No matter what one may think of U.S. President Donald Trump’s outrageous idea of making Canada the 51st American state, the alternate idea taking hold in Canada is no less problematic. In reaction, many Canadians are turning to various forms of economic nationalism, ranging from adopting flag-waving “Made in Canada” shopping habits, to government investment strategies that would reshape the entire Canadian economy.

Many Canadians seem to be uplifted by this Trump-induced surge in patriotic actions, from booing the U.S. national anthem at sporting events to advocating for massive expansions of east-west oil and gas pipelines and cutting off energy exports to the Americans.

This rise in economic nationalism is filled with unacknowledged peril. Even seemingly innocent ideas, such as “patriotic shopping,” would lead to higher prices throughout the economy, including for food. After years of obsessing over the lack of competition in this country, consumers are now told to remove competition from the market.

The grander national economic strategies, such as those advocated by former prime minister Stephen Harper, are even more economically dangerous. Commenting on Trump’s 51st state threats, Harper reportedly said that, “If I was still prime minister, I would be prepared to impoverish the country and not be annexed, if that was the option we’re facing.” To which ultra-left nationalist Liberal Catherine McKenna replied: “Good for Stephen Harper. He is 100 per cent right.”

This surge in nationalist thinking, and the implied abandonment of the liberal economic principles of free trade and open internationalism, pose a threat to Canada’s economy that could exceed the threat posed by Trump.

All politicians seem to have jumped aboard the nationalist policy wagon. Conservative Leader Pierre Poilievre, in his “Canada First” speech over the weekend, laid out an unworkable plan, telling the crowd that, “We need to bring home our jobs, investment and companies and break our dependence on the United States. We will unleash a fierce free enterprise economy to bring home control of our economic future from outside forces.”

Poilievre talked of a national “east-west economy,” but not a north-south economy, as if the U.S. and Canada could, and should, be separated. Poilievre echoed Harper: “We will bear any burden and pay any price” to avoid be coming the 51st state.

The leading Liberal contender, Mark Carney, has stopped short of threatening an all-out trade war. But Carney says he is ready to increase federal debt and partner with private capital to remodel the Canadian economy.

Tariff nationalism

The leading nationalist reaction to Trump has been to call for dollar-for-dollar counter-tariffs. Such a move would merely compound the negative impact of Trump’s tariffs on Canada by imposing more new costs on Canadian companies and consumers. University of Toronto economist Joseph Steinberg calculates that a trade war with Trump will hurt Canada more than the United States, and over time the GDP loss to Canada could exceed the damage done during the COVID lockdowns.

Private investment nationalism

Tom Czitron, a former Royal Bank bond fund manager, argued in a recent Globe and Mail commentary that, “Buying and holding Canadian investments based on patriotic emotion is a terrible investment strategy.” In fact, Czitron argued, in today’s uncertain economic conditions, it would be wise for Canadians “to decrease exposure” to Canadian assets. In other words, buying Canadian ketchup triggers patriotic emotions, but holding Canadian stocks for patriotic reasons may trigger investment shocks.

Public investment nationalism

All levels of government are gearing up economic interventionist strategies using government spending. In a weekend CBC interview, Carney outlined how he would increase federal debt. “We are willing to borrow,” he said, “at a time when we absolutely have to build as a country.” Carney’s strategy calls for using “precious taxpayer dollars catalyzing many multiples of private dollars” to fund home-building, new energy infrastructure and “new trade corridors.”

In effect, Carney’s plan would turn more of the economy over to planners and corporate subsidy-seekers while imposing new debt on taxpayers.

Energy nationalism

Leaving aside the nonsensical political plans for Canada to cut off energy shipments to the U.S. — at a severe cost to Canadian energy companies and investors — the steady burbling of calls for new  fossil fuel pipelines to the east and west coasts would involve billions in government funding, on top of existing loans and support. Two leading Canadian energy companies, Enbridge and TC Energy, have already thrown doubts on the outlook for alternatives to exporting energy south.

Last week, TC Energy CEO François Poirier said that — despite Trump — the U.S. is the company’s prime investment focus. “The vast majority of our discretionary capital is going, and we expect that it will continue to go, into the United States,” he said. As for the famed Energy East pipeline from Alberta to New Brunswick, Poirier said the market situation had changed and it would no longer be a viable project.

Military nationalism

Some say Canada, which is dependant on the U.S. for military protection, may have to become militarily self-sufficient. Historian David Bercuson argues Canada must prepare for a future without U.S. military support. “From Arctic defence and security to securing our border with the United States, we must act. That will take a lot of cash and redirecting money from social programs to defence and security,” he wrote in a recent National Post column.

The question must be asked: which could be worse for Canada — becoming more closely aligned with America as “the 51st U.S. state” or going it alone under extreme Canadian economic nationalism?

• Email: tcorcoran@postmedia.com

Financial Post

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