US-Canada Border. Also Markets.

April 4, 2017

This is a BBC report about US-Canada trade and transit: Behaviors have consequences, and that is true even among the best of friends. 
It is safe to assert that the US-Canada nation-state relationship is one of the very strongest the US has. The two countries maintain a 3000-mile border and have been allies in nearly every major military conflict that involved the United States. We have a huge trading relationship and a mostly common language. We tolerate fluctuations in our respective currency exchange rates. In general, we have a deeply interlinked set of economic and personal relationships.
Thus this report on the BBC and some anecdotes are enough to give us pause.
My personal anecdote involves my Canadian daughter-in-law, whose father is a retired petroleum engineer living in Calgary. She mentions the rising nervousness in that community about the direction of policy in the US.
I asked my friend David Rosenberg of Gluskin Sheff in Toronto, Canada, if he had any personal observations.
He replied with this:
“Looking at southbound travel flows, US immigration officials are now asking Canadians at the airport what their purpose is and if they are getting paid if it is a business visit…used to be the odd time, now almost 110%. I was in Vancouver a few weeks ago and the manager of the Fairmont said that convention bookings are soaring in the city, much at the expense of California destinations and Seattle because global firms do not want their executives on these junkets from overseas counties to have any entry difficulties.”
Caroline Miller of BCA Research offered this note:
“My mother crosses the land border between Quebec and upstate NY to grocery shop in Plattsburgh every other week with her posse. She says the car lineup at the Lacolle border into NY State is down to a trickle, mid-week, relative to history. People don’t want the hassle so they stay home.”
Under a request for anonymity, a Canadian friend offered this:
“I think it may be due in part to the increased focus on undocumented persons in the US – some may be looking to come to Canada.”
In subsequent exchanges Caroline offered more:
“I am a Trustee on the Board of the school I attended in Montreal as a girl, and we have just followed the School Board cited in this article and temporarily suspended school trips south for fear of any member of a sports team or musical troupe being turned away, as we know has happened in recent weeks – fact. Moreover, I have crossed the land border into VT en route to Boston in recent weeks, and there is no one in line, so cross-border car traffic is way down… This is what he wants, isn’t it???
“As for Canada turning Americans away, no idea… sounds fake to me… but Canadians are certainly choosing to travel less. Should be visible in next year’s stats…”
Fear and concern triggered this from another friend:
“Respectfully prefer not to be quoted (but feel free to relate comments in anonymous way). The issue is a bit politically sensitive – concerned about being placed on some ‘watch list.’”
Anecdotes offer single data points, but hotel bookings are high-frequency data, so we should be able to quickly discern the trend Rosenberg discussed. Trade and commerce trend changes take time to see. Caroline suggests a year before stats begin to clarify.
The issue is plain. If we want more commerce and more exchanges and economic growth? Don’t put barriers and impediments in the way. 
If we make commerce more difficult and more costly or more offensive, we’ll have less commerce, less income, and fewer exchanges. That is true for US-Canada, our strongest nation-state partnership. It is even more true for relationships with nations that share fewer common interests.
I’m worried that the Peter Navarro-driven, anti-trade, protectionist Trump Administration is seeding lots of adverse consequences that will reveal themselves only over a longer time period. Markets will adjust to this adversity and do so quickly once it is visible or estimable, and the US may be the loser. Just ask the grocery store on the NY-Canada border. 
This issue is inter temporal. The initial political rhetoric is dismissed as such in the beginning. We are cynics about our politicians of all parties and persuasions and generally don’t trust them. So rhetoric is taken as just that. But translation of rhetoric to policy is a different item. It starts us on a path that can be difficult to reverse.
As a financial-market professional and an observer of economics and markets, I believe the US’s protectionist stance is fraught with rising risks. Our portfolio adjustments will reflect those risks as we see them unfold. Today, however, we have taken our cash reserve  to about 10%. The rest is fully invested. 
We like the banks and will have a few words about them in a forthcoming missive. The wind in Washington is blowing in favor of them.

We also like biotech. The healthcare legislative fiasco has lifted some of the pressures on those firms. The same is true for healthcare equipment.



The ideas and opinions expressed in this blog are those of the author, and they should not be perceived as investment advice or as any other kind of advice.

The preceding is a commentary by Cumberland Advisors and has been reposted with permission. Cumberland Advisors commentaries are available at

Follow Cumberland Advisors on Twitter at @CumberlandADV.

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