While Donald Trump can look forward to four years of power, Canadian Prime Minister Justin Trudeau’s grip is weakening by the day. The Canadian Press / AP
While Donald Trump can look forward to four years of power, Canadian Prime Minister Justin Trudeau’s grip is weakening by the day. The Canadian Press / AP
While Donald Trump can look forward to four years of power, Canadian Prime Minister Justin Trudeau’s grip is weakening by the day. The Canadian Press / AP
While Donald Trump can look forward to four years of power, Canadian Prime Minister Justin Trudeau’s grip is weakening by the day. The Canadian Press / AP

Trump, Trudeau and tariffs: US president-elect causes major headache for Canada's PM


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Just when Justin Trudeau thought things could not get any worse, one of his key allies walked out of his cabinet. Chrystia Freeland’s resignation as finance minister this week capped a wretched year for the Canadian Prime Minister, as pressure continues to mount on him to step down after nine years.

Ms Freeland's resignation came weeks after Mr Trudeau broke bread with president-elect Donald Trump at Mar-a-Lago, hoping to avoid a damaging trade war, as the American leader-in-waiting threatened to impose 25 per cent tariffs on Canadian imports.

Far from being diplomatic, Mr Trump smelt weakness, suggesting Mr Trudeau could become “governor” after Canada became the 51st US state. This remark did not go down well north of the border.

But Jeffrey Lord, who worked in the White House of former president Ronald Reagan, suggested that Canada should relax.

“President Trump does like to troll Justin Trudeau, which I find amusing,” Mr Lord told The National. “There may be some rivalries between the countries and their respective leaders. President Trump does have a good sense of humour. So this doesn’t surprise me at all.”

Donald Trump with Justin Trudeau at the White House in October 2017. AFP
Donald Trump with Justin Trudeau at the White House in October 2017. AFP

Mr Trump’s strategy, according to a diplomatic source, is to soften up Mr Trudeau before the negotiations.

“His view is that Trudeau is on the other side of the table, and I am going to do everything I can to weaken his position,” the source said. “There used to be a saying in Washington, that if you want anything from Canada, don’t do it publicly. Trump’s position is entirely different. Unfortunately for Canada, Trudeau is in a weak position right now.”

While Mr Trudeau has tried to defuse the looming tariff crisis, other Canadian politicians have tried to fight fire with fire, with Ontario Premier Doug Ford threatening to cut off energy supplies to large parts of the US, potentially leaving 1.5 million homes in New York, Michigan and Illinois without power.

Mr Ford has urged other Canadian provinces and the government to back his hard line, but the country appears split over what to do.

Ms Freeland, in her resignation letter, was scathing about Mr Trudeau’s approach to the impending trade war, which could devastate Canada’s economy.

“Our country today faces a grave challenge," she said. "The incoming administration in the United States is pursuing a policy of aggressive economic nationalism, including the threat of 25 per cent tariffs. We need to take that threat extremely seriously.”

Ms Freeland called on Canada to avoid “costly political gimmicks” in favour of “keeping our fiscal powder dry” ahead of any trade war. And she is not alone in suggesting that Canada should be ready to fight back if diplomacy fails.

“President-elect Trump’s threat of a 25 per cent tariff on all Canadian imports is insulting and unwarranted,” said Derek Burney, a former Canadian ambassador to the US.

“His crude 'might is right' ploy would blatantly contravene the United States-Mexico-Canada Agreement. He favours coercion over co-operation, even with key allies. Sadly, Trump’s announcement reflects the degree to which Canada has fallen in terms of the mutual respect and relevance that has long characterised a special, even privileged relationship.

Canadian Prime Minister Justin Trudeau and his then-deputy Chrystia Freeland announce a new trade pact between Canada, the US and Mexico, in Ottawa in October 2018. AFP
Canadian Prime Minister Justin Trudeau and his then-deputy Chrystia Freeland announce a new trade pact between Canada, the US and Mexico, in Ottawa in October 2018. AFP

“If the threat becomes real following Trump’s inauguration, Canada should retaliate with equivalent measures.”

Mr Burney said he supported strengthening the border and voiced hopes that common sense would prevail. But, judging by what happened during the first Trump administration, it would be unwise to expect sweetness and light.

Talks did not go well at the 2018 G7 summit in Charlevoix, Quebec, with Mr Trump lashing out at the Canadian leader on Twitter, calling him “very dishonest” and “weak”. The latest barbs appear to be a continuation of what happened before, and suggest there is little love lost between the two men.

“Trump since the election has both threatened Canada with tariffs and joked about it becoming the 51st state, neither of which are very neighbourly,” Christopher Galdieri, professor of politics at Saint Anselm College in New Hampshire, told The National.

“This may be Trump playing to his base and mocking Canada – perhaps for being a stable and normal democracy – or it may signal an eagerness to start a fight he thinks will be easy to win. I am not an economist but if that's the case, given the amount of trading between the two countries, this seems like a real miscalculation on Trump's part.”

But the Trump camp believes the incoming president is in a much stronger position than Mr Trudeau, as he pushes for concessions on immigration and trade, even though the bigger problem is on the US southern border.

In short, while Mr Trump can look forward to four years of power, Mr Trudeau’s grip is weakening by the day. The one-time golden boy of Canadian politics is losing his lustre. Members of his own Liberal Party are urging him to stand down after a series of disastrous election results.

Until now, he has managed to fend off no-confidence votes, but with Canada’s left-of-centre New Democratic Party calling on him to quit, an election in the next few months appears inevitable.

With the conservatives well ahead in the polls, a change of administration seems inevitable. But that is no guarantee that things will get easier for Canada.

Mercer, the investment consulting arm of US services company Marsh & McLennan, expects its wealth division to at least double its assets under management (AUM) in the Middle East as wealth in the region continues to grow despite economic headwinds, a company official said.

Mercer Wealth, which globally has $160 billion in AUM, plans to boost its AUM in the region to $2-$3bn in the next 2-3 years from the present $1bn, said Yasir AbuShaban, a Dubai-based principal with Mercer Wealth.

Within the next two to three years, we are looking at reaching $2 to $3 billion as a conservative estimate and we do see an opportunity to do so,” said Mr AbuShaban.

Mercer does not directly make investments, but allocates clients’ money they have discretion to, to professional asset managers. They also provide advice to clients.

“We have buying power. We can negotiate on their (client’s) behalf with asset managers to provide them lower fees than they otherwise would have to get on their own,” he added.

Mercer Wealth’s clients include sovereign wealth funds, family offices, and insurance companies among others.

From its office in Dubai, Mercer also looks after Africa, India and Turkey, where they also see opportunity for growth.

Wealth creation in Middle East and Africa (MEA) grew 8.5 per cent to $8.1 trillion last year from $7.5tn in 2015, higher than last year’s global average of 6 per cent and the second-highest growth in a region after Asia-Pacific which grew 9.9 per cent, according to consultancy Boston Consulting Group (BCG). In the region, where wealth grew just 1.9 per cent in 2015 compared with 2014, a pickup in oil prices has helped in wealth generation.

BCG is forecasting MEA wealth will rise to $12tn by 2021, growing at an annual average of 8 per cent.

Drivers of wealth generation in the region will be split evenly between new wealth creation and growth of performance of existing assets, according to BCG.

Another general trend in the region is clients’ looking for a comprehensive approach to investing, according to Mr AbuShaban.

“Institutional investors or some of the families are seeing a slowdown in the available capital they have to invest and in that sense they are looking at optimizing the way they manage their portfolios and making sure they are not investing haphazardly and different parts of their investment are working together,” said Mr AbuShaban.

Some clients also have a higher appetite for risk, given the low interest-rate environment that does not provide enough yield for some institutional investors. These clients are keen to invest in illiquid assets, such as private equity and infrastructure.

“What we have seen is a desire for higher returns in what has been a low-return environment specifically in various fixed income or bonds,” he said.

“In this environment, we have seen a de facto increase in the risk that clients are taking in things like illiquid investments, private equity investments, infrastructure and private debt, those kind of investments were higher illiquidity results in incrementally higher returns.”

The Abu Dhabi Investment Authority, one of the largest sovereign wealth funds, said in its 2016 report that has gradually increased its exposure in direct private equity and private credit transactions, mainly in Asian markets and especially in China and India. The authority’s private equity department focused on structured equities owing to “their defensive characteristics.”

Updated: December 19, 2024, 6:35 AM