Financial Post TopStories

The Canadian Urban Libraries Council also called on the government to exempt books

Every Canadian I meet is in a flurry about the impact of potential tariffs that change in scope and size with the wind. What do we do to cope? Be calm, be confident, focus on facts.

The negotiating approach of the U.S. administration is to upset opponents. Don’t let that happen. We control how we feel, no one else.

Tariffs have been imposed, removed, imposed, removed, imposed with some qualifiers. Don’t panic every time a new announcement is made, it might even change that very day.

Second, let’s take a minute to restore our confidence in our great country.

Canada is today in an enviable position, poised on the precipice of an era of exceptional growth and prosperity. Why do you think the U.S. is interested in acquiring us?

We have an abundance of critical minerals and fresh water, and an electricity grid that is more than 80 per cent green, meaning things we make here don’t carry a heavy carbon footprint.

We have a great education system and our student scores consistently track strongly in international comparisons, consistently ahead of the U.S.

We have freedom of speech and a society that values women and diversity in all its forms.

We are one of the few global centres to be considered a world leader in both manufacturing and technology, notably AI, which is powering our world-leading advanced manufacturing businesses, which make products the world can’t do without.

We are highly productive. What, you say? Canadian business productive? Yes. Canadian productivity stats reported to you do not reflect the productivity of Canadian business because they include workers who do not generate sales, such as government and not-for-profit workers. They reflect our overall demographics. If we exclude those workers from the calculation and just look at Canadian business you can see a strong and steady growth in productivity, up more than 50 per cent over the past 25 years. Canadian manufacturing productivity growth has outpaced that of the U.S. steadily over the past 15 years.

It is up to us to unlock Canada’s prosperity potential. Governments must reduce regulatory burdens to accelerate time to market, reduce personal and business income taxes to make us more globally attractive to talent and investment, and reduce heavy government bureaucracy. Our politicians seem to understand these imperatives given both parties are currently campaigning on some version of this strategy.

And finally, we need to focus on the facts as we enter negotiations with the U.S. to come up with winning solutions.

Let’s look at the automotive industry as an example.

The U.S., with by far the largest auto sector on the continent, employs 50 per cent more workers in the automotive industry than the next largest employer, Mexico. That means if production declines, it hurts American workers more than any other country. Way more.

The U.S. produces 9.9 million vehicles a year, 66 per cent of North America’s total. The population of the U.S. is 67 per cent of all North America.

Mexico produces 4 million vehicles a year, 26 per cent of North America’s total. The population of Mexico is 25 per cent of all North America.

Canada produces 1.2 million vehicles a year, 8 per cent of North America’s total. The population of Canada is 8 per cent of all North America.

Seems reasonable.

The automotive industry in North America is highly integrated. Parts often cross the border six or seven times in some form or another before pulling into your driveway as a new vehicle. We are all enormously reliant on each other. Mexican-built vehicles have 40 per cent U.S. content. If you shut down Mexican auto imports into the U.S., that is approximately US$72 billion of U.S. parts not being made and about 360,000 American workers out of work.

You can’t unscramble the eggs. The cost is enormous, the timeframes are lengthy and the payback is zero.

Shifting suppliers for a highly engineered part or sub-assembly cannot happen quickly. It takes 12 to 18 months and significant investment for the new supplier to tool up and do all the required testing and validation. Meantime, automakers are paying tariffs of 25 per cent. No way does that math work.

Shifting production saves nothing and brings no additional revenue. Where is the payback for business? Avoiding tariffs that could go away tomorrow? Or, sorry, was that yesterday?

Let’s look at vehicle assembly as an example. The U.S. administration certainly appears to want to make all the vehicles in North America in the U.S.

Notwithstanding that Canadians and Mexicans buy vehicles, too, and might just want to have some production, let’s just explore this idea.

The cost to build a plant to make 250,000 vehicles is US$2.5 billion to US$5 billion and takes two to three years to get to production. For five million vehicles that would be US$75 billion. Three years from now, vehicles are rolling off the line in the U.S. Three years and 294 days from now, a new administration will be taking office in the U.S. No reduced cost, no additional revenue, no payback.

Instead, let’s focus on how we can instead build and sell more vehicles globally. North America buys 19.2 million cars and the global market is 89 million, meaning 80 per cent of the world’s automotive sales are outside of North America — let’s target that.

What if Mexico made the highest labour content parts of the car, Canada made the most energy intensive parts of the car (remember our 80 per cent clean energy grid), the U.S. made the rest of the parts, and we split up vehicle production fairly (maybe by population). Tap into world leading North American technology to drive amazing innovation into those cars. Then we might just have the most innovative, leading edge, lowest cost and greenest cars in the world.

In the end it is collaboration that drives prosperity, not divisiveness. When did you ever strengthen a chain by breaking it?

• Corcoran: Trump, Carney destroy to free trade
• Opinion: Tariffs matter, but Canada’s challenges run deep

Let’s collaborate in North America and win together and then we will all be more prosperous.

In the meantime, Canada, let’s stay calm, let’s be confident, and above all let’s focus on facts.

Linda Hasenfratz is the executive chair of the board of Linamar Corp.

The Canadian dollar has had a tough year so far, but the worst could be over, according to economists.

Desjardins Group is scrapping its forecast that the loonie would sink to 67.56 cents U.S. this year and now predicts it will hold between 70.92 and 68.96 cents U.S. over the next three months.

Why the change? This year there has been a shift and suddenly the Federal Reserve is “out-doving” the Bank of Canada .

Recession risks are rising in the United States and the Fed on March 19 signalled that growth was becoming more of a concern, even referring to the impact of tariffs on inflation as “transitory.” 

Inflation, on the other hand, popped up frequently in remarks at the Bank of Canada’s meeting March 12.

“The Bank of Canada has turned cautious on the pace of rate cuts, while the Fed waits for hard data. Yield spreads may narrow, especially if the U.S. labour market cracks,” said Desjardins chief economist Jimmy Jean and foreign exchange strategist Mirza Shaheryar Baig.

Narrowing the spread between the interest rates of two central banks would bolster the Canadian dollar.

Meanwhile, the appeal of the U.S. dollar as a safe-haven has been rocked by the policy upheaval of Donald Trump’s new U.S. administration. 

“With a made-in-America recession lurking, the U.S. dollar is unlikely to hedge risky assets as it did in the past,” said Jean and Shaheryar Baig.

While the Canadian dollar has held fairly steady against the greenback, it has “depreciated significantly” against other currencies, which should help Canadian exporters find new markets outside North America, they said.

The loonie could appreciate even further if economic reforms to boost productivity now being proposed in the federal election bear fruit.

“Bringing more of Canada’s vast resources to international markets would also increase demand for the Canadian dollar,” said Desjardins.

Bank of America’s forecast for the Canadian dollar is even higher at 71.42 cents U.S., mainly because of their “sanguine view” on tariffs.

They expect the March equity flight from risk to reverse, oil to average US$66 and markets to reprice the Bank of Canada terminal rate higher as tariff tensions de-escalate.

“Tariffs do not need to fully unwind this year for USD/CAD to fall to our forecast,” said economist Carlos Capistran.

“A gradual shift toward constructive communication between U.S. and Canada on trade terms, making February 1 the peak tariffs panic moment for the year, should still drive USD/CAD meaningfully lower, in our view.”

 Sign up here to get Posthaste delivered straight to your inbox.

The budgets of seven of Canada’s 10 provinces are out and according to an estimate by National Bank of Canada the combined deficit adds up to $32 billion, double the forecasts for this fiscal year made a year ago.

“The budgetary tone, unsurprisingly, has shifted massively relative to prior guidance, tariff risks front and centre,” said National economist Warren Lovely.

The provinces are now focused on downside risks with tariff, slower growth and lower oil price scenarios hinting that the red ink could grow to about $40 billion this fiscal year, which would be a record shortfall for the group, he said.

Ontario’s budget will have to wait until after legislature resumes April 14, as will the federal budget which is on hold until after the April 28 election.

• Today’s Data: U.S. construction spending, ISM manufacturing
• Earnings: Novagold Resources

• Capital gains tax break for investing in Canada is a big idea that makes sense
• Who is Canada’s middle class and why are they important to the election?
• Does Canada have the workers needed for Carney’s housing plan?

This 65-year-old woman wants to keep working past 70 and wonders if that will affect her Canada Pension Plan and Old Age Security. FP Answers offers some suggestions on how to make the best use of her investments and savings.

McLister on mortgages

Want to learn more about mortgages? Mortgage strategist Robert McLister’s Financial Post column can help navigate the complex sector, from the latest trends to financing opportunities you won’t want to miss. Plus check his mortgage rate page for Canada’s lowest national mortgage rates, updated daily.

Financial Post on YouTube

Visit the Financial Post’s YouTube channel for interviews with Canada’s leading experts in business, economics, housing, the energy sector and more.

Today’s Posthaste was written by Pamela Heaven, with additional reporting from Financial Post staff, The Canadian Press and Bloomberg.

Have a story idea, pitch, embargoed report, or a suggestion for this newsletter? Email us at  posthaste@postmedia.com .

• How Canadians might be the best weapon against Trump's tariffs
• Trump is trashing America's reputation as a trading partner

Bookmark our website and support our journalism: Don’t miss the business news you need to know — add financialpost.com to your bookmarks and sign up for our newsletters here

Politicians' promises are aimed at this key voter base, but the challenges have changed

Choices we make at the grocery store, shopping mall and travel agent could have big impact, says CIBC