After spending five days in the US, we flew to Calgary to see friends of ours. The province of Alberta is in the middle of an independence debate that is going badly, especially when the leader of the independence movement has just been served with a $100 million lawsuit by a US hedge fund that was backing his independence movement activities. It seems that the hedge fund was sold something that could not be delivered.
Our stay in Canada was limited, but one thing we found amazing was the new Canadian identity that has been created since Donald Trump, the American president, began his trade war with the country. Canada, like Germany at the beginning of the war in Ukraine, know that a trade war with America will be costly. Aside from a few crazy separatists, the vast majority of Canadians, even in Calgary had the same view, as they say "elbows up". Somehow that refers to ice hockey. In our two days stay in Canada, it was apparent that there was a strong anti-American sentiment. Far stronger than anything we’ve ever seen in the UK. Shops we visited during our stay, granted they weren’t that many, outline the origine of the goods for sale. Although we did not visit any supermarkets, we were told by our host that American goods were avoided.
In addition, and I was not aware of this, many Canadian companies will no longer export to the United States. That is a surprising outcome, that merchants are willing to cut themselves off from such a large market. However, our host indicated that the paperwork and aggravation of exporting to the United States was such that it wasn’t worth the trouble. For the past year, many Canadian exporters have found a huge amount of red tape out of the US customs system. In addition, the aggravation from American buyers with the huge tariffs that were being imposed, made it less than attractive.
That was a surprising comment. My entire life, I have lived on the premise that Canada and the United States had one of the strongest alliances in the world, cemented by a 5000 mile border, largely unguarded and unprotected. Canada‘s winning hand is that it is mostly a natural resource producer. I was told by our host, but the volume of shipping out of Canadian ports had exploded in the past year to such a point, that it was redefining trade between Canada and the rest of the world.
This was an eye-opening visit. It may explain why the flow of investment into Canada has been exploding over the past six months. When the American president announces "trillions of dollars" of new investments into the United States, the Canadian government said very little, but announcements of specific investments are apparently occurring on a daily basis now. According to some news, the recently vacated car plant for Stellantis is in the process of being sold to BYD the Chinese Car manufacturer. For decades, manufacturers have gravitated to the United States for good reasons, a deep labor pool, excellent capital market, and a corporate friendly government. Over the past two years, the labour pool has been affected by demographics, poor education, and ICE, which has undertaken a massive program of forcible deportation.
Suddenly, Canada can be seen as an interesting option. My suspicion is that we will see a small decline in US capital investment and we will see a disproportionally large one in Canada, especially since this Canadian dollar is so weak.
If I still was of an age or long investments were considered a good idea, and if I wasn’t as focussed on the farms activity and it’s in ancillary businesses, I think that Canada has a direct investment target would be very interesting.
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