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‘It will be very difficult’: Ontario’s Doug Ford faces uphill battle amid NAFTA troubles, Trump’s tariffs

Analysts say Ford will have a tough time delivering on campaign promises amid weakened provincial finances and an increasingly uncertain business environment.

Naomi Powell – Financial Post
June 13, 2018

Doug Ford pledged to stand united with the federal government in its heated trade dispute with the United States as the beleaguered NAFTA talks become a “critical” issue for his new government.

“The stakes are high,” Ontario’s premier-designate told reporters following a meeting with auto and steel industry representatives Wednesday. “Thousands of jobs rely on the outcome of these talks. Thousands of Ontario families are counting on us to defend their interests.”

The U.S. struck out at Canada last month with tariffs of 25 per cent on steel and 10 per cent on aluminum. Hours later, Canada announced retaliatory tariffs on $16.6 billion of U.S.-made steel, aluminum and a range of other goods. Relations have been on a downward course since then, with Trump calling Prime Minister Justin Trudeau “weak and dishonest” in a Twitter post, apparently after he was angered by a G7 press conference in which Trudeau restated his objections to the U.S. levies.

Ford said the “name-calling” was “not acceptable whatsoever.”

“I want to be very clear: we stand shoulder to shoulder with our federal counterparts,” he said.

As the Canada-U.S. dispute deepens, analysts say Ford will have his work cut out for him as he strives to deliver on his campaign promises amid weakened provincial finances and an increasingly uncertain business environment.

“The campaign was one thing but now we have a major trade issue and it will impact Ontario the most,” said Benjamin Tal, Deputy Chief Economist of CIBC World Markets Inc. “That means he has to run a lot faster just to stand still. It will be very difficult.”

The Quebec government has promised $100 million in loans and guarantees to smaller steel and aluminum companies hit by the tariffs. Ford, who has pledged to end corporate welfare, did not say whether he would do the same for Ontario firms and instead vowed to make the province a more competitive place to do business. He has promised to cut business regulations, fight upcoming federal rules on carbon taxing, do away with the cap-and-trade system and lower hydro rates by 12 per cent.

Achieving those goals will be “tougher overall” given an uncertain economic and trade environment and government revenue stream, said Doug Porter, chief economist at BMO Capital Markets.

“I think before we make rash decisions we need to see how things unfold and we have to be prepared,” Porter said. “There’s not a lot of detail in (Ford’s) proposals but they are intended to be phased in over time and I think that’s the way to go.”

Maintaining a consistent flow of trade with the U.S. is crucial to Ontario, which sends about 80 per cent of its exports across the border and is home to roughly 70 per cent of Canadian steelmaking. And while the U.S. steel and aluminum tariffs are unlikely to have a dramatic impact on the economy, Trump has also threatened tariffs on the auto sector, initiating a Department of Commerce investigation to determine the national security effects of the import of automobiles and auto parts.

While Ford could conceivably extend support to businesses hit by the steel tariffs, the greater worry is how much could be done to prop up industry if the levies are extended to Ontario’s far larger auto sector, Porter said.

“The concern is that Ontario finances have been weakened considerably over the course of the business cycle,” he said. “And unfortunately, that means the province has less firepower than it might have had 10 or 15 years ago to offer that kind of support.”

Ontario’s net debt has nearly doubled in the last decade and is expected to hit $325 billion this year.

As for pushing the NAFTA talks forward, there’s only so much a premier can do, Tal said of CIBC.

“At the federal level, that’s where the focus will be,” he said.

Among the firms represented at Ford’s meeting were auto parts giant Magna International Inc., Hamilton-based steelmakers Stelco, Algoma and ArcelorMittal Dofasco, and automakers including Honda, Toyota and Ford. Ford will meet Foreign Affairs Minister Chrystia Freeland and the Canadian ambassador to the U.S. David MacNaughton Thursday for a briefing on the NAFTA talks.

Flavio Volpe, president of the Automotive Parts Manufacturers’ Association, said the meeting was “a good first signal” from Ford.

“The premier understands that there is only one Canadian objective on NAFTA and trade with the U.S. and he was eager to hear from the industry on how he could further support the Canadian effort on it,” said Volpe, who had a representative at the meeting, while he was in Washington speaking with senior White House officials about trade. “The sentiment was very positive and he was asking the right types of questions.”

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