The resignation of Justin Trudeau leaves Donald Trump with a decision: Which Canadian leader does he pick on now? The answer to that question might become more obvious after the federal election, but it does mean Trump has lost a clear Canadian surrogate through which he can wage his trade war with China. Today, we run through the fallout from Trudeau’s departure and examine how Trump might shape China and the world over the next four years.
In the news
Canadian exports rose and the country’s trade surplus with the U.S. increased ahead of Trump’s inauguration.
Meta says it will end fact-checking and restrictions on free speech, as the company becomes more aligned with the incoming administration.
John Hunkin, a former Canadian Imperial Bank of Commerce chief executive officer who tore down silos in finance and supported several charitable causes, died on Monday at the age of 79.
Happening today
- At home: We’re watching developments in Ottawa as Trump ups his rhetoric on taking over Canada. In the absence of a distinguishable national leader to target on social media, perhaps he has decided to settle for the nation itself.
- Across the border: Initial jobless claims, oil inventories and minutes from the Federal Reserve’s latest meeting are released today.
- In Asia: China reports inflation numbers for November. Timely! See below.
Economy
The fallout from Trudeau’s resignation
Bank CEOs warn of increased peril for Canadian business: The upheaval of the federal government is adding to an already perilous year for the country’s businesses. The chief executives of Canada’s largest lenders said 2025 was already poised to bring global political uncertainty, rising mortgage competition and intensified anti-money laundering requirements, Stefanie Marotta reports. And now, the unravelling of Prime Minister Justin Trudeau’s Liberal Party has been added to the risk watch lists at the banks.
- The country’s businesses face this uncertainty as the outlook for their peers in the United States is starting to brighten, Bank of Montreal CEO Darryl White said.
Uncertainty swirls over capital gains tax changes: The federal and provincial governments were relying on the Liberals’ capital gains tax hike to pad their finances over the next few years, Nojoud Al Mallees reports. But with prorogation putting the required legislative changes in doubt, the policy’s uncertain fate risks deepening government deficits.
- What’s a taxpayer to do? It’s unclear whether the capital gains tax changes will ever become law. But experts say taxpayers aren’t quite off the hook, Erica Alini reports. They have two unappealing options: risk overpaying the tax or face interest and penalties later on.
- Opinion: Assuming the role of the government is to act in the best interest of the people it serves, Ottawa needs to pause the new tax rules, Daryl Ching argues.
A vendor photographed this week in Beijing. It looks like she’s reading Business Brief.AFP/Getty Images
In focus
How Trump will shape China and the world
Watching the first Donald Trump administration from Asia was to experience almost constant whiplash, says James Griffiths, The Globe and Mail’s Asia correspondent. Griffiths joins us today to talk about the outlook in Asia, and how Trump’s return could rewire global trade.
You used the word ‘whiplash’ to describe Trump’s first presidency. Can you elaborate on that?
First, he threatened North Korea with nuclear destruction, then he sat down with dictator Kim Jong Un for historic peace talks.
On China, Trump vowed sanctions, but was then won over by Beijing’s charm offensive – only to flip-flop again and launch a trade war that reshaped Washington’s approach to one of its largest economic partners and biggest geopolitical rival.
Other countries in the region tussled for influence or even an audience, with much depending on personal relationships with then-leaders: Japan’s Shinzo Abe proved himself an adept Trump whisperer, as did South Korea’s Moon Jae-in, while Australia’s Malcolm Turnbull only won the U.S. President’s lasting enmity.
And we’ve swung from Trump to Joe Biden and now back to Trump. What has changed over the course of those years?
The world found a bit of stability. Washington finally followed through on Barack Obama’s promised pivot to Asia, despite or because of the war in Ukraine, building up the tripartite agreement with South Korea and Japan in particular, while also improving ties with the Philippines and Vietnam. This rebounded to Canada’s benefit, as Ottawa was also pursuing its new Indo-Pacific Strategy and largely followed Washington’s lead when it came to increasing trade and defence ties in the region.
What will a second Trump term will bring?
That’s unclear. The president-elect is entering office with a more aggressively isolationist policy, and his threats of tariffs have unnerved both allies and rivals in Asia, all of whom will be trying to strike a deal to avoid the worst. This could hurt Canada, as Ottawa faces pressure to match Washington on sanctions and other restrictions, while also not squandering burgeoning new markets in Asia.
The tripartite alliance is already shaking following elections in South Korea and Japan, which weakened both ruling parties and in Seoul eventually led to President Yoon Suk Yeol’s moment of insanity in early December, when he tried to seize power militarily, resulting in his impeachment and investigation on charges of insurrection. Showing that Trump’s influence on global affairs goes beyond merely his actions in office, Yoon and his supporters are now attempting to cling to the presidency using the same “Stop the steal” and false claims of election rigging Trump used in 2020.
How will world leaders treat China this year knowing they might run afoul of Trump?
The issue of how to handle China will be front of mind for many countries. Beijing has demonstrated it will again seek to charm Trump to the table with offers of a grand bargain, but it is unclear how much appetite his hawkish foreign policy and trade teams will have for such a deal. Other countries in the region and beyond would likely seek to counterbalance U.S. isolationism by warming up to China, but this could backfire if Trump regards them as allying against the U.S.
China’s influence has also waned somewhat as the country’s economy has failed to recover from the effects of the COVID-19 pandemic, despite multiple stimulus measures and attempted reforms. So far, President Xi Jinping has not shown the ambition markets want him to demonstrate when it comes to fixing long-standing structural issues – not least a housing bubble, high local government debt and a shrinking population – and it is unclear whether he can do so without relaxing the tight grip on power built up in the past decade. The potential shock to the weakened Chinese economy if Trump follows through on some of his threats could be great.
What are some possible outcomes of these shifting dynamics?
Reduced U.S. influence in Asia as a result of an isolationist turn in Washington, and a China more focused on domestic matters than expansionist foreign policy could give middle powers like Indonesia, Vietnam and Australia more influence. And that’s to say nothing of India, now the most populous country in the world with a rapidly growing economy. It also creates room for outside actors like Canada and the European Union to – cautiously, with an eye on Trump – increase engagement as well, with Ottawa in particular having built a solid base in recent years with multiple trade missions across the region (though an election and potential change of government may distract policymakers somewhat).
Charted
In the stock market, big years are common, average years are rare
A couple of years ago, Tim Shufelt writes, Vanguard Group looked at the reliability of market forecasts since the end of 2010. The analysis found that 75 per cent of the time one-year returns were either higher than the most optimistic forecast, or lower than the most pessimistic. Read more here on why Wall Street’s crystal ball is broken.
Bookmarked
On our reading list
In space: NASA is pitching a cheaper and quicker way of getting rocks and soil back from Mars, after seeing the cost of its original plan swell to US$11-billion.
On mushrooms: Canadian companies are developing robotic technology used worldwide to automate the harvesting process.
By the sea: The International Longshoremen’s Association and its employers have resumed talks in the hopes of averting a sequel to October’s massive strikes that shut down ports along the U.S. East and Gulf coasts.
Morning update
Global markets edged lower in cautious trading as investors took in economic data that could signal future moves on interest rates. Wall Street futures and TSX futures reversed course and pointed lower after a media report that president-elect Donald Trump was considering a national economic emergency declaration to allow for new tariff program.
Overseas, the pan-European STOXX 600 was down 0.23 per cent in morning trading. Britain’s FTSE 100 gave back 0.35 per cent, Germany’s DAX fell 0.03 per cent and France’s CAC 40 slid 0.73 per cent.
In Asia, Japan’s Nikkei closed 0.26 per cent lower, while Hong Kong’s Hang Seng fell 0.86 per cent.
The Canadian dollar traded at 69.45 U.S. cents.