Business Council of Alberta says U.S. trade 'lifeblood' of Canadian economy

Mike Holden, Business Council of Alberta VP Policy & Chief Economist, speaks with Alberta Primetime host Michael Higgins about the economic positions of both Alberta and Canada.

This interview has been edited for clarity and length.

Michael Higgins: How do you see organizations like yours, like the Canada West Foundation, fitting into that post presidential election narrative?

Mike Holden: We're all deeply aware of the fact that this is, by far, the most important trade relationship that Canada has. It affects every province, it affects every part of the country, and we're talking about a trillion dollars worth of two-way trade between Canada and the U.S. every year. That's a staggering number, and it's critically important to our prosperity, to our economy.

In a sense, it's a lifeblood of the Canadian economy, and so there are specific issues and concerns that we have with some of the language that we're hearing out of the United States.

There's some opportunities that we have as well as we approach 2026, where we are scheduled to have this renewal of the USMCA, we want to make sure our voices are heard.

Higgins: So as a consortium of organizations, what kind of direction are you offering to the federal and provincial governments in coming to the table?

Holden: We're focusing on a couple of different things. First of all, there's a series of opportunities that we see with these negotiations, and that includes in areas like rules of origin, opportunities to integrate their North American economies in areas like critical minerals production, in energy and clean energy development, and agriculture and so on.

But at the same time, we need to be mindful of what some of the risks we face are. The United States has with Canada a series of long-standing trade irritants.

These are some perennial things we think about, or we know about from years past, things like supply management and software lumber, but then there's also issues like the digital services tax and some other non-trade related issues that are going to factor into this situation. The U.S. is concerned about Canada's level of defense spending in NATO, and so those that might not be a trade issue specifically, but it's almost certain to come up in the context of these trade negotiations.

Higgins: How does the business community view political calls for a carve out for bilateral trade that would push Mexico out of the picture?

Holden: It's interesting to note that that was floated by Premier Ford and Premier Smith as well, and with what we're hearing out of Ottawa, there's not been any effort to necessarily slam that door shut.

I think that from a logical, sort of a straight-up economic standpoint, there's good reason to be concerned or to think about that as something to consider. Trade between Canada and the U.S. is about a trillion dollars, between Canada and Mexico it's only $50 billion, so it's a tiny fraction. So this is by far our most important trading partner.

We do have some companies and some individuals who do business in Mexico, who have large investments there, who trade there, and those concerns need to be taken into account. But I think it's not surprising that if Canada is in a position where we feel this ultimately, supremely important trade relationship is at risk, that we would concentrate our efforts there.

Higgins: In reviewing the trade dynamics, what would need to be prioritized to ensure there is an improvement from Alberta's standpoint?

Holden: The first improvement is probably a defensive measure, and that is making sure that Alberta and Canada aren't affected by this proposed 10 or 20-per-cent tariff that we hear being talked about in the United States. We don't really know what that's going to be, we don't know what it's going to be on. I don't think Canada is the primary target of that and Alberta is certainly not.

But we don't want to get caught up in the crossfire of this and so I think that the primary goal, really, is just make sure that we get in under the umbrella and try to work with the United States and with Mexico. If we can create a sort of North American integrated economy, where we work on things like regulatory harmonization and rules of origin, and make sure that we can capitalize on our strengths as a region and use that strength to be competitive outside of it.

Higgins: In working with personalities south of the border, what's to be made of the president elect nominating Howard Lutnick for Commerce Secretary, the position likely to be tasked with trade policy, raising and forcing tariffs as well?

Holden: What we know so far isn't a lot. I think what we know is that they're viewing tariffs in a couple of ways. One is as a strategic way to reshore some manufacturing and critical activity in the United States, and the second one, and this is where it affects Canada, is in terms of using it as a negotiating tool. I think that that's something that we're likely to see coming ahead.

We have this USMCA review coming up next year, in anticipation of a hopeful renewal in 2026, and if Canada does get hit by tariffs on certain products or a range of products, we don't really know. I think that is most likely to be used and seen as a negotiating tool in the U.S. to extract concessions or to make progress in areas of frustration for them.

Higgins: Latest numbers from Stats Canada show the national inflation rate jumped back up to two per cent in October. We're feeling it more so here in Alberta, leading the way with a three-per-cent figure. What's to be made of economic pressures in the province right now?

Holden: A single month of data on inflation, or anything else, isn't really something to be too fussed about. We want to take a look on a two-, three- or four-month time horizon to see what’s happening over a longer period of time.

We are generally in a state of slowing economic activity in Canada and in Alberta. The jobs numbers from October were pretty good, actually, but if you look further back over the last six months or so, we are seeing economic activity, especially the labor market, start to decelerate.

I think that a slight spike, or higher than expected inflation, may cause the Bank of Canada to pause future interest rate decreases, or at least maybe have more modest decreases. I don't think it's going to necessarily change the general trajectory of where we're going.