Economy holds the Trump card

Opinion

Hey there, time traveller!
This article was published 27/05/2016 (2883 days ago), so information in it may no longer be current.

Smug predictions of a Hillary Clinton landslide didn’t sit well with Bill Maher and shouldn’t sit well with Manitoba’s business community, either.

The irreverent and liberal host of Real Time With Bill Maher recently took movie director Rob Reiner to task for suggesting a Clinton win over Donald Trump was a certainty.

Maher worries such predictions could convince liberals and Democrats victory for Clinton is certain, and he fears resulting apathy on the left could leave the door open for Trump to sneak in to victory.

Regardless of what pundits might say about the bombastic businessman’s relative chances of success, prudent strategic planning here might include some thought into what a Trump presidency might mean to Canada’s and Manitoba’s economies.

For Canada, and especially Manitoba, business in the U.S. is an economic lifeline.

Even a Trump presidency, as outrageous as that outcome might be, would likely not alter the cross-border flow of goods and services that totals about $25 billion per year in and out of Manitoba.

In a recent posting, Murray Leith, executive vice-president and director of investment research at the large Vancouver-based wealth-management firm Odlum Brown, told clients it’s more likely economic dynamics will affect politics than the other way around in the U.S. election.

He doesn’t think Trump will win, and if he does, Leith doesn’t think it would be good for the U.S. or its stock market. That would be of great concern for many Canadian investors, including the clients for whom Odlum Brown manages about $9 billion in assets.

“We don’t think it will be the end of the world,” Leith said. “He’d likely be forced to moderate his positions on many fronts.”

For instance, NAFTA can’t easily be unwound, and the Trans Pacific Partnership (TPP) is a juggernaut that may be hard to stop.

But that’s not to say a Trump administration wouldn’t be capable of a few curveballs.

Carlo Dade, director of the Centre on Trade and Investment Policy at the Canada West Foundation in Calgary, recently wrote a piece in the Huffington Post titled, There’s Simply No Way Donald Trump Can Win the Election.

He’s an old Washington hand and clearly is not the only one who is convinced of that, but he also knows while it would take time, there are processes whereby the U.S. could walk away from some of its trade deals.

“There is a whole bunch of mischief Trump could do,” said Dade.

From his current western Canadian vantage point, Dade says Manitoba’s economy is more integrated with the U.S. than the rest of the western provinces and so may very well have the most at stake were Trump to throw some sort of wrench into trade relations with Canada and the rest of the world.

“But,” he said, “(Regardless of who wins) the election will not alter the strong fundamentals in the U.S., which is the largest, fattest, easiest market in the world.”

From a global macroeconomic perspective, Leith is more concerned about seeing improved co-ordination of government and central bank policy-making, ideally with more fiscal and less monetary policy and an acceptance of slower growth by central bankers around the world.

“We are muddling through in a less-than-optimal manner right now,” he said. “Hopefully that will evolve and change for the better.”

Leith notes real household incomes among the lowest-earning households in the U.S. have declined at a far greater rate than higher earners, citing that as one of the main reasons voters are fed up with political gridlock and using Trump as a way to express that protest.

A publication from the Manitoba Bureau of Statistics that came out last month on the Manitoba economy showed household disposable income in Manitoba averaged 4.4 per cent annual growth between 2010 and 2014 without differentiating between various income brackets.

Luckily, Manitoba is likely not to alter its moderate growth rate regardless of who is in the White House.

martin.cash@freepress.mb.ca