Tension is Growing in the Sandbox

One marvel of human progress is how interconnected global trade has become.  The amount of free trade agreements in Canada provides a staggering glimpse into all the different agreements that exist worldwide.   The prevailing wisdom suggests global trade is a giant sandbox, with everyone having a collective goal of making the sandbox bigger and more efficient.  However, within such a complex and evolving system as global trade – or even an actual sandbox for that matter – there is always someone unhappy with the situation.  There’s always that one kid.

The US just announced import levies on both steel (25%) and aluminum (10%).  While the details haven’t been fully flushed out, Trump has suggested they will be in effect for “a long period of time”.  There hasn’t been any mention if Canada will be exempt, so it’s reasonable to assume it will be a negotiating chip in the ongoing NAFTA discussion.  From a negotiating standpoint, the US has just done something equally as genius as it was sinister.  They can now say to Canada, “listen, we’ll let you be exempt from this new levy, but in exchange we want…”.   Or they can just force it through anyways and let us wonder how we lost the game.

Notwithstanding Canada’s opposition to the levy, the European Union has also stated they will be responding firmly in due course.  China (who is the world’s largest steel and aluminum producer) will likely not take this news lightly either.  Even members of Trump’s party are opposed to these tariffs.

These protectionist measures are not restricted to country-to-country either.  A storm has been brewing between Alberta and British Columbia.  Alberta (and the federal government) are supporting Kinder Morgan’s $7.4 billion proposal to expand the Trans Mountain pipeline to the west coast.  This has been met by new premier John Horgan adamantly refusing to allow it to proceed.  In response, Alberta temporarily boycotted wine from BC.  This was largely a symbolic act as Alberta wants to get its oil to global markets much more than BC wants to get its wine to Alberta.  That particular situation has appeared to de-escalate as the wine ban has lifted and Horgan has agreed to let the courts decide the fate of the project.

If the relations between the two provinces wasn’t frothy enough however, in the recent BC budget, there is a proposal for a levy on out-of-province property owners in Vancouver, Fraser Valley, Victoria, Nanaimo and Kelowna.  While intended to help make housing more affordable, it will place a much larger tax burden on Albertans who own property in those areas.  It is clearly not meant to discriminate against Albertans but it is certainly going to strain the inter-provincial relationship even further.

Notwithstanding the free-trade threats to NAFTA and active opposition to Alberta getting its oil to market, the economy appears well poised to emerge from the recession.  Oil prices are currently hovering around $60 / barrel, which is particularly good news for the provincial finances as it means the deficit is now expected to be $1.4 billion less for 2018.  The deficit is still expected to be $9.1 billion, but we need to think up another analogy before we get to that issue.

We would love to hear your thoughts….how will these issues between Alberta and BC play out?  Does the Trans Mountain pipeline proceed?  What’s the future of NAFTA?




Why is a blog about Edmonton commercial real estate writing about global free trade and inter-provincial (un) cooperation?  Quite simply because we feel the local commercial real estate market is interconnected with these variables.  The lease rates of a distribution facility in Acheson, or the sale price of a manufacturing plant in Nisku, or the price of office space in downtown Edmonton will all ebb and flow alongside these macroeconomic factors.  Whether it’s the price of oil, the differential between Western Canadian Select and West Texas Intermediate or foreign policy, we track it because we believe it can help companies make intelligent real estate decisions.  Also, we can overuse analogies and cliches without worrying about editorial guidelines.  That’s a biggie.


Information contained herein has been obtained from sources deemed reliable but is not warranted to be so.  Nothing contained herein should be construed as real estate or investment advice.  We have been completely wrong with other predictions so don’t rely upon any of our guesses, estimates, predictions or forward looking statements.  See full disclaimer here.

3 thoughts on “Tension is Growing in the Sandbox

  • Well it seems to make sense on a logical level, but perhaps not a political one. The wine ban was meant as a reaction to proposed restrictions by BC that were generally regarded to be unconstitutional. BC over reached and was slapped down. Now that BC has retreated from that, the wine ban has been suspended. However, this issue tends to polarize people and leads people on both extremes tend to act illogically. Some in Alberta want to punish BC for failing to roll over completely and the supposed environmentalists in BC probably should be targeting the users of fossil fuels, not the pipelines. Do they really think that not expanding this pipeline will cause fewer cars to be on the roads of the lower mainland or China? Of course it might upset the Federal governments carefully crafted national climate plan. You have to wonder if the Federal Liberals are thinking is the carbon tax really worth all this grief, many Albertans are.

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