Ready for the Trump Effect?
Published in Le Devoir
(Canada) on 28 September 2024
by Jean-François Lisée (link to original)
(Canada) on 28 September 2024
by Jean-François Lisée (link to original)
Translated from
by Soeli Leverett.
Edited by Patricia Simoni.
Dear Readers,
I regret to inform you that I must start to intellectually and emotionally prepare you for the very real possibility of our U.S. neighbors to the south electing Donald Trump on Nov. 5. There is a scenario in which he could win by cheating. If the majority decision of electors rests on Georgia, he has arranged for his henchmen to be able to refuse to certify the election in that state, thereby forcing Congress to announce that there is no winner. In this case, the Constitution has a Plan B: The president will be elected by a majority of the states represented in the House of Representatives, making Trump victorious –- even if the majority of seats are occupied by Democrats. This is because the count is made by state rather than by seat.
I also want you to consider there is a very real possibility that Trump could win without cheating, that he will receive enough votes in the swing states to be declared the winner on election night. I thought you would need reasonable warning. That is 38 days from now.
Of course we cannot predict what will happen, but commitments made by Trump could have important and immediate consequences, even before his being sworn in next January.
A large influx of asylum seekers: Trump has repeatedly pledged to carry out the “biggest deportation program in the history of the country.” He is referring to illegal immigrants, of which there are officially around 12 million who have been living there for decades, most with jobs and children.
How many does he want to deport? He mentions "millions of illegal aliens," as well as targeting legal immigrants in the U.S. under an emergency procedure that would affect almost half a million Haitians, notably the 15,000 in Springfield, Ohio, whose deportation Trump has made a priority. (Uncertain of their exact origins, he has threatened to send them to Venezuela.)
Implementing this program will take a lot of time and will be challenged in court. But we can expect tens of thousands of these migrants will not wait patiently for immigration officials to round them up and pack their bags soon after Trump’s election. Their most logical destination would obviously be Canada and, for those 500,000 Haitians, Quebec.
The decrease in value of the Canadian dollar: Because Trump has promised to impose a 20% tax on all imported goods, including those from Canada, markets will not wait for the bill to be passed before reacting. They call it “discounting.” So, according to Economist Pierre Fortin, “It is clear from the outset that the value of the Canadian dollar would take a beating.” The markets would expect the surtax on our exports to hurt our entire economy and, therefore, the value of our dollar.
This currency depreciation would have several effects. If the fall were 20%, it would reestablish the competitiveness of our products, taxed at 20%. However, all our American imports would be 20% more expensive, significantly increasing inflation. Our central bank would want to tighten credit, and we could say goodbye to lower mortgage interest rates. American tourists could come and visit us for a bargain price, but our Snowbirds would have to tighten their belts.
Obviously, America’s business class is opposed to this tariff proposal, which would create a commercial war. It is risky to count on Trump to change his position. He still thinks that the tariffs are paid by foreign producers, which is untrue, rather than by American consumers, which is true. He has even floated the idea of abolishing personal income tax, which brings $2.2 trillion to the U.S. Treasury, and offsetting this loss by revenue generated by the tariffs, making up a total of $0.
A fiscal straitjacket: The capacity to adopt a reasonable tax rate for our businesses (and millionaires) depends on the taxes imposed by our southern neighbor. Although we combine fiscal tax and that of the state — and provinces — the current global rate on business profit both here and there is the same. But Trump has promised to reduce the federal tax from 21% to 15%, which will compel Ottawa and the provinces to do the same, depriving themselves of revenue.
But every cloud has a silver lining, and Trump’s politics will also save us a lot of money.
Less money for Northvolt: The amounts promised by Ottawa and Quebec to Northvolt and other battery producers are directly and contractually linked to the generosity shown by the Biden administration. Trump has vowed to put an end to the entire U.S. program for green energy, which will result in a boom for our finances.
Less money for Ukraine: Since the Russian invasion of Ukraine, Canada has spent, or has pledged to spend, $4.5 billion. With Trump promising to “resolve the conflict in 24 hours,” even before his inauguration as president, Ottawa will be able to reduce spending. Of course, we think that Trump will suggest that Vladimir Putin keep the Ukrainian territory he has already claimed. No matter how much Ukrainian President Volodymyr Zelenskyy protests, an end of the American support essential to the continuation of the war will force him to raise a white flag. With Europeans unable to compensate for the withdrawal of American aid, everyone will be able to breathe easy, while we wait to see which country Putin will invade next. (My bet is on the Baltic states.)
Less money for the environment: As Trump will (once again!) withdraw from the Paris agreement and cancel almost all U.S. environmental budgets, this will have a knock-on effect for other polluting states. Future Prime Minister Pierre Marcel Poilievre will be completely justified in doing as little as Trump, in the name of Canadian competitiveness. Well, the planet will warm up even faster, but we’re getting used to it, aren’t we?
I regret to inform you that I must start to intellectually and emotionally prepare you for the very real possibility of our U.S. neighbors to the south electing Donald Trump on Nov. 5. There is a scenario in which he could win by cheating. If the majority decision of electors rests on Georgia, he has arranged for his henchmen to be able to refuse to certify the election in that state, thereby forcing Congress to announce that there is no winner. In this case, the Constitution has a Plan B: The president will be elected by a majority of the states represented in the House of Representatives, making Trump victorious –- even if the majority of seats are occupied by Democrats. This is because the count is made by state rather than by seat.
I also want you to consider there is a very real possibility that Trump could win without cheating, that he will receive enough votes in the swing states to be declared the winner on election night. I thought you would need reasonable warning. That is 38 days from now.
Of course we cannot predict what will happen, but commitments made by Trump could have important and immediate consequences, even before his being sworn in next January.
A large influx of asylum seekers: Trump has repeatedly pledged to carry out the “biggest deportation program in the history of the country.” He is referring to illegal immigrants, of which there are officially around 12 million who have been living there for decades, most with jobs and children.
How many does he want to deport? He mentions "millions of illegal aliens," as well as targeting legal immigrants in the U.S. under an emergency procedure that would affect almost half a million Haitians, notably the 15,000 in Springfield, Ohio, whose deportation Trump has made a priority. (Uncertain of their exact origins, he has threatened to send them to Venezuela.)
Implementing this program will take a lot of time and will be challenged in court. But we can expect tens of thousands of these migrants will not wait patiently for immigration officials to round them up and pack their bags soon after Trump’s election. Their most logical destination would obviously be Canada and, for those 500,000 Haitians, Quebec.
The decrease in value of the Canadian dollar: Because Trump has promised to impose a 20% tax on all imported goods, including those from Canada, markets will not wait for the bill to be passed before reacting. They call it “discounting.” So, according to Economist Pierre Fortin, “It is clear from the outset that the value of the Canadian dollar would take a beating.” The markets would expect the surtax on our exports to hurt our entire economy and, therefore, the value of our dollar.
This currency depreciation would have several effects. If the fall were 20%, it would reestablish the competitiveness of our products, taxed at 20%. However, all our American imports would be 20% more expensive, significantly increasing inflation. Our central bank would want to tighten credit, and we could say goodbye to lower mortgage interest rates. American tourists could come and visit us for a bargain price, but our Snowbirds would have to tighten their belts.
Obviously, America’s business class is opposed to this tariff proposal, which would create a commercial war. It is risky to count on Trump to change his position. He still thinks that the tariffs are paid by foreign producers, which is untrue, rather than by American consumers, which is true. He has even floated the idea of abolishing personal income tax, which brings $2.2 trillion to the U.S. Treasury, and offsetting this loss by revenue generated by the tariffs, making up a total of $0.
A fiscal straitjacket: The capacity to adopt a reasonable tax rate for our businesses (and millionaires) depends on the taxes imposed by our southern neighbor. Although we combine fiscal tax and that of the state — and provinces — the current global rate on business profit both here and there is the same. But Trump has promised to reduce the federal tax from 21% to 15%, which will compel Ottawa and the provinces to do the same, depriving themselves of revenue.
But every cloud has a silver lining, and Trump’s politics will also save us a lot of money.
Less money for Northvolt: The amounts promised by Ottawa and Quebec to Northvolt and other battery producers are directly and contractually linked to the generosity shown by the Biden administration. Trump has vowed to put an end to the entire U.S. program for green energy, which will result in a boom for our finances.
Less money for Ukraine: Since the Russian invasion of Ukraine, Canada has spent, or has pledged to spend, $4.5 billion. With Trump promising to “resolve the conflict in 24 hours,” even before his inauguration as president, Ottawa will be able to reduce spending. Of course, we think that Trump will suggest that Vladimir Putin keep the Ukrainian territory he has already claimed. No matter how much Ukrainian President Volodymyr Zelenskyy protests, an end of the American support essential to the continuation of the war will force him to raise a white flag. With Europeans unable to compensate for the withdrawal of American aid, everyone will be able to breathe easy, while we wait to see which country Putin will invade next. (My bet is on the Baltic states.)
Less money for the environment: As Trump will (once again!) withdraw from the Paris agreement and cancel almost all U.S. environmental budgets, this will have a knock-on effect for other polluting states. Future Prime Minister Pierre Marcel Poilievre will be completely justified in doing as little as Trump, in the name of Canadian competitiveness. Well, the planet will warm up even faster, but we’re getting used to it, aren’t we?
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