Canada needs “a little less talk and a little more action” as it seeks to eliminate
interprovincial trade barriers
and build new projects to negate the impact
on its economy, he says
general manager.
“I'm worried the air will leak out of this balloon.”
This was discussed at the Global Forum in Toronto on Wednesday. “Are we competitive on tone? Are we competitive on taxes? I know the answer to that question is a resounding no, and it doesn't get talked about enough.”
There has been much talk in recent months that the tariffs should serve as a wake-up call for Canada to take advantage of its strengths, such as its natural resources sector, and become more competitive, but he said the momentum may be on the verge of fading.
White said Canada's tax rates need to be more competitive to keep its economy growing and attract international investors. There are investors who are more interested in Canada because of all the recent negotiations, but “we're kidding ourselves if we think these people are going to step up,” he said.
“I can be high-elbow and patriotic and all that, but at the end of the day, capital isn't that hard. It will flow to the point of least resistance.”
White said eliminating Canada's domestic trade barriers could “overcome almost any negative impact” Canada might face from a renewed trade agreement with the U.S., which would almost certainly include some form of tariffs.
Most Canadian goods exported to the United States are protected from tariffs imposed under the Canada-US-Mexico Agreement (
) trade agreement, which is expected to be renegotiated next year, and negotiations between the three countries are ongoing.
White said Canada is on the right track when it comes to negotiations with the United States, but said it is important to take “action at home” and do it quickly.
“The stakes are very high, but I think we can handle it,” he said.
White also said that while the Donald Trump administration is committed to its “America First” policy, it is not “America Alone” and that it would be nice for Canada to be in second place.
“Canadians don't like to hear this, but if Canada were second in the world where America comes first… the idea of an advantage in North America is starting to become real,” he said. “Despite the headlines, despite the drama, there is a lot of well-intentioned and probably well-done work going on to take advantage of these inherent advantages that we can use to help each other as two countries.”
BMO beat analysts' expectations in its latest quarter, as did the rest of Canada's largest banks.
U.S. banks' latest quarterly earnings are also beating expectations so far, but White said they are outperforming because they are doing well in “Wall Street businesses” such as capital markets, investment banking and asset management.
“Go from Wall Street to Main Street and it’s not as pretty,” he said. “Loan growth is very slow, which is a signal that demand is slowing; they're starting to see some cracks in the quality of loans. You've heard several US banks talk about the credit quality of their loan book.”
White said earnings headlines are based on averages, so people should be careful when looking at results.
“It’s like keeping your feet in the freezer and your head in the oven; on average you feel good, but it’s damn uncomfortable,” he said. “We are becoming more and more uncomfortable.”
White also said he expects Canada's unemployment rate, currently at 7.1 per cent, to approach eight per cent before falling back below seven. He expects the “adjustment period” to take some time.
He also expects the Bank of Canada to continue cutting interest rates, but considers this factor a “minor piece of the puzzle” when it comes to the economy as a whole.
“It will encourage a little more spending activity, but if you give them a 25 basis point mortgage rate, that's not going to make a difference,” he said.
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