I try not to get political—honest! But it’s hard to avoid the elephant in the room, especially when he’s Trumpeting so obnoxiously. 🐘
If the incoming president decides to ignore the USMCA agreement (the free trade agreement that replaced NAFTA)—the one he previously insisted was the best trade agreement ever negotiated and which is crucial for maintaining the stability of our trade relations with the US—and If the United States Congress doesn’t stop him (for the time being, some safeguards remain in place to prevent an authoritarian abuse of power), a 25% tariff against all Canadian goods would certainly be devastating for the Canadian economy and particularly for Alberta’s oil and gas sector.
And, as the oil and gas sector goes, so goes Alberta’s real estate market. But will it actually happen? Please read on.
The United States is our largest trading partner (by a long shot), and energy is our largest export. Canada exports around 4.3 million barrels of oil daily to the US (as of July 2024) using various pipelines and rail.
The Trans Mountain Pipeline is finally open, giving us access to Asian markets, but its capacity (890,000 bpd) is small compared to the total we ship to the USA. In fact, we still ship most of the oil from the TMP to refineries in the northwest states or by tanker to California!
Our dependence on the US market is why Canadian crude (WCS) has always been cheaper than American WTI. It’s a myth that WCS is “lower quality”. It’s different than WTI, which is lighter, but the US refinery infrastructure is well-suited to our heavier oil.
WCS is cheaper mainly due to marketability factors (our inability to access other markets). You simply can’t get top dollar when only one guy is bidding at the auction. And the capacity of the TMP is insufficient to make much of a difference. If we could build more pipelines to either coast and thereby access more markets, the price of WCS would go up!
That’s oil. What about gas?
Virtually ALL of our natural gas exports (84 billion cubic meters in 2023) go to the northwestern states. Why? Because we’re the closest source for them and therefore the cheapest option. But if they now have to pay 25% more? We’re no longer the cheapest option—not even close.
So, what are our alternatives for exporting gas? Well, let’s see. How many LNG export facilities are there across our great land?
Zero. Although the LNG Canada facility will open partially in 2025. This will be the most environmentally efficient LNG plant in the world, by the way.
By harnessing Canadian ingenuity, we could potentially have 20 such facilities in Canada to supply the entire world, including all of Europe. And we could make them more and more environmentally efficient as we increase our expertise over time.
Instead, our federal government has installed roadblocks preventing the development of this valuable natural resource. Apparently, they prefer far less environmentally conscious countries and/or with abysmal human rights records, such as Qatar and Russia, to fulfill the ongoing worldwide demand. It’s asinine. That’s my rant within a rant.
Back to the tariffs. The Americans are simply not going to pay 25% more for everything they buy from us. Why should they? That’s not how the global economy works.
This means demand for Canadian goods, including oil and gas, would fall precipitously, tens of thousands would lose their jobs, and the economy would go into a deep recession.
And, as mentioned, the Calgary real estate market walks hand-in-hand with the oil and gas sector. If the tariffs are implemented, the resulting economic downturn could lead to a significant slowdown in our real estate market.
But the real question is, will he follow through? Trump is well known for shooting from the hip and spewing whatever pops into his head. And he thinks it’s “good business” to threaten and intimidate. It’s worked for him as a ruthless and unscrupulous real estate developer. Never mind that being the president is quite a different job. But you can’t change a leopard’s spots, as the saying goes.
Does anyone think that Trump consulted with economic experts and asked if they thought applying massive tariffs against all three of their largest trading partners would be a good idea?
Of course not! The idea just popped into his head as a way to blame their border troubles on us and Mexico, and out it came. No filters, right? That’s how he operates—some people like that about him. I’m not one of them.
If he had consulted experts, they would have told him it was foolish and would hurt their economy and cause massive inflation, let alone what it does to us.
Nevertheless, I’m confident that he’ll “let us off the hook” at some point because we “bowed down to his demands.”
Perhaps our illustrious PM has already done that, having flown to the castle to grovel at the king’s feet and kiss his ring. Better him than me.
If I were in charge, we’d probably be getting 100% tariffs.
Many people reading this will take the position that it’s our own fault that we don’t have better alternative markets for our resources, and clearly, I agree with that point, as I’ve outlined.
BUT THAT’S NO EXCUSE for being threatened by our historical ally and friend!
Can you imagine any other American president treating us with such contempt? Canadian soldiers fought and died alongside American soldiers in two world wars. Our two countries have shared 150+ years of peace, prosperity, and mutual respect. And now, to be threatened by the incoming president—essentially to destroy our economy—if we don’t jump when he says jump? It’s a betrayal of our shared history and values, and it’s profoundly insulting and infuriating.
If you disagree with any of my ranting, I’m always open to a friendly debate. I value your perspective and believe respectful discussion is crucial to our democratic process.
I appreciate any and all feedback! Thank you.
Ted