Canada’s economic future isn’t just about what happens at home — it’s about how much we depend on the decisions made south of the border. Professor Walid Hejazi joins the latest episode of Rotman’s Executive Summary to explain why Canada’s reliance on the U.S. leaves businesses vulnerable, what the U.S. midterm elections could mean for our economy...and why we need to build resilience before it's too late.
Canada’s economic future isn’t just about what happens at home — it’s about how much we depend on the decisions made south of the border. Professor Walid Hejazi joins the latest episode of Rotman’s Executive Summary to explain why Canada’s reliance on the U.S. leaves businesses vulnerable, what the U.S. midterm elections could mean for our economy...and why we need to build resilience before it's too late.
Show Notes:
[00:00] Meet Walid Hejazi
[1:52] Why Canada should be paying attention to the midterms
[4:11] How the elections could change the balance of power in Washington
[6:09] U.S. protectionism is bigger than one president
[7:38] Why do Canadian companies struggle to diversify into other markets?
[9:36] What happens when a business is too dependent on the U.S.
[11:50] Canada should stop waiting for American politics to settle down
[12:40] Building resilience through international diversification
[13:27] Why a stronger domestic economy matters, too
[15:14] The U.S. doesn’t have to be our only trading partner
Megan Haynes:
Historically, Canadians haven’t always watched the US mid-term elections all that closely. Certainly, not in the way we watch US presidential cycles. But the upcoming midterms could be hugely consequential for Canadian businesses and policy makers.
Walid Hejazi:
The fact that 75 to 80 per cent of our trade is with the U.S…we should be paying attention.
MH:
That’s Walid Hejazi, a professor of and expert on international trade and productivity. And he’s deeply concerned Canadians aren’t paying enough attention to the upcoming elections. He says a shift in the balance of power down south could have huge implications for policy here in Canada – and he’s very concerned about how dependent Canada has allowed itself to become on the state of U.S. politics. But how did we get to this state? What would a shift in power at the mid-terms even mean? And can Canada create a strategy that would make us more resilient to the chaos down south?Welcome to The Executive Summary. I’m your host, Megan Haynes, editor of Rotman Intelligence.
MH:
It’s no secret that American politics have wreaked havoc on Canada’s way of life over the past decade. When president Donald Trump was re-elected to power in 2024, policymakers, politicians and business leaders faced an uncertain reality. And in the months that followed his assumption of power have been anything but stable. There’s plenty to talk about since Trump took the office in January 2025, but probably the most consequential issue for business leaders has been his erratic and unpredictable use of tariffs — and his desire to cancel the Canada-U.S.-Mexico trade agreement, which, we’ll note, he signed in 2017. Despite tariffs being something Congress is supposed to approve, Trump has found considerable latitude to impose them. None of the usual checks and balances around international trade, it seems, have been particularly effective. But this November, Americans head back to the polls for midterm elections, and the results could change the balance of power in Washington, potentially constraining the Trump administration.
WH:
The one thing that will go away, I believe, is the uncertainty. And so you’ve heard it from many trade associations, many business leaders, because of the uncertainty, business leaders are unable to make decisions, and that’s why we’ve heard over the past year of so many planned investments in Canada moving to the United States. Because all of these companies that are planning to build these multi-billion-dollar plants in Canada to get access to the entire North American economy…if Trump doesn’t renew CUSMA, then many of these companies will say, ‘Why should we invest in Canada? We can just invest in the U.S. because that’s the prize.’ They want access to that huge market.
MH:
This is more than just an abstract problem. Businesses make investment decisions years in advance. A manufacturer thinking about a multibillion-dollar facility in Ontario needs confidence that the goods produced there will continue to have reliable access to the North American market. Without that confidence, the safer decision may be to put the facility directly in the United States. So, if the Democrats take control of Congress and the Senate this November, there’s an assumption that this shift will bring back checks and balances on Trump, resulting in some market stability that favours Canada. But Walid says, that’s not necessarily true. The US has been shifting inwards for a decade. Case in point: After Trump’s first time in office, people assumed President Joe Biden would re-open trade flows.
WH:
When Biden came to power, he became more protectionist. He was just more polite than Trump.
MH:
In other words, the shift is bigger than one President - and potentially bigger than one political party. A change in congressional power could reduce some volatility. But it wouldn’t necessarily restore the two countries’ economic relationship.
WH:
So the big question we want to ask on the economic file in terms of trade: What would happen in Washington if power swung from the Republicans to the Democrats? I’m really not sure, because it may be the case that protectionism is a new part of the American political fabric…I don’t think that will go away.
MH:
The central problem, then, isn’t just that American policy has become less predictable. It is that Canada is always exposed to changes in American policy. The United States is Canada’s largest customer, its closest neighbour and its most deeply integrated economic partner. That relationship has created enormous prosperity. We’ve actually talked about this on the show before – go give “Trading blows,” featuring professor Dimitri Anastakis a listen if you want hear more about the history of Canada-US trade relations. But our integration has also led to complacency. Walid actually gave this warning during the first Trump administration.
WH:
In 2017, I testified before parliamentary and Senate committees on NAFTA, and I asked then—whose fault is it that the prosperity of 10 million Canadians depends upon a decision of one man? And the whole idea was that we really need to develop strategies to help open other markets for Canadian companies. Here we are, almost 10 years later, and nothing has changed, and so many people are just hoping that somehow a new government will come in, and all of these policies from Trump will fade away, and that’s proven to be a failing strategy.
MH:
Canada’s dependence on the US is one part geography, and one part structure. The United States is next door. The two countries share language, time zones, supply chains, cultural traditions and the rule of law. For Canadian companies, entering the American market can feel almost domestic.
WH:
When you go there to do a business deal, the analogy is you start on third base. When you go to Europe or the Middle East or Asia, you’re not even on first base. So one of the frustrations we’ve had with many companies is they’re used to this familiarity, and this shared history and going to the United States and everybody’s talking about baseball or football or basketball. It’s relatively easy. When you go to these other markets, there is a lot more homework to be done. But further to that, it takes time.
MH:
Canadian execs are accustomed to travelling to an American city, meeting a prospective partner and quickly beginning negotiations. But Walid says that other markets may need multiple visits before a deal is even discussed. Because businesses need time to understand different expectations and establish trust.
WH:
I’ve worked closely with several companies in helping their executives do visits in the Middle East and in Asia, and the idea is that we come back after the second or third meeting, and the senior executives are frustrated because they haven’t signed a deal yet. But if you want to penetrate these other markets, it’s not a one-and-done trip. It’s a process.
MH:
And while governments can make that work easier by signing trade agreements and organizing missions… they can’t force Canadian companies to expand internationally. Countries can open doors. Companies still decide whether walking through them makes economic sense.
WH:
What we need to do is, we need to create the conditions in Canada that enable Canadian companies to be more innovative and more productive, so that they’re able to be more successful internationally. But also, when the cost of penetrating these foreign markets go down, the economics become more efficient.
MH:
While Canadian business leaders are likely watching the balance of power in congress – hoping for some stability, Walid says they should be asking a more direct question: how exposed is our business if the rules change?
WH:
There’s one particular company we’re working very closely with in southwestern Ontario, and they exported 80 per cent, of their products to the U.S. And we’re meeting with this company regularly. And now 80% of their products that used to go to U.S. are now subject to the steel and aluminum tariffs. It’s completely crushed that company. And so that company now is trying to change its positioning to focus on other markets that are more open to Canada.
MH:
As Walid sees it, Canadian companies concentrating their export business in the United States may have an easy and profitable time when things are predictable. But when a policy change can suddenly threaten most of a company’s market, that efficiency comes with significant risk. And our pre-Trump complacency has meant that lots of businesses are in a precarious position. Some industries face more exposure than others. Automotive manufacturing, advanced manufacturing, steel, aluminum, energy and natural resources are especially sensitive to tariff changes and the future of continental trade rules.
WH:
Donald Trump keeps saying things like, “We don’t need anything that Canada has." He said it many, many times.
MH:
But Trump doesn’t have this totally right. In retaliation to the trade tariffs, Canada and Canadians have flexed their might where they can. Provinces pulled liquor off the shelves – costing American businesses hundreds of millions of dollars in lost exports. Travel to the US is down to the tune of more than 20 per cent, resulting in a loss of more than 3 billion dollars for American businesses.
WH:
Premier Ford, at one point, threatened to cut off energy exports to the U.S You know, we have a lot that the U.S. needs. The relationship, the bilateral relationship, has been beneficial to both. The question is, what impact would these upcoming midterms have? Probably not very much in the short term, but it may signal where governments are going in the U.S. in terms of their position related to Canada and how aggressive they may or may not be. But cross-border engagement at all levels, is so very important. And of course, business has a really important role to play, to be able to let people in the U.S. understand that, you know, it’s not unilateral in the sense that, you know, the Americans will do something and somehow Canadians are going to just say okay and accept it.
MH:
For almost a decade, Canada has been waiting for American politics to settle down — and waiting for the next administration to restore some of the predictability we once took for granted. But Walid says we can’t build a strategy around that hope. The midterms may bring some moderation. They may even make the U.S. policy environment more predictable in the short term. But Canadian businesses can’t control who Americans elect — and they can’t assume the next administration, regardless of party, will return to the trade policies of the past. What they can control is how dependent they are on the U.S. market.
WH:
So what they really want to think about is this concept of resilience.
MH:
Resilience does not mean withdrawing from the American market.
The United States will almost certainly remain Canada’s most important trading partner. In Walid’s view, resilience means ensuring our southern neighbours aren’t the only realistic option. And it means beginning the difficult work of diversification before a tariff, broken agreement or another political crisis forces the issue.
WH:
I really think companies in Canada need to wake up and understand that they can’t take the US market for granted anymore. It’s not as accessible as being in the past. We don’t know what the future holds, so uncertainty is problematic. They need to invest in developing relationships internationally, and further to that is this whole concept of cultural intelligence, which is a whole other dimension.
MH:
Walid says international expansion is only part of the solution. Canada also needs a stronger domestic economy. He says one problem is the presence of interprovincial trade barriers.
WH:
Some Canadian companies, it’s easier for them to trade with Europe than it is with other Canadian provinces, which is just a remarkable statement. In addition to the 200 billion dollars estimated losses year over year that come with interprovincial trade barriers, it would help Canadian companies be more productive because they could scale within Canada before they go abroad.
MH:
This changes how we might think about Canadian trade resilience. It’s not only about signing more international agreements. It’s also about productivity, and the ability of a growing company to serve customers across Canada. So perhaps then, reducing Canada’s dependence on the United States means an external strategy AND an internal one.
WH:
You have to be pragmatic. You have to be pragmatic because, you know, you might feel good if you go say something and offends Trump, and your voters might like it, but if it results in negative economic effects in Canada, that’s not what we want from our leaders, our business leaders, or our political leaders.
MH:
The most important consequence of the midterms may not be a particular law passed immediately after election day. It may be the message US voters send about the administration’s overall direction. Walid sees two broad possibilities. If dissatisfaction with the administration translates into significant Republican losses, the White House could face stronger institutional constraints. If Republicans gain ground despite that dissatisfaction, the result could be interpreted as an endorsement—and encourage a more aggressive approach. I think the biggest danger for Canada economically and politically is if that doesn’t translate into losses. If the Republicans were to gain during the midterms, that would be effectively an affirmation on the part of the public on net that they approve of what Donald Trump is doing, and I think many of the things that Donald Trump is doing is detrimental to Canada. On the other hand, if that discontent manifests itself in significant Republican losses, then what we’ll see is a moderation. So it’s not as if Donald Trump won’t try to do what he’s doing, but he will be unable to move things through, Congress and the Senate, and I think that would be beneficial to Canada.
MH:
Canada cannot choose the outcome of an American election. It cannot eliminate geography, unwind deeply integrated supply chains or replace the United States as its largest trading partner. But it can decide how much of its future prosperity depends on Washington.
WH:
We’re tied at the hip with the U.S.
It’ll always be our number one trading partner. It doesn’t have to be our only trading partner.
MH:
This has been the Rotman Executive Summary….. Special thanks to Professor Walid Hejazi. Join us next month as we explore how knowledge moves through organizations- and how tools like AI can reshape who gets access to it. If you’re tuning in for the first time, check out some of our earlier episodes. We cover everything from how your workplace reputation shapes your career to the psychology behind more persuasive communication.Make sure you subscribe on Apple Podcasts, Spotify, YouTube or Amazon Music, and consider giving this episode and the series a five-star rating. This episode was written and produced by Meaghan MacSween. It was recorded by Dan Mazzotta and edited by Avery Moore Kloss. Thanks for tuning in.