Welcome to Trump World

The president-elect’s unlikely victorious bid for the White House points to a likely disruption of global trade and international relationships. That includes Canada.

December 17, 2016   Joe Terrett

Canadian manufacturers tend to live on the cautious side of life, playing it pretty safe, and sticking close to home. Their careful view of prospects and opportunities is a common thread running through successive PLANT Manufacturers’ Outlook surveys, and such is the case with the latest study.

Our companies are often described as more risk averse than their more productive (by 18% per worker) US counterparts, and that may be so. Most are small (less than 100 employees), family or owner run, they’re operating in a smaller pond with less access to giant pools of investment capital, and their costs are high.

Almost two-thirds of their revenue comes from domestic sources, and about 25% from the US, with a smattering coming from other parts of the world. Most (32%) find the chief impediment to more adventurous exporting is intense competition.

Despite all that talk about the need for companies to diversify their markets, there’s the backlash against global trade to consider. Britain pulled a Brexit, CETA was almost scuttled by the burghers of an obscure region in Belgium and the Trans-Pacific Partnership ran into trouble during the US election.

Then Trump happened.

The president-elect’s unlikely victorious bid for the White House points to a likely disruption of global trade and international relationships. That includes Canada.

Donald has made his position clear. America first. Make America great again. He’s bringing manufacturing jobs back to America. NAFTA is the worst trade deal in history. And “no” to the Trans-Pacific Partnership.

Suddenly the world is looking a lot more protectionist, especially in our neighbourhood.

There is nothing to indicate Trump’s version of fair dealing will be to Canada’s benefit. But if he tears up the NAFTA agreement, we still have the Free Trade Agreement (FTA) to ensure tariff-free commerce, right?

Don’t bet on it. Trump promised jobs for America. So what does that mean to the automotive sector? Unifor just wrapped up four-year contracts with the Detroit Three worth roughly $1.6 billion in Canadian investments. How will auto investments fit into Trump’s “America first” world? Ford has already walked back plans to shift Lincoln production from Kentucky to Mexico.

And Trump is a climate change denier. He intends to sweep aside Barack Obama’s environmental initiatives as the Trudeau government and the provinces prepare to levy carbon reduction costs on consumers and businesses – another potential competitive disadvantage for our home team.

Trump also plans to lower corporate taxes and repatriate cash from foreign profits. Mathew Wilson, vice-president of national policy at Canadian Manufacturers & Exporters, says that could have a direct impact on Canadian manufacturing’s competitiveness and ability to attract investment.

CME has released an ambitious plan for manufacturers that would double output and exports. Are companies ready to meet the challenge, especially in a Trump world?

The Outlook 2017 survey (and other studies) suggest we have some work to do. Manufacturers hesitate on matters of investment in machinery, equipment, technology and innovation; and they lag in the adoption of technologies that would make their businesses more productive.

“We are not investing enough,” Wilson warns, noting that since 2002, investment in new machinery has dropped 65% compared to the US – the worst in the G7.

That has to change. Manufacturers must become more competitive, which requires investments in hard and soft technologies that will drive up productivity. Diversifying markets outside the US is no longer a should do, but a must do. The potential for growth and expansion is out there – and it’s no longer safe to play it safe.

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1 Comment » for Welcome to Trump World
  1. A concerned worker says:

    Hi Joe,

    Thanks for your insightful article, Welcome to Trump’s World, published on December 17, 2016. I work for a local metal fabrication company located in Concord, ON. Last October, our company invested in two, advanced manufacturing equipment (a Tube Laser and a 250 tonnes capacity Punch machines from Germany).Your article cited Mr. Wilson, vice-president of national policy at Canadian Manufacturers & Exporters words that manufacturing firms in Canada are not investing enough. Well, I would like to say that as a small, privately owned firm of no more than 40 people, we are making huge investments in both hard and soft technologies with hopes to drive up our productivity. We also invested in time and resources and applied for the CME SMART program only to be told the program was out of funding. I just want to say that as an employee, I see first-hand the challenges the owners of my company faced. They have to deal with many competition at home and abroad, they have to work very hard to keep the profit margins at fair levels and at the same time, they must ensure they invest in the necessary resources to remain competitive. For a small company, we are doing well to keep people employed. We try not to lay off people during the slowest season and even recruit for highly paid, highly-skilled and experienced people in the trade. We are doing our best at times like these to contribute to our local economy by investing in technology and human capital. However, we have not been successful to obtain any help from our government initiatives to provide aids for companies like ours. Who is really watching, listening and helping employers who are actually doing the “must do” by investing in the economy and taking risks? Just a thought.

    A concerned worker

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