CPP Investments Calls For More Economic Diversification as Tariffs Hit
Canada must diversify its economy and position itself as more competitive on the global stage if tariffs promised by U.S. President Donald Trump take effect, Canada's biggest pension fund said on Tuesday.Edwin Cass, chief investment officer of the Canada Pension Plan Investment Board, said his country's economy was "tied at the hip" to the U.S. after Trump said on Monday 25% tariffs on Canada and Mexico would go into effect almost immediately."One of the things we obviously should have been doing in the past, and I think you'll see going forward, is that we'll try and diversify our economy a lot more and we'll try and do some things to make it more competitive on the world stage," Cass told the Australian Financial Review Business Summit in Sydney.Canada's federal and provincial governments had already started planning to lower trade barriers inside the country in response to the threat of U.S. tariffs, he added.Cass, who oversees the investment of C$675 billion ($465.74 billion) on behalf of 22 million Canadians, said the Trump administration was apparently moving multiple policy levers at once to improve productivity and may succeed, but not without discomfort."There is a way that those combinations of policy levers can end up with a better result in the U.S., but it's going to be a bumpy road," Cass told the conference, noting that Trump himself had warned his policies may bring short-term pain.
Jedidajah Otte of the Guardian also reports that ‘the relationship is broken’: Canadians respond to Trump’s tariffs:
Since Donald Trump began his tariff threats against Canada and his ‘jokes’ about making Canada the 51st US state, I have not bought a single product originating in the US,” said Lynne Allardice, 78, a retired business owner from New Brunswick, Canada.
“Not a single lettuce leaf or piece of fruit. I have become an avid reader of labels and have adopted an ‘anywhere but the US’ policy when shopping. I will not visit the States while Trump remains in office, and most of the people I know have adopted the same policy.”
Acquaintances, Allardice added, were selling US holiday properties they had owned for many years.
Many Canadians have responded to Trump’s economic tariffs and political messaging with a consumer boycott of US products and services – no more California wines or American Bourbon; local shopping instead of Amazon Prime; analogue entertainment and cable TV instead of Netflix and Spotify; holidays in the Kootenays instead of Disney World.
Hundreds of people from across Canada shared with the Guardian their reactions to Washington’s political and economic gear change, and how they may be affected personally.
Many expressed defiance and anger over what they saw as a hostile new US administration that was no longer an ally and, voicing economic fears and a sense of permanent loss, said they would no longer buy US goods nor cross the border again – at least while Trump was in office.
Pam, a 64-year-old retired woman from British Columbia, said she and her husband had cancelled a five-week trip to Palm Springs, losing their $5,000 (£3,900) deposit. They were planning, she said, to buy a Honda truck now instead of a Ford.
Many said their local supermarkets had displayed labels marking Canadian products and that they were happy to pay significantly more for non-US goods, for example 50% more for Mexican lemons; others said they hoped Canadian companies would expand offerings and services after cancelling Amazon Prime and streaming platform subscriptions.
One woman from British Columbia who lives a 10-minute drive from the US border and is participating in the boycott pointed to the irony of having joined several Facebook groups promoting Buy Canadian campaigns – one of which had now ballooned to 1.2 million members.
Amid fiery pledges to stand up to the US government, hundreds of Canadians shared grave concerns about the impact of the trade tariffs on their personal finances.
Many said they were anxious about their retirement savings amid the market turmoil and economic uncertainty that have followed what they referred to as Trump’s “economic warfare”.
Scores said hiring and budget freezes were already happening in the companies they worked for, while a number of business owners highlighted a loss of sales since Trump’s election that was likely to worsen.
People working in sectors including hospitality, tourism, retail, entertainment, the wider service industry, manufacturing, the auto industry, aviation, property and construction, agriculture, marketing and financial services, among others, shared concerns about their business or line of work being negatively affected by the tariffs and resulting economic uncertainty.
Ian Hallett, the owner of an architectural bureau, from Seaforth, Ontario, said: “With steel, wood and aluminum tariffs, the construction industry will be hit hard and fast, which means a slowdown in building. We will likely have to lay off staff.”
The owner of a landscaping business in Calgary, Alberta, said his sector would be “highly impacted” by the tariffs. “People won’t spend money to maintain or redesign their lawn. I may have to reduce my workforce and potentially shut down the season early. This will have a domino effect,” he said.
Adrian, a business owner from Northern Ontario, said: “The tariffs have created chaos, anxiety and depression, a loss of hope. My US sales have dropped and if the tariffs [stay in place], I will have to close my business, as American customers are half my sales.”
A 65-year-old support worker at an elementary school from Toronto said: “I’m worried my husband may lose his manufacturing job because the company he works for has a lot of American customers. Tariffs may make the building materials products his company makes too expensive.”
Various business owners who were expecting a collapse in North American sales predicted that it would be impossible to make up the difference by increased exports to Europe or other parts of the world, where the markets were either saturated or shipping was too expensive.
“I’m stressed about my investments and the financial markets, and I’m concerned about prices going up,” said Susan, an accountant from Toronto, mirroring the fears of many.
While most of those who got in touch were outraged by Trump’s America First protectionism, scores of Canadians signalled an appetite for an isolationist approach for Canada, too.
“I think that we should take a tip from Trump and build our own wall to keep the USA out,” said a 56-year-old single mother from Montreal. Scores of Canadians said they felt Canada needed to strengthen its military.
Sarah from Nova Scotia said the Trump administration’s tactics and “threats against sovereignty, water, resources and territory” had “fired people up to be less dependent and integrated economically”.
Antoine Delorme, a 43-year-old self-employed heavy machinery mechanic from Montreal, who has to order parts and material from the US every week, appeared to blame globalisation for Canada’s perceived vulnerability.
“With free trade, we lost a lot of economic independence. Many distributors are centralised south of the border [and] no longer need to keep Canadian facilities,” he said. Like many others, he felt Canada was now exposed, economically and militarily. “If the USA turns into a hostile neighbour, no one will be in a position to meaningfully help us,” he said.
Jean Whieldon, a retired journalist from Ontario, said: “We have become too dependent upon America – Trump is right about that. Who can we turn to for help and protection? Nato? The UK? Don’t make me laugh, it hurts too much.”
Hundreds of people expressed fury over a perceived lack of solidarity from allied nations and were particularly critical of the British prime minister, Sir Keir Starmer, and King Charles.
“Canada’s relationship with the rest of the world has changed for ever,” said Katy, a finance professional from Toronto. “We just came to the stark realisation that allies are an illusion. As we endure the Maga onslaught, our supposed ‘allies’, including Britain, remain silent. Our ‘head of state’, King Charles, remains silent. Nato countries remain silent. We will weather the economic storm, but [I am] not so sure about our relationships with other nations.”
Canada, Katy added, could leave international partnerships as it was “blessed with innumerable natural resources”. “If things don’t change, then Canada needs to extricate itself and consider becoming a neutral country. Dismantling the constitutional monarchy is now a must. The Commonwealth is dead.”
Hundreds of Canadians reported a palpable, freshly ignited rise of patriotism, as well as a kind of nationalism usually frowned upon in Canada.
“Canadians have become much more nationalistic,” said a woman from Ontario. “Some of us have been booing at the US national anthem at hockey games, which is not typical Canadian behaviour. We are furious about the tariffs that will deeply hurt Canadian businesses and quite likely see other companies move their operations south of our border.”
Donna, a retired woman living in a small city in British Columbia, said: “We have lost our trust in the USA as a friendly country. Patriotism was never something that Canadians celebrated enthusiastically. Today I see more Canadian flags than I have ever seen – in front yards, hanging from porches and hedges, and adorning cars. Both sides of the political spectrum and a majority of citizens are much more united than before.”
A woman in her 40s from British Columbia who works in tech agreed: “There’s a huge sense of national unity around the country, and a lot of focused action to build our nation up.” She said she had “quit the US cold turkey”.
“This is a shift unlike any I have seen in my lifetime, and unlike anything my parents have seen either. Canada is turning away from the US – if not forever, at least for a long time. Goodbye America, we’ll miss what we had, but not what you have become.”
While some people said they were differentiating between the Trump administration and their American neighbours, others shared feelings of personal hostility towards the American population, saying they wanted to “stick it to” their “poorly educated neighbours to the south”, as one woman from British Columbia put it, echoing the remarks of many.
Scores of Canadians said they had fallen out with American friends and even family members over the political tensions between the two countries and ideological disagreements over American and Canadian democracy, freedoms and Trump himself.
A silver lining to the economic upheaval, various people pointed out, were renewed efforts to improve intra-Canadian trade between provinces.
Matt, 41, a university employee from Vancouver Island, said: “Having a common opponent in the USA is drawing many people of my vast country together in ways that were seemingly impossible just a year ago. The work being done to dismantle inter-provincial trade barriers, with the potential to add tens to hundreds of billions of dollars to our economy, would never have had the political backing without Canada facing a significant external threat.”
Most Canadians who got in touch felt that ties between Canada and the US had been permanently damaged.
“The relationship is broken,” said Allardice, the pensioner from New Brunswick. “A great many Canadians hate the USA now. How can you remain on good terms with a neighbour who threatens your economy and jokes about bringing you to your knees?”
And Andrew Coyne penned an op-ed in the Globe and Mail on why Donald Trump is trying to destroy Canada:
“What he wants is to see a total collapse of the Canadian economy, because that will make it easier to annex us.”
After all the pretexts, after all the fake grievances – migrants, fentanyl, trade deficits, banks – there is no longer any doubt. After months of attempting to mollify Donald Trump, only to be struck by the same 25-per-cent, across-the-board tariff first announced in November, the Prime Minister at last saw no reason not to lay out the reality of our situation in the starkest possible terms.
The President of the United States is trying to destroy us.
This is not a trade war. Mr. Trump does not have any legitimate issue he wishes to raise with us, using the tariff to impress upon us how serious he is. It is not a negotiation, in which each side brings something to the table it is willing to trade for something else. But neither can it even be dignified as extortion. The tariff is not intended to extract concessions from us. If it were, we would have heard some sort of concrete demand from him by now. It is intended, purely and simply, to harm us.
And it will not end here. More tariffs are coming, on our steel, on our lumber, plus a “reciprocal” tariff designed to punish us for the crime of collecting a national value-added tax, the GST. That pretext is as baseless as the rest: the GST does not discriminate against imports, but applies equally to all goods and services sold in Canada, domestic or foreign. Again, there is no demand here, or none that could possibly be met. The point is not to force us to the negotiating table. The point is to break us.
As ever, it is necessary to step out of conventional modes of analysis, to wrap our minds around the full insanity of Mr. Trump’s ambitions. Sucker-punching your nearest neighbour and closest trading partner, even as you are cozying up to Vladimir Putin’s Russia, may not seem to make any sense, until you recall that Mr. Trump has been attacking every other democracy in sight, from Ukraine to Europe to Taiwan.
At which point the penny drops: he sides with the expansionist dictatorships because he agrees with them – because he aims to establish one himself. When he talks about invading Greenland or seizing the Panama Canal – or using “economic force” to annex Canada – he means it.
The good news is that the weapons of economic warfare are, by their nature, mutually punitive. Mr. Trump’s tariffs may hurt our exporters, but they will hurt American consumers, workers and businesses just as much. That’s particularly true in a tightly integrated continental economy such as ours, where parts might move back and forth across the border half a dozen times en route to making the finished product.
Sticking a spoke in the wheels of trade, as Mr. Trump has now done, can only result in higher prices, stalled production lines, broken supply chains, and lost jobs – in America, not just in Canada. Just the threat alone seems already to have spooked investors: not only are stock markets cratering, but the Atlanta Federal Reserve projects that first-quarter GDP in the U.S. will fall by 2.8 per cent annualized.
Of course, the retaliatory measures Canada has announced will do much the same to our consumers and workers. So be it. If this were an ordinary trade war, a spat over this product or that industry, that might be seen as needlessly escalatory. But this is something quite different. The tariff fight has to be seen in the context of the larger struggle, which – if it were not clear before, it should be crystal-clear now – is existential.
Whatever harm we do to the Americans will probably be only a fraction of the harm they do to themselves. But what is essential at this moment is the demonstration effect: to show that we are unafraid, our resolve is ironclad, and we are willing to pay whatever price we must to preserve our independence.
That cannot, however, be the end of it. Fending off Mr. Trump’s advances may be the immediate imperative. But we must be no less vigilant to reduce our exposure to such attacks in future – by making our investment climate so attractive that businesses will want to locate here, notwithstanding the Trump tariffs; by increasing our productivity enough to offset the efficiency losses from such unwarranted restrictions on trade; by diversifying our trade as much as possible, in favour of more reliable partners.
In time, perhaps, the Americans will come to their senses. But the damage is done. Mr. Trump will never realize his dream of annexation. He has, however, succeeded in destroying the trust between our two nations, probably permanently.
There is a lot Canada should have done but we were ill-prepared for Trump's tariffs and now we are grappling with the effects.
CPP Investments' CIO Ed Cass, just like CEO John Graham, believes in a diversified portfolio and a diversified Canadian economy.
The reality is we are tied to the hip with the United States and until 2025, we had great relations and no major problems to deal with.
Now we are facing Trump's tariffs and it's forcing us to rethink our relationship with our long-time southern neighbour and staunchest ally.
So what is this all about? Trump's advisors know our two economies are highly intertwined, especially in the auto sector which is why he granted it a 30-day reprieve today from tariffs.
My friends and I have been trying to figure out why Trump is doing this, going after Canada and Mexico.
The only thing that makes some sense is Trump wants to accelerate the de-globalization of the US economy and by threatening tariffs, he's going to force big American companies to revamp their supply chains so everything is done domestically.
But therein lies the catch. Trump needs revenues to introduce tax cuts and if he goes through this tariff war, he risks seeing a surge in inflation "like nothing you've seen before" (borrowing his words).
Trump thinks he can use tariffs to introduce another great US manufacturing renaissance but this policy can come back to haunt him if inflation expectations soar.
One thing I can share is I do not think Trump is trying to destroy Canada to annex it, he doesn't want another California or Vermont as a state and Canadians are too leftist for his taste.
Annexation is never going to happen but economic uncertainty is upon us and Canada is in deep trouble precisely because we rely on the US so much.
Anyway, as far as our large pension funds are concerned, I don't think they should change their asset allocation to invest less in the US, more domestically.
If there are great opportunities domestically across public and private assets, by all means, go for it, but I doubt they will get caught up in the politics of tariffs.
Below, Bruce Heyman, Power Sustainable CEO and former US Ambassador to Canada in the Obama administration, joins ‘Squawk Box’ to discuss President Trump’s tariffs policy, what’s behind the new round of tariffs against Canada, Mexico and China, state of US-Canada relations, and more.
Also, Alberta Premier Danielle Smith responds to imposed US tariffs.
Third, CBS News correspondent Shanelle Kaul spoke with Ontario Premier Doug Ford on Wednesday on why he's threatening to cut off energy to some US states over Trump's tariffs (bad move!).
Fourth,
Lastly,
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