The good and the bad of a Trump presidency for Canadian energy
Today, Donald Trump will be sworn in as the 45th president of the United States, and while nobody knows how Mr. Trump will actually govern, his rhetoric leading up to today’s inauguration offered both potential opportunities for Canada, and potential problems.
On the upside, Mr. Trump ran for office explicitly pledging to approve the Keystone XL pipeline, which could give Canada, and particularly hard-hit Alberta, a bit of an economic lift. It would also fit in with Mr. Trump’s pledge to create “jobs, jobs, jobs” for America’s growing population of unemployed blue-collar workers.
On the downside, Mr. Trump is now talking about imposing a border adjustment tax on goods imported to the U.S. The possibility of such a tax has many Canadians worried—including Canadians in the oil patch. This is understandable given that 99 per cent of Canadian crude oil exports and 100 per cent of Canadian natural gas exports go to the U.S. That’s a lot of revenue for Canadian companies, workers and governments that could now be subject to an additional tax and made less competitive.
However, there may be a small silver lining to the possible border tax as well, as it might finally break the logjam and make abundantly clear the need for Canadian pipeline infrastructure to the east and west coasts to facilitate exports of oil to Asia and India, where future oil consumption is expected to increase. Unfortunately, while infrastructure growth is slow, tax changes could be very fast, potentially leaving Canada in a painfully exposed position for several years.
The other downside is that Mr. Trump’s other pledged actions—slowing down or unwinding some environmental regulations, lowering corporate tax rates, and so on, could increase the competitiveness gap between the U.S. and Canada, as Canada continues to resolutely march down the pathway of increasing taxes and laying on carbon taxes.
Many Canadians (and quite a few more Americans) will be glued to televisions today, to see the pageantry, and what is expected to be raucous demonstrations, over the election of Donald Trump. On the following Monday, we’ll begin to see what it all means for Canada’s future as an energy producer.
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