Benjamin Tal, deputy chief economist at CIBC World Markets 10/04/25
Regardless of all of the calls to diversify Canada’s commerce, the nation will find yourself extra depending on the USA as soon as tariff negotiations have concluded, in line with a well known economist.
“We’re within the midst of a world commerce battle, and in a world trade war, like within the Chilly Warfare, it’s important to select sides,” Benjamin Tal, deputy chief economist at CIBC World Markets, mentioned.
On Wednesday, U.S. President Donald Trump turned his international commerce battle right into a faceoff with China after he introduced a 90-day reprieve on larger reciprocal tariffs levied towards different international locations, however raised the speed on the world’s second-largest financial system to 125 per cent in a tit-for-tat retaliation.
“The query is, you probably have a Chilly Warfare commerce battle between China and the U.S. and also you’re Canada, the place do you go? There are a lot of points that (make) the selection clear,” together with points round democracy and human rights,” “however geography is certainly crucial,” Tal mentioned.
However there’s extra to his outlook.
Tal mentioned Canada has tried to diversify its commerce to different international locations for many years beneath numerous prime ministers, and has inked 15 commerce agreements general, however commerce with the U.S. nonetheless rose throughout that point.
“To diversify our export machine away from the U.S., we’ve the 15 free commerce agreements with 51 international locations, and our dependence on the usA. went up regardless of all that,” he mentioned. “It’s very troublesome to interrupt.”
Tal believes that in negotiations for a brand new Canada-United States-Mexico Agreement (CUSMA), the U.S. will demand that Canada enhance purchases of American defence merchandise and pure gasoline, amongst different issues and run opposite to the present nationwide temper.
Canadians are offended with Trump’s assaults on Canada’s sovereignty and financial system, with tariffs at the moment in impact on steel, aluminum and autos. Liberal Chief Mark Carney has tapped into that angst, arguing that Canada can not depend on the U.S. and should forge new financial ties across the globe.
“The system of worldwide commerce anchored by the USA that Canada has relied on for the reason that finish of the Second World Warfare … is over. Our outdated relationship of steadily deepening integration with the USA is over,” Carney mentioned in remarks after Trump introduced his reciprocal tariff plan on April 2. “Canada have to be trying elsewhere to broaden our commerce, to construct our financial system and to guard our sovereignty.”
He mentioned Canada is actively “strengthening” commerce relationships with different “dependable” international locations.
However Tal thinks the sheer power of geography and the present interconnectedness between Canada and the U.S. will in the end override any nationwide aspirations to even weaken current commerce ties, by no means thoughts get rid of them.
“Whenever you speak to folks within the discipline, you understand that it’s not really easy to do,” he mentioned, pointing to the proximity, infrastructure and the price of making an attempt to interrupt away.
He added that Canada will wind up sourcing extra from the U.S., not much less, after CUSMA is renegotiated.
Tal mentioned if Canada manages to get a brand new deal on CUSMA, then the ultimate tariff fee gained’t be very vital, someplace within the neighbourhood of 5 per cent to seven per cent, with some industries, akin to vitality merchandise, exempted altogether.
“5 years from now we are going to get up and understand that our dependence on the U.S. has risen, not fallen,” he mentioned.
Shares soared after President Donald Trump mentioned he’d pause some tariffs on dozens of nations for 90 days, signalling a tentative reprieve in commerce hostilities that has worn out trillions from international markets and ignited fears of a United States recession.
The euphoric response lifted shares after 4 classes of unstable, high-volume buying and selling pushed the S&P 500 to the brink of a 20 per cent bear-market plunge. The benchmark measure surged as a lot as 8.3 per cent with nearly each firm gaining. Whereas bonds eased an earlier selloff, they remained down throughout maturities for a 3rd day.
“The market cares as a result of 90 days provides you far more vital time to barter — that’s all of the market desires,” mentioned Artwork Hogan, chief market strategist at B. Riley Wealth. — Bloomberg
