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Will reworking of NAFTA mean SHAFTA for Canada?


Most times, I guess, balance is inevitable. But that’s a contradiction in terms, which may befit the newly “inauged” president when he takes office on Friday. If we couldn’t predict what he might say yesterday or the day before, the mind boggles as to the potential utterances on his first day in office.

The ceremony, as I understand, will be lacking in the Obama-style, Hollywood-grade glitterati, although I heard they may be showing a 1983 Jane Fonda workout video on a very large screen. I’m not sure if Prime Minister Trudeau will be in attendance as he seems dedicated to his Timbit (Honey I Shrank the Crullers) Saving-Face-For-Selfies tour.

I believe that Mr. Trudeau has more at stake than his face with Mr. Trump – now the leader of the U.S. contingent of NAFTA, which may have to be renamed SHAFTA. One of the trial balloon rumours being floated around is that Trump is considering a border tax, which in thumbnail brevity means that imports into the U.S. will be penalized, yet U.S. exports will not. This will of course have serious implications for the energy sector, as it will make imported crude oil and its derivatives more expensive when consumed or incorporated in U.S. manufactured goods. Conversely, U.S. manufactured goods entering Canada will not be subject to an export tax.

That’s bad enough, but when you compound the problem with a carbon tax now in effect in our major resource and industrial provinces, and a national carbon tax plan on the menu from double-double Trudeau, then things look a tad bleak because taxing carbon is a term and concept that that has been doctored out of the Trump doctrine.

In short, our NAFTA cousins to the south encourage consumer spending to support the economy, while we in the “Great White What Me Worry?” vote-in and pay for politicians to dig deeper economic moats to accomplish the opposite.

I believe that Mr. Trump has made a career out of huffs and bluffs and this may be just another one. The U.S. imports three million barrels a day of crude from this country.

Applying a punitive and hidden tax would only encourage, or even necessitate, the building of pipelines to bypass the U.S., forcing the U.S. to import even more crude from politically unstable regimes contained within OPEC, who are in the midst of cutting back production and increasing prices to the same U.S. consumers Trump is dedicated to protecting.

On the other side of the moon, if this tax is triggered (an appropriate metaphor), then the immediate line of defense would be to tank the Loonie, making our exports more attractive price-wise.

But the other side of the Moon is dark, as a lower Loonie will increase the costs of all imported goods. Crude oil, gasoline and diesel prices are set on world markets in U.S. dollars.

Which all brings us to the fact that driving to the store to buy those now very expensive imported fruits and vegetables from our friends in California will be a painful SHAFTA experience indeed.


Roger McKnight

Roger McKnight

Roger McKnight is the Chief Petroleum Analyst with En-Pro International Inc. Roger has over 25 years experience in the oil industry, and has held senior marketing management positions responsible for national and international accounts. He is the originator of the card lock concept of marketing on-road diesel that is now the predominant purchase method of diesel in Canada. Roger's knowledge of the oil industry in North America, and pricing structures has resulted in his expertise being sought as a commentator by local, national, and international media. Roger is a regular guest on radio and television programs, and he is quoted regularly in newspapers and magazines across Canada.
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