THUNDER BAY – Economist Jack M. Mintz says Canada needs to find its place in U.S. President Donald Trump’s new world order.
Mintz had some grim news for the city's business leaders at the Thunder Bay Chamber of Commerce's leaders luncheon on Thursday.
For Canada's economy to succeed, the country is going to have to leverage its resource sector and give a major tax cut to corporations, said Mintz.
“We have to have policies that are distinctive and tilt the playing field to Canada, that's in my view, as I've argued for almost two decades, what we need to do in terms of policy. Now I think it's even more urgent today. I think we could use some very significant regulatory reform. I think we need to have a major tax cut. I think we're gonna need to have a much more efficient government and a much better productivity in government,” said Mintz.
He added that Canada’s economy is weak and will only get weaker under Trump’s tariffs.
“What's really concerning in terms of the tariffs, and this is the bad news, is that manufacturing, which is roughly about 89 per cent of Canada's GDP, is very badly hit by the tariffs,” said Mintz.
“Canada’s manufacturing is going to, even with retaliation, lose about 14.2 per cent of the value added in manufacturing. So that's almost half of Canada's GDP.”
Mintz also mentioned that Canada’s agricultural and mining sector will drop by 6.7 per cent.
He stated that the U.S. won’t feel the impact of tariffs as badly.
The U.S. saw significant growth during the Biden administration, while Canada’s growth stagnated.
“When you look at the total value of imports into the (United States), which is, like roughly $2.2 trillion it's only seven per cent of their GDP. In the case of Canada, our exports to the United States are almost 19 per cent of the GDP,” said Mintz.
“We're very heavily exposed to the U.S. while the U.S. is not very heavily exposed to us. It's that asymmetry. That is a very significant problem because you can see this is why Trump and the people around him don't believe that tariffs are gonna have a huge impact on the economy in the United States because imports are just not that important as part of their overall sector.”
He said in terms of total exports Canada is expected to lose 17 per cent without retaliatory tariffs. With retaliatory tariffs, Canada can lose 20 per cent.
In the U.S., exports are going to hurt them by 14 per cent, 22 per cent with retaliation.
Mintz stated the U.S. imports and exports are roughly five to seven per cent of the GDP. In Canada, the country's exports are in the 30 per cent range and the imports are around 26 per cent of the Canadian GDP.
“These numbers are a lot. Even though these show these are significant impacts on exports and imports and trade overall, as you can see from the value-added calculations. The U.S. doesn't bear as much harm as we will if these tariffs stay in for a very long period. I mean two or three years as opposed to one year.”
Karl Skogstad, associate professor for the department of economics at Lakehead University, said he is concerned about Canada producing more resources and exporting them to foreign markets.
“If anything, the last few months have shown us that maybe foreign markets aren't always going to be there," said Skogstad.
Mintz said that having a strong manufacturing sector that uses resources to export is always good for competition, but it’s a very competitive market.
“I think that's where our policies have to be to try and do that. But my proposal for corporate taxes, exempts reinvested profits, I can tell you it would be a huge attraction for investment in all sectors and maybe we would be able to attract more money to do that,” said Mintz.
Mintz warns that if Canada is not exporting to the rest of the world, our domestic economy will leave the country vulnerable.
“I think what's alarming right now is the fact that our most important market, the United States, has now become a difficult market.”
Sarah Lewis, a senior manager with Deloitte's Economic Advisory, asked “how training and education systems can support our economic competitiveness” in the wake of Trump’s tariffs.
Mintz said, “one of the most important contributors to growth is human capital.”
However, Mintz isn’t worried about the Canadian education system. He is worried about Canadian youth migrating south after obtaining their degrees.
“What I worry about is migration and younger people leaving to go elsewhere, because they don't feel they have these great opportunities here in Canada," said Mintz.
“We just have to make sure that we get the proper training that the business sector needs. I think that requires a lot more analysis and incentives that allow businesses a better understanding of what happens to graduates in terms of where they want work and get the kind of job that they want.”
