Indeed, that the U.S. has become more like China rather than the other way around—at least in terms of respecting the WTO rules-of-the road regarding disciplines on non-market economies—is exactly what Mr. Xi has been hoping for as his Christmas gift all year long.
As long as Trump stays in power, Xi can count on this as the gift that will keep on giving. Given imperiled economy Mr. Xi oversees—if not feverishly trying to resuscitate—Trump’s gift is welcome indeed.
There is a plausible reason why Mr. Xi understands very well what drives the U.S. president. Trump emulates Mr. Xi’s ability to give the state the paramount role in the functioning of the economy.
The same can be said for Trump’s simpatico rapport with Russia’s Vladimir Putin, Turkey’s Recep Tayyip Erdoğan, and even North Korea’s Kim Jong-un, among other strongmen today across the globe.
Beyond the arranged agricultural deals with China, other actions reflect Trump’s longing for state control of the U.S. economy. Here are three that the president or his team have been contemplating or have begun to execute during his term in office so far.
The first is the starkest example. It was Trump’s attempt to order U.S. firms to leave China. Recall his Tweet earlier in 2019: “Our great American companies are hereby ordered to immediately start looking for an alternative to China, including bringing your companies HOME and making your products in the USA.”
Second, Trump and his Treasury Secretary, Steven Mnuchin, have been working with allies in Congress to force a de-listing of Chinese firms from U.S. stock exchanges.
Ironically, portfolio investments in these businesses by American individuals and institutions might help those groups attain greater oversight of—or at least a better window on—the activities and performance of those Chinese firms, something one would think would be of value to the U.S. government.
And, third, Mr. Trump’s Secretary of Education, Betsy Devos, has launched a new program to penalize U.S. universities that inadequately disclose funding received from certain foreign governments.
These are resources that significantly help finance the operations of U.S. universities’ overseas campuses (which are highly profitable activities); fund cutting edge research activities taking place within U.S. universities by U.S. scholars; and plug a hole in cash-strapped U.S. universities, especially publicly funded schools.
These three initiatives are a few of the components of Mr. Trump’s overarching drive for a forced “decoupling” of the U.S. from China. If such a decoupling were successful, it would be the ultimate example of Trump’s exercise of a state-directed economy.
Fortunately, as I have written earlier in this space, any meaningful form of artificial decoupling is not only unwise public policy but it simply will not take root easily in a global economy whose supply chains, including the assembly of various components sourced from numerous geographies into final products, are truly multinational.
In short, no matter how forceful a government’s policy might be to try and sharply re-orient the current worldwide constellation of the location of production and consumption, as well as both the flows of technological advances and their geographic diffusion, it will unlikely counter in the short-run powerful forces engendered by inertia.
Why do I say that?
First, enacting and implementing new U.S. policies to bring about changes in taxes, tariffs and wage rates—among other factors—in order to alter global supply chains will not be easy tasks to accomplish. Even if the same party controlled both the executive and legislative branches, do not underestimate the power of U.S. businesses, labor and other interest groups to weigh in heavily.
Second, corporations with large fixed investments abroad will—for good reasons—not reconfigure their supply chain configurations on a dime. They will want to hedge their bets that any policy changes are durable.
Third, countries compete against each other to attract investment. A move by the U.S. to, say, make China a less desirable location for American firms to operate, will beget compensatory changes not only by Beijing but other countries in the region, for example, the ASEAN states. The world marketplace operates like a dynamic game.
Finally, the notion that the world will operate according to bifurcated technology standards for very long—say a duopoly of Western and Chinese technological regimes—is hard to digest.
The power of global economies of scale and scope will likely disrupt any semblance of a stable competitive equilibrium in this regard. One does not have think back very long to remember the race between Betamax, VHS, and DVDs.
Mr. Trump surely envies Mr. Xi’s sweeping governmental powers and his hold over the Chinese economy, which—for better or worse—has become the “world’s factory” of today.
In an ever-changing global marketplace, however, nothing guarantees such a configuration will not migrate to elsewhere on the globe in a few decades time. Indeed, this could be hastened by Xi’s reluctance to reform a moribund economic system.
In this regard, Trump would do well to recognize that strongmen economies do come to end, and often their demise is not a pretty sight, particularly for those at the very top.
OTTAWA – Canada’s unemployment rate held steady at 6.5 per cent last month as hiring remained weak across the economy.
Statistics Canada’s labour force survey on Friday said employment rose by a modest 15,000 jobs in October.
Business, building and support services saw the largest gain in employment.
Meanwhile, finance, insurance, real estate, rental and leasing experienced the largest decline.
Many economists see weakness in the job market continuing in the short term, before the Bank of Canada’s interest rate cuts spark a rebound in economic growth next year.
Despite ongoing softness in the labour market, however, strong wage growth has raged on in Canada. Average hourly wages in October grew 4.9 per cent from a year ago, reaching $35.76.
Friday’s report also shed some light on the financial health of households.
According to the agency, 28.8 per cent of Canadians aged 15 or older were living in a household that had difficulty meeting financial needs – like food and housing – in the previous four weeks.
That was down from 33.1 per cent in October 2023 and 35.5 per cent in October 2022, but still above the 20.4 per cent figure recorded in October 2020.
People living in a rented home were more likely to report difficulty meeting financial needs, with nearly four in 10 reporting that was the case.
That compares with just under a quarter of those living in an owned home by a household member.
Immigrants were also more likely to report facing financial strain last month, with about four out of 10 immigrants who landed in the last year doing so.
That compares with about three in 10 more established immigrants and one in four of people born in Canada.
This report by The Canadian Press was first published Nov. 8, 2024.
The Canadian Institute for Health Information says health-care spending in Canada is projected to reach a new high in 2024.
The annual report released Thursday says total health spending is expected to hit $372 billion, or $9,054 per Canadian.
CIHI’s national analysis predicts expenditures will rise by 5.7 per cent in 2024, compared to 4.5 per cent in 2023 and 1.7 per cent in 2022.
This year’s health spending is estimated to represent 12.4 per cent of Canada’s gross domestic product. Excluding two years of the pandemic, it would be the highest ratio in the country’s history.
While it’s not unusual for health expenditures to outpace economic growth, the report says this could be the case for the next several years due to Canada’s growing population and its aging demographic.
Canada’s per capita spending on health care in 2022 was among the highest in the world, but still less than countries such as the United States and Sweden.
The report notes that the Canadian dental and pharmacare plans could push health-care spending even further as more people who previously couldn’t afford these services start using them.
This report by The Canadian Press was first published Nov. 7, 2024.
Canadian Press health coverage receives support through a partnership with the Canadian Medical Association. CP is solely responsible for this content.
As Canadians wake up to news that Donald Trump will return to the White House, the president-elect’s protectionist stance is casting a spotlight on what effect his second term will have on Canada-U.S. economic ties.
Some Canadian business leaders have expressed worry over Trump’s promise to introduce a universal 10 per cent tariff on all American imports.
A Canadian Chamber of Commerce report released last month suggested those tariffs would shrink the Canadian economy, resulting in around $30 billion per year in economic costs.
More than 77 per cent of Canadian exports go to the U.S.
Canada’s manufacturing sector faces the biggest risk should Trump push forward on imposing broad tariffs, said Canadian Manufacturers and Exporters president and CEO Dennis Darby. He said the sector is the “most trade-exposed” within Canada.
“It’s in the U.S.’s best interest, it’s in our best interest, but most importantly for consumers across North America, that we’re able to trade goods, materials, ingredients, as we have under the trade agreements,” Darby said in an interview.
“It’s a more complex or complicated outcome than it would have been with the Democrats, but we’ve had to deal with this before and we’re going to do our best to deal with it again.”
American economists have also warned Trump’s plan could cause inflation and possibly a recession, which could have ripple effects in Canada.
It’s consumers who will ultimately feel the burden of any inflationary effect caused by broad tariffs, said Darby.
“A tariff tends to raise costs, and it ultimately raises prices, so that’s something that we have to be prepared for,” he said.
“It could tilt production mandates. A tariff makes goods more expensive, but on the same token, it also will make inputs for the U.S. more expensive.”
A report last month by TD economist Marc Ercolao said research shows a full-scale implementation of Trump’s tariff plan could lead to a near-five per cent reduction in Canadian export volumes to the U.S. by early-2027, relative to current baseline forecasts.
Retaliation by Canada would also increase costs for domestic producers, and push import volumes lower in the process.
“Slowing import activity mitigates some of the negative net trade impact on total GDP enough to avoid a technical recession, but still produces a period of extended stagnation through 2025 and 2026,” Ercolao said.
Since the Canada-United States-Mexico Agreement came into effect in 2020, trade between Canada and the U.S. has surged by 46 per cent, according to the Toronto Region Board of Trade.
With that deal is up for review in 2026, Canadian Chamber of Commerce president and CEO Candace Laing said the Canadian government “must collaborate effectively with the Trump administration to preserve and strengthen our bilateral economic partnership.”
“With an impressive $3.6 billion in daily trade, Canada and the United States are each other’s closest international partners. The secure and efficient flow of goods and people across our border … remains essential for the economies of both countries,” she said in a statement.
“By resisting tariffs and trade barriers that will only raise prices and hurt consumers in both countries, Canada and the United States can strengthen resilient cross-border supply chains that enhance our shared economic security.”
This report by The Canadian Press was first published Nov. 6, 2024.
