Business Brief: Did we just break up?

Good morning, and yes. But we can hope it’s only temporary.

U.S. President Donald Trump’s speech to Congress last night painted a picture of strength and progress in his first six weeks, but the hours leading up to it suggested not everyone was sharing his confidence. Today, we look at what comes next.

In the news

Finance: Toronto-Dominion Bank plans to give its U.S. chief a US$2-million retention award.

Lending: Investors are pushing Canadian banks to disclose how much lending goes to high-emissions sources.

Spending: Bay Street law firms raise salaries for associates even as hiring slows.

On our radar

• Statistics Canada reports fourth-quarter labour productivity. The last report showed a continuing decline – largely owing to a lack of business investment – that economists have been tracking for years.
• Linamar Corp. is scheduled to report after close today. The company has said that tariffs will halt North American auto production and trigger layoffs across the sector.
• Other notable earnings today include Descartes Systems Group Inc. and Grindr Inc.

Open this photo in gallery:

In focus

The tariffs are here. Now what?

We’ll start with Rob Carrick, who has written the first instalment in a series that helps us navigate our personal finances through the trade war. A preview:

• File your 2024 tax return.
• Prepare for the inflation reboot.
• Suck it up and look at what’s happened to your investments.
• Find the right house for your cash savings.

Now, the news:

He did the thing he said he’d do.

But then stock markets stumbled as the broad tariffs on Canada, Mexico, and China rattled investor confidence. By the end of yesterday’s trading, Trump’s commerce secretary was already hinting at a potential pullback on the new duties. Perhaps that’s why tariffs didn’t rate much air time in the President’s remarks.

Canada followed through yesterday with its $30-billion in countertariffs on U.S. goods, with an expanded list of products – including electric vehicles and food – set to face levies in less than three weeks. Prime Minister Justin Trudeau vowed that Canadian tariffs would remain in place “until the U.S. tariffs are withdrawn and not a moment sooner.”

In remarks aimed at Trump, Trudeau said the tariffs were a “very dumb thing” to put in place. Trump responded as you’d might expect – and indicated the U.S. will simply respond in kind. A retaliation to a retaliation.

To recap:

• A 25-per-cent tariff on most imports from Canada is in effect.
• A 10-per-cent tariff on Canadian energy: also under way.
• An additional 25-per-cent tariff on aluminum and steel is slated for this month.
• A reciprocal tax in April that could target GST and the Digital Services Tax – both of which the U.S. views as unfair to its businesses.
• A potential retaliation for Canada’s retaliation.
• These stack.
• That sucks.
• All of the above can turn on a dime.

Whether or not the logic feels lacking, and regardless of whether it’s fair that the largest rupture between Canada and the U.S. is unfolding so soon after the upheaval of COVID and the shock of the Great Recession – no matter how surreal it all seems – this is where we are.

This is how we’re responding

Economists and union leaders are urging Ottawa to implement emergency relief measures for Canadians who lose their jobs and for businesses affected by the trade war. These measures would include expanded employment-insurance benefits, direct support to businesses, and tariff relief for companies unable to source goods outside the U.S.

• The energy sector, already vulnerable, is under even more pressure. Greg Ebel, chief executive of Enbridge Inc., said Canada should declare pipelines in the national interest to bypass regulatory hurdles.
• Energy Minister Jonathan Wilkinson said slapping retaliatory export tariffs on Canadian energy and resources remains an option, though Ottawa first wants to apply pressure on the Trump administration to reconsider its decisions. We wonder if this approach hasn’t proven to be the most effective. (I am “we.”)
• Ontario was one of many provinces to remove U.S. booze from its government-operated alcohol retailer. Premier Doug Ford also said he’s cancelling a $100-million contract with Elon Musk’s Starlink. (Musk has personally lost over $15-billion in one day on several occasions over Tesla’s extended slide.)
• Quebec is threatening to stop exports of electricity to the south.
• Union leaders at General Motors’ Oshawa assembly plant are bracing for a halt in production as U.S. tariffs choke off the supply chain.

You can follow developments throughout they day here.

What we’re up against

While the full economic impact largely depends on the duration of the tariffs, economists are warning that prolonged taxes of this magnitude could be devastating for the Canadian economy.

• Recent economic modelling by the Bank of Canada shows an 8.5-per-cent drop in exports, a nearly 12-per-cent decline in business investment (which is already fuelling a productivity crisis), and a 2-per-cent contraction in consumer spending by 2027.
• The Canadian chapter of the United Steelworkers Union predicts that 30,000 jobs could be lost immediately in Canada, with more than 100,000 jobs at risk overall if the trade war prolongs.
• In a note to clients this week, economists at CIBC estimated that up to 350,000 jobs could be lost if these measures remain in place.

Amid the uncertainty, some business leaders are taking the long view. John Manley, a former deputy prime minister, said Canada needs a new economic strategy that doesn’t rely on the U.S. as a primary trading partner. Former New Brunswick premier Frank McKenna advises keeping the door open for future U.S. relations, noting that geographic reality ensures the U.S. will always be Canada’s neighbour.

Louis Vachon, operating partner at private investment firm J.C. Flowers & Co. and former CEO of National Bank of Canada, said that recession is a price Canadians should be willing to pay to win a trade war.

Simmering in the south

But in the U.S., some executives are less enthused about the idea. A search of earnings-call transcripts and corporate documents using AlphaSense reveals concerns shared this week about the tariffs’ potential to disrupt supply chains and drive up consumer prices. Eric J. Cremers, CEO of PotlatchDeltic Corp., underscored how trade disputes with Canada are nothing new: “This trade dispute with Canada goes back literally 100 years. It’s been going on forever. And with duties reaching 25 to 30 per cent, coupled with potential new tariffs, it’s going to make it very onerous on Canadian producers.”

And at the Windsor-Detroit border, the trade war is more than an abstract policy battle – it’s an everyday reality. Truckers are seeing fewer loads and slower business at gas stations. Some, such as Neil Martinez, view the tariffs as a necessary “hardball” move against big corporations, while others worry they are collateral damage in a broader economic battle.

Dealing with a new United States

Trudeau called the trade war a clear attempt to “collapse the Canadian economy” and firmly rejected any idea of Canada becoming “the 51st state.” (Again: Surreal.) He also criticized the U.S. for cozying up to Russia.

The U.S. is becoming increasingly more protectionist, rethinking trade deals and focusing less on its allies. While some American industries might benefit, economists warn that untangling global supply chains and building manufacturing capacity could take years, if not decades. For Canada, as it is for most western nations, that shift is seismic.

Trump seems to be betting that voters will have the patience to endure rising prices, but only time – perhaps as soon as the 2026 midterms, if not this week – will tell whether the tariffs will pave the way to a golden age or stand exposed as a “dumb idea” that set the economy back, with no pandemic or financial crisis to blame.

Charted

Eggcriculture

We all know the avian flu has driven up the price of eggs worldwide. New research suggests major egg corporations may be using avian flu as a ruse to hike prices, generating record profits while hurting American consumers.

Bookmarked

On our reading (and listening) list

Happy enough? A new Globe podcast examines what we can learn from some of the happiest people in Canada.

We give him a C++: A renowned pioneer of artificial intelligence who came to Canada two decades ago from the U.S. has won the world’s top prize in computer science.

The shipping news: BlackRock strikes a deal to bring ports on both sides of the Panama Canal under American control.

Morning update

Global stocks staged a comeback a day after the global trade war hit investor sentiment. TSX futures pointed higher after Canada’s main stock market suffered its biggest loss of the year yesterday, and Wall Street futures were in positive territory.

Overseas, the pan-European STOXX 600 was up 1.3 per cent in morning trading. Britain’s FTSE 100 rose 0.41 per cent, Germany’s DAX gained 3.27 per cent and France’s CAC 40 1.87 per cent.

In Asia, Japan’s Nikkei closed 0.23 per cent higher, while Hong Kong’s Hang Seng climbed 2.84 per cent.

The Canadian dollar traded at 69.49 U.S. cents.