Canada's Wheel of History

“So in the Libyan fable it is told That once an eagle, stricken with a dart, Said, when he saw the fashion of the shaft, ‘With our own feathers, not by others’ hands, Are we now smitten.”

― Aeschylus

 

The merger of the Northwest Company of Montreal (NWC) and the Hudson Bay Company (HBC) in 1821 led to the complete absorption and end of the Montreal based fur trade.  The negotiations in London ultimately pitted the western based partners of the NWC against the eastern based Montreal agents who were apparently unaware the other was negotiating with the HBC.  In the end, the HBC negotiators were able to extract better terms as a result of the lack of unity amongst the NWC shareholders.  The tension between the western based Wintering Partners in the fur resource hinterlands and the capital raising Montreal Agents eventually proved to be the Achilles heel of the NWC. 

As noted by Harold Adams Innis, the NWC, whose operations stretched from east to west along the waterways of the Canadian Shield, was essentially the forerunner of the Canadian federation.  The east-west tensions of the fur trade have also been replicated within Confederation with the western resource-based provinces in particular tugging against capital intensive central provinces of Ontario and Quebec.  While history does not repeat, itself, the similarity of circumstances and economic forces does lead to what can best be termed repetitive patterns of issues. In the case of western Canada, much of the tension is rooted in historical grievance given that unlike Ontario and Quebec, the west did not get control of its natural resources from the federal government until 1930.  Moreover, federal resource and energy policy – in particular the National Energy Program of the early 1980s – was seen as directly counter to the economic and business interests of energy producing western provinces.

Which brings us to the present day and the current desire by some Albertans to separate from Canada.  Despite a federal government that appears quite sympathetic to Alberta’s current energy interests, Alberta is embarking on a referendum to decide whether to hold a referendum on separating from Canada. It appears that Canada will again be consumed with fate of the nation debates, dilemmas and brinksmanship.  And, depending on what happens this fall in Quebec, there is the distinct possibility that the Parti Quebecois will form the government with the prospects of yet another sovereignty referendum in that province.  Needless to say, there will again be a market for assorted Captain Canadas to come to the rescue.  When not railing against Ottawa, there is nothing Canada’s Premiers like better than embarking on heroic cross Canada tours professing their love for the country.   After all, what better way to divert constituents from their provincial problems than by their dashing Premier helping to save the country.

Canada has always been one of the most fortunate and blessed of countries possessing abundant resources, oceans on three sides to shield us from adversaries and despite recent frictions, a largely benign southern neighbour that served as an economic partner and yet was generally oblivious of our presence.  Canada developed a high material standard of living and by the measures of a dangerous world, a rather open and unique approach to international relations that allowed us to underspend on national security while moralizing and lecturing others without worry as to the consequences. We became a nation of happy Hobbits, dancing away the long summer days and celebrating our good fortune while ignoring the dark Mordorian clouds swirling about.

Taking Canada’s blessed situation for granted afforded us the luxury of consuming ourselves with questions of national existence.  It also created situations that by world standards, were somewhat comedic.  After all, what other country could have pulled off the self-absorbed 1990s drama of having a separatist as the Leader of Her Majesty’s Loyal Opposition?  On the one hand, that Canada could undergo such tensions and stresses and remain a bastion of civil order and discourse, is an achievement in itself.  On the other hand, how many times can a country continually come to the brink and then retreat?

It is now Alberta’s moment in the sovereignty sun and its Premier in typically Canadian fashion has decided that it will be a referendum if necessary but not necessarily a referendum.    The Premier of Alberta is not a separatist and notwithstanding legitimate concerns regarding equalization, resource management and energy policy, neither are the vast majority of Alberta’s people. However, the Alberta Premier is a politician and is forced to balance diverse interests and constituencies with a referendum stand that in the end will likely satisfy no one.  However, wielding the separatism spectre might be a convenient cudgel in making sure Alberta’s energy sector is in no way compromised in the upcoming CUSMA negotiations and that the federal government does not retreat from its advocacy for new pipelines.  It is however a dangerous game.  When you light a fire, you do not always get a controlled burn.

Of course, there are some Albertans who would be happy to leave the most successful federation in modern history for a future as a landlocked country joining the ranks of Kyrgyzstan, Ethiopia and Uzbekistan. To be fair, these same Albertans probably see their future more as a unitary energy powered Switzerland or Austria.  Interestingly enough, these very successful countries are actually federations rather than unitary states and also not dependent on boom bust energy products for twenty percent of GDP and government revenues, as well as seventy percent of exports.  While Alberta has the highest per capita GDP in Canada and is riding a wave of prosperity, it risks creating investment uncertainty for itself and the rest of the country.  As economist Trevor Tombe has noted, a separate Alberta would be a poorer Alberta.  It is likely not a coincidence that never-ending threats of separation and referendums in Quebec until the 1990s were correlated with the stagnation of Montreal’s economy and the growth of Toronto’s.

Yet here we are.  This new wave of national torsion will come at a time not only of growing international political and economic uncertainty, but in the midst of what will likely be a most acrimonious and hardball renegotiation of our trading relationship with the United States.  Needless to say, Canada is the most self-indulgent of countries if it believes that internal divisions will not affect its role in the world and will not be taken advantage of by adversaries.  In the end, if we are unable to make our way in the world via improved trade arrangements and investment because of continued unfortunate distractions generating political and economic uncertainty, we will have no one but ourselves to blame.

 

 

 

 

Growth, Assessments and Municipal Taxation in the Northern Ontario Big Five

The economic narrative in northern Ontario has evolved in recent years.  From lamentations of stagnation and decline, the north is now talking about growth and development with visible construction booms in many of its major centers.  While the growth rates of population and the economy are not on par with what has occurred recently in southern Ontario, they are nevertheless a change from what was.  And this growth has also translated into growth in taxable assessment even despite assessment values being at 2016 levels. The municipal tax base has been growing.

It has been a decade of change for the five major northern Ontario cities, and an examination of growth over the 2015 to 2025 period using an assortment of sources (BMA Municipal Studies, Financial Information Return and Statistics Canada) allows us to piece together the dimensions of the changes.  Figure 1 plots population growth in the five cities with the most growth in Greater Sudbury at 11 percent, followed by North Bay at 10 percent, then Thunder Bay at 8 percent and the Sault and Timmins at nearly 5 percent each.  However, it should be noted that Ontario as a whole over the same period grew by 18 percent so northern Ontario’s population as a share of the province most certainly still declined over this period.

 

 

Figure 2 plots the growth in average household income growth over the 2015 to 2025 period.  For northern Ontario cities, growth rates during this period ranged from a high of 33 percent for Greater Sudbury to a low of 25 percent for North Bay.  Thunder Bay came in at 29 percent, the Sault and Timmins at 26 percent. Note that for Ontario’s 35 largest cities, the average household income growth during this period was somewhat better at 34 percent.  

 

 

Population and economic growth must inevitably result in a growing municipal tax base and Figure 3 looks at the growth in the per capita taxable unweighted assessment in these cities.  It is done in per capita terms (provided in the BMA Reports) because total assessments do not adjust for population and per person comparisons allow for this.  Unweighted rather than weighted assessment is used as actual current value assessment of properties are a better raw economic measure of the total assessment base. 

 

 

The growth in per capita unweighted tax assessment over the 2015 to 2025 period ranged from a low of 11 percent in Greater Sudbury to a high of 30 percent in Thunder Bay with Sault Ste Marie at 27 percent, Timmins at 19 percent and North Bay at 11 percent.  Per capita assessment value in Ontario’s 35 major cities grew an average of 21 percent over the same period which means that Thunder Bay and the Sault actually grew their per capita municipal tax bases faster. 

This is a remarkable achievement and in the case of Thunder Bay raises the question of the target property tax base growth target in its Smart Growth Action Plan. The property tax base growth target is set at 3 percent in the plan.  However, over the 2015 to 2025 period, per capita taxable assessment grew 30 percent (which averages to 3 percent annually) but given that population grew 8 percent during this period, it means total unweighted assessment grew 38 percent or 3.8 percent annually.  In other words, the plan was a success before it was even started.

Also of interest is how increases in the per capita tax levy compare to increases in the per capita tax assessment base.  In theory, a growing property tax base should afford the opportunity for relatively lower growth in future property tax rates.  Figure 4 plots for each city the growth rate of per capita taxable assessments alongside the per capita tax levy (Net municipal levy per capita from BMA Reports) and the evidence suggests all five cities are in a municipal property tax regime whereby per capita property taxes are rising faster than the per capita assessment base thereby outstripping the growth in assessments. 

 

 

Greater Sudbury seems to have the largest gap with its per capita tax levy growing 51 percent whereas the per capita assessment grew 11 percent – more than four times the resource base per capita.  Next is North Bay where the gap is 28 percentage points.  For the Sault, the gap is 18 percentage points while for Timmins it is 13 points.  Meanwhile, the smallest gap is Thunder Bay which had its per capita assessment grow 30 percent and the per capita tax levy grow 35 percent.

Where does this bring us?  Since 2015, the major cities of northern Ontario have grown substantially in terms of income, population and taxable assessment.  This growth has yielded additional taxable resources to municipal government in terms of expanded assessment bases.  However, despite an expanding tax base, the property taxes paid per capita have grown faster than the growth in the tax base.  Taxes growing faster than the resource base suggest a rising tax burden relative to the ability to pay.  Despite economic growth and rising taxable assessment bases, major municipalities in northern Ontario are raising taxes faster than the resource base. 

One could blame this on the need to compensate for lower growth in provincial grant funding.  One could blame it on rising costs of service delivery in the post pandemic era. Or it could be blamed on municipalities expanding spending oblivious to the rising burden being placed on ratepayers.  When it comes to municipal finances in Ontario’s north, there may not necessarily be a revenue problem but an expenditure problem.  Going into an election year, it is a situation that could use some explanation.

 

The Fork in the Road

  

“Two roads diverged in a wood, and I—

I took the one less traveled by,

And that has made all the difference.”

Robert Frost

 

As our glacial spring morphs into summer like weather, we are also approaching a crossroads of sorts, a fork in the road if you wish. Over the last year, Canada’s government has been navigating a somewhat delicate road between its vital economic relationships with a volatile and more aggressive United States and attempts to diversify our trade and security relationships with like minded middle powers.  At some point, most likely this summer, Canada will need to make some decisions that will require commitments. Moreover, despite the attractions of poetry, automatically taking the road less travelled may not necessarily be the best option as it could make a difference not compatible with our best long term economic interests. Yet, the more travelled road comes with its own challenges.

We are poised at the junction of two roads.  First, there is the continuation our North American trade zone as currently embodied in the Canada-US-Mexico (CUSMA) trade arrangement with new emphasis on our trade with Mexico.  This arrangement has been under siege of late with higher tariffs levied on our auto production, steel, aluminum and forest products.  Yet about 90 percent of our exports still flow tariff free into the United States and our economy has been surprisingly resilient over the last year. This economic arrangement is the result of over a half century of North American economic integration and has benefitted Canadian energy producers, manufacturers and business in general.  Despite the pronouncements of President Trump, it has also been of great benefit to the United States in terms of providing a market for its manufacturers, raw materials for its industries, and a secure fossil fuel energy source that is sold to them at a discount of between $10 and $20 a barrel known as the WCS-WTI differential. Indeed, Canada accounts for about half of the crude oil imported by the United States but it then re-exports some of it at the world price yielding a windfall to the US of nearly $20 billion annually.

The other approach is what can best be described as a New National Policy driven by the change and disruption in the US led world economic and security order.  Essentially, in this approach, Canada will pursue trade and export opportunities with Europe and Asia for its goods and resources to build an east-west flow to complement the north south flows of CUSMA.  This will be accompanied by investment in defence production and security arrangements with like-minded partners in Asia and Europe.  In essence, Canada and its Arctic become a Zone of Transit for these east-west global flows.  To some extent, the marathon trade and marketing trips undertaken by the Prime Minister to bring this about have been bearing some fruit.  For example, our investment drought has taken a turn for the better with foreign direct investment in Canada hitting a $93 billion high. However, nearly half of that has come from mergers and acquisitions rather than the financing of new productive activity. While such a successful metric may befit the efforts of an investment banker Prime Minister, it remains that investment in productive capital rather than asset ownership rearrangement is what is needed to improve Canada’s poor real per capita GDP growth performance.

Of course, which road we will take is uncertain.  On the one hand, Canada still relies on the United States for nearly three quarters of its export market and even without CUSMA, the fact is that the United States is a natural trade partner given we share the continent with them and the north south physiography of North America favours trade with the United States.  As well, despite our pronounced flirtation with the EU and even hints of membership, realistically, that will require a level of political and regulatory integration of social and economic policies that will be blocked first and foremost by Canada’s provinces who after 150 years of Confederation have yet to address inter provincial trade barriers.  At best what we are looking at is perhaps an  “Associate EU Membership” that will boost trade, investment and defence but even there the reality remains that all the members of the EU have yet to approve full implementation of the Canada-EU free trade agreement reached in 2017.

Prime Minister Carney is of course aware of these challenges which is why it appears he is hedging his bets.  On the one hand, he travels the globe making deals and dangling the prospect of Canadian military purchases of Korean submarines and Swedish fighter jets while maintaining that Canada must seek non-US trade partners.  On the other, he remains open to deeper integration with the United States in some sectors with the likelihood that current arrangements in energy and auto manufacturing are what he wishes to continue.  Of course, there was a time when some type of deeper common market arrangement with the United States with common external trade policies might have been the next step to deeper North American integration, but the actions and antics of the Trump administration have nixed that path with the Canadian public for the next fifty years. The point worth considering is that despite greater integration and a larger effective market, over the last few decades, our productivity has declined rather than grown with such advantageous access to the US market.

Ultimately, what Prime minister Carney seems to be signalling is that at this fork in the road, Canada will be travelling down both roads at once.  It will pursue greater integration with the United States, if necessary, along the lines of the existing relationships in energy, steel and auto manufacturing but it will likely not expand or create new ones in either those areas or even other areas.  At the same time, Canada will seek to expand trade with Europe and Asia especially with regards to energy and resource developments though even here, to put our money where our mouth is, we will need to build new pipeline and transport capacity.  Moreover, we will need to offer some tangible evidence we are serious about diversifying away from the United States such as buying Swedish fighter jets or Korean or German submarines.  Needless to say, the Americans will likely not take kindly to such impertinence given that their approach to trade with Canada seems to be “what is ours is ours and what is yours is negotiable”. How dare we spurn their wares.

Still, here we are and by summer’s end we are likely to get some answers as to whether or not Prime Minister Carney’s strategy is working. Stay tuned.

 

 

Explaining Canadian Gas Prices

  

Since the start of the U.S.- Iran war and the blocking of the Strait of Hormuz, gasoline and fuel prices around the world have soared.  As of yesterday, the daily national average gasoline price in Canada according to CAA was 184.8 cents per litre though of course it varies across the country.  For example, in Thunder Bay this weekend, it hit 203 cents per litre.  Reasons for variation in Canadian pump prices at least according to the CAA include seasonal changes, weather conditions, increased demand, geopolitical conflict, status of oil and gas reserves, refining capacity, and the value of the US dollar given crude prices are in USD.

Of course, despite having substantial supplies of domestic oil, in the end, Canada’s gasoline prices at the pumps are tied to the international price of oil and so what better comparison is there than looking at Canadian gasoline pump prices relative to the international price of a barrel of oil as measured the price of West Texas Intermediate Crude (WTI). For the period January 1990 to April 2026, Figure 1 plots the monthly 18 city average of Canadian self-serve unleaded regular gasoline prices in cents per litre calculated from Statistics Canada (Table: 18-10-0001-01 (formerly CANSIM 326-0009)) alongside the monthly price in USD of Cushing, OK WTI Spot Price FOB taken from the U.S. Energy Information Administration.

 

 

The two series certainly seem to move together.  However, simply eyeballing the movement does not really tell us how sensitive the Canadian price at the pump is to the international price of crude.  For that, linear regression is a better tool.  I took the log of the two series and then ran a very simple linear regression of Canadian gasoline prices on the WTI price.  For the period January 1990 to April 2026, there was an r-squared of 0.86 and a coefficient on the price of WTI of 0.54.  What this can be interpreted as given it was a log-log regression is that since 1990, a 1 percent increase in the price of a barrel of WTI in USD results in a 0.54 percent increase in the average 18 city price of Canadian regular unleaded gasoline at the pumps. 

Has this been a stable relationship over time?  Well, the data was broken up into two approximately equal time periods – January 1990 to December 2007 and January 2008 to April 2026 – and two more regressions were run.  The results were interesting as they suggest that the price of gasoline in Canada over time has become less sensitive to the international price of crude.  Moreover, the two periods separately are less sensitive to the price of WTI than when combined if one looks at the coefficients on WTI. For the pre 2008 period, the r-squared was 0.91 and the coefficient on WTI was 0.44 whereas for the post 2008 period the r-squared was 0.35 and the coefficient on WTI was 0.33.   

Essentially, the results seem to suggest that over time the price of Canadian gasoline at the pumps seems to have become less sensitive to fluctuations in the price of WTI with variations in the price of WTI explaining over 90 percent of the variation before 2008 and barely one third since.  What other factors might explain trends in Canadian gasoline prices?  Well, there is the list of variables provided by the CAA, alongside which one could perhaps also add any changes in fuel taxation by the federal and provincial governments over this period as well as the degree of competition in the Canadian retail gasoline market. Naturally, a fuller and more detailed analysis with more control of assorted confounding factors would be quite interesting. 

Do Thunder Bay Councillors Deserve a Raise?

  

At the April 21^stcouncil meeting, Thunder Bay City Council voted itself a substantial set of pay increases that will take effect over time bringing the mayor’s salary as well as those of the councillors to $173,859 and $62,298 to align with current “market” medians of $139,618 and $50,689 over the next eight years.  What of course has caught a lot of attention is the annual increases of up to 9 percent annually that will approximately double councillor remuneration. Naturally the comments and the poll results on TBnewswatch.com overwhelmingly disapprove.

For the record, I think that members of city council do require the pay increases though the term “market median” is a bit disingenuous given that municipal service as a councillor is not a labour market in which councillors shop their wares across a geographic distribution of municipalities. While some might think that this type of community service should be completely selfless at low amounts of compensation, it remains that the compensation is necessary because although the community service is an honour and therefore does not require compensation, the salary is for all the other things that come with the position including constant scrutiny by the public and  the substantial amount of abuse it entails.  If you think about it, the current compensation of a municipal councillor in Thunder Bay is barely at the level of full-time minimum wage work (assuming five eight hour days a week at 50 weeks with two weeks’ vacation) which means it is unlikely to appeal to a broader range of talent. You do get what you pay for.

Still, what has been proposed is not without criticism.  In my view, it is not what was done, or the amount of the compensation per se, but how it was done.  Raising councillor salaries is not just a Thunder Bay thing.  Indeed, many of the “comparator” communities used to justify the increase are also raising or planning to raise their compensation next year including Barrie, Chatham-Kent, and Kingston. Also interesting is Cambridge which in its review of salaries concluded that the mayor was overpaid while councillors were underpaid. However, most interesting is the way Chatham-Kent is implementing its pay increases alongside a restructuring and shrinking of its municipal council from 17 to 14 councillors.  Thunder Bay considered but, in the end, did not reduce the number of councillors going with the status quo, but has gone ahead with pay increase anyway.  The pay increase would have been a lot more politically palatable if it had been accompanied by structural reform.

The other aspect was the choice of comparators.  In the past, when comparing things like property taxes, municipal expenditures, or debt levels across municipalities, some of the feedback received has involved criticism that what I am doing is comparing “apples” with “oranges” and that there are substantial differences and nuances across municipalities and how they function that require highlighting when presenting comparisons as every city is unique. It would appear, however that when it comes to salary comparisons resulting in a pay increase, there are no such qualms at the local municipal level.

The new plan sees council salaries pegged to the median pay of eight comparator municipalities: Barrie, Cambridge, Chatham-Kent, Greater Sudbury, Guelph, Kingston, Sault Ste. Marie, and the County of Simcoe.  These were chosen by a consulting company, and the same communities have been used by this company to do other salary comparisons for other municipalities.  In the case of Thunder Bay - a single-tier urban municipality - it is being compared to Chatham-Kent,  which is a single-tier semi-rural municipality, Greater Sudbury, which is a regional municipality, and the County of Simcoe – which is a rather odd fish in that it has a population of nearly 400,000 and includes Barrie and Orillia as separate single tier municipalities. Even more odd is its governance, no doubt an artefact of history,  with a council of 37 members including a warden rather than a mayor, deputy mayors and councillors.  It looks like a regional type municipality to me. Personally, I would have left these three out and included St. Catherines, Burlington, and perhaps Peterborough but I digress.

Using the comparators provided, it is useful to illustrate these comparators with Thunder Bay on several indicators though I am exercising my prerogative to not use Simcoe County because it seems to be a real outlier and replace it with Orillia which is in Simcoe County.  Incidentally, the mayor’s salary and councillor salary for Orillia are close to those for Simcoe County so it fits in just fine.  Figure 1 plots my comparators by population size, and they range from a high of 179,197 for Greater Sudbury to a low of 36,904 for Orillia. In terms of population, Thunder Bay (117,000) is below both the median and the average in this group of comparators.  Figure 2 plots the number of councillors (not including the mayor) and here Thunder Bay is not greatly at odds with everyone else being above average but at the median. 

 

 

Figure 3 plots the salaries of mayors, and these range from a high of $152,500 for Guelph to a low of $87,638 for Sault Ste. Marie with Thunder Bay below both the average and the median.  Finally, Figure 4 plots the councillor salaries which range from a high of $56,206 in Cambridge to a low of $28,193 in Sault Ste. Marie with an average of $43,317 and a median of $44,276.  Thunder Bay’s mayor is paid 19 percent below the average while its councillors are paid 23 percent below the average.  It turns out that relatively speaking, councillors in Thunder Bay are more underpaid than the mayor but not by much.

 

 

Having looked at these indicators, one cannot help but conclude that given the comparators, members of Thunder Bay City Council receive remuneration below the average for these comparators.  Given that these averages are moving targets since other municipalities are also raising their compensation, the increases suggested are also not unreasonable.  In the end, based on this year’s total tax levy of 250 million dollars, the salaries of the mayor and council comprise about $500,000 which is about one-fifth of one percent of the total tax levy.  Sure, it’s a bit more with additional benefits and stipends but even with the proposed increases, by 2033 the total will be about $1 million.  With growth, the council share of the tax levy is not going to change much.  This is not unreasonable.

 

What is also reasonable is given the choice of comparators, why not use them to do one more comparison.  If they are good enough to show that our municipal politicians are underpaid, then they are also good enough to compare tax burdens. Figure 5 plots the average property taxes paid for a detached bungalow for these same comparator municipalities.  The taxes paid range from a high of $4,811 for Guelph to a low of $3,707 for Sault Ste. Marie.  Thunder Bay comes in second at $4,615 which is above the average of $4,275 and the median of $4,298.  It is nice to know that we are above average in something.

Ontario Regions, The Trade War and Employment

  

In a recent post in which I dealt with how the trade war had impacted Canada in 2025, I covered several indicators including employment and noted that all in all Canada was not impacted in as dire a way as originally forecast when President Trump began to levy his tariffs. As discussed, Canada saw an employment increase of 134,000 jobs in 2025 notwithstanding that it also shed about 50,000 in manufacturing. This is a national number and the impact of the trade war like all things economic in the Canadian federation can be expected to vary regionally.  Indeed, as a recent report from RBC Economics showed, the average effective tariff rate on exports to the United States is under 4 percent but it is highest in Ontario and Quebec exceeding 6 percent while Newfoundland and Labrador, New Brunswick, Alberta, Saskatchewan and Prince Edward Island with fewer affected industries are at the other end with less than 1% rates.

Ontario is exported oriented towards the United States and manufacturing intensive especially focused on auto parts and production.  Yet, even within Ontario, manufacturing intensity and export orientation varies across the province so one would expect different parts of Ontario to have been hit differently with respect to employment losses.  Figure 1 uses monthly employment level by Ontario economic region to calculate each month’s job loss or gain in 2025 and then tally them up and used to generate percent growth for 2025.  For 2025, Ontario saw 71,500 jobs created which is down from 2024 at 127,600 calculated using the same methodology. Based on employment in December 2024, Ontario saw a 0.9 percent increase in employment in 2025. 

 

The results by economic region show that in 2025, only two of Ontario’s 11 economic regions saw a decline in total employment.  Kingston-Pembroke saw a drop of 3.8 percent in employment while Ottawa saw a 5 percent drop in 2025.  These two economic regions covering Eastern Ontario were likely hit disproportionately not so much by the trade war but by cuts to the federal civil service. The remainder of the province saw percent increases ranging from a high of 6 percent for Northwestern Ontario (6,200 jobs created) to a low of 0.6 percent for Kitchener-Waterloo-Barrie (5,000 jobs created).  The Hamilton-Niagara region saw 1.7 percent growth (13,800 jobs created) while Toronto saw 1.5 percent employment growth (nearly 60,000 jobs).  Given the concentration of steel and auto manufacturing in Hamilton-Niagara and Windsor-Sarnia, manufacturing jobs losses there were obviously counteracted by employment creation in other sectors.

Of course, the real question is whether this trend of employment growth will continue.  For the first quarter of 2026, Ontario has seen its employment decline by 1.6 percent - that is, nearly 130,000 jobs.  Of course, the first quarter often sees employment losses in the aftermath of holiday season spending so a more apt comparison would be to see what the first quarter of 2025 was like.  In 2025, the January to March period saw a 0.3 percent decline – about 21,000 jobs lost. The year is still young, but it appears the first quarter of 2026 has been a much more difficult period than either the first quarter of 2025 or even the first quarter of 2024 which saw employment decline by about 60,000 jobs (a 0.8 percent decline). If this is the case, 2026 may be the year the trade war comes home to fully roost in Ontario.

Applications Growing at Ontario Universities

  

Fall 2026 may see a bumper crop of undergraduates at most Ontario universities given the recent application statistics from the Ontario Universities’ Application Centre. As of April 8, 2026, there were 600,912 applications from Ontario Secondary School Students (OSSS) and 205,044 applications from All Other Applicants (AOA) (a mix of out of province, mature students and international applicants) for a total of 805,956 applications.  Applications from OSSS were up 2.2 percent from last year while AOAs were up 9.1 percent suggesting that some measure of recovery is underway in terms of international students applications.  Of course, these are the number of applications, and one can apply to multiple universities.  If one looks simply at the number of applications, total applicants in the 2025 cycle totalled 159,310 whereas for 2026 the individuals total 168,919 for an increase of 6 percent. The growth in individuals applying is even more pronounced when it comes to AOAs which have grown 12.4 percent as opposed to 2.3 percent for OSSS.

Figure 1 plots the ranked percentage change in undergraduate applications by Ontario Secondary School Students by institution. The largest increases (not shown here due to scaling issues) were for Université de l’Ontario Français (166.7 percent) and Université de Hearst (11.1 percent).  However, there were only a total of 20 applications to Hearst and 88 to l’Ontario Francais. Notwithstanding these two, the fastest growing OSSS applications were for Nipissing (9.9 percent), Western-Huron (8.5 percent), Guelph (8.2 percent) and Lakehead (6.3 percent).  There were also declines in applications with the largest being OCAD (-9.9 percent), Western-Kings (-9.7 percent), Algoma (-8.2 percent) and Waterloo (-3.5 percent).  It should be noted that application increases and declines do not necessarily automatically translate into enrolment changes as with each applicant making three or four applications, what matters is the conversion rate of applications into bums in seats.  As well, even with a decline of 1 percent, a university like U of T should have no problem filling up its ffirst-year entry slots given it has received over 68,000 applications and first year intake is about 17,000 students.

 

Figure 2 plots the ranked percentage change for the All-Other Applicants category and here the largest increases are Hearst, Algoma, Toronto and Carleton, while declines only affected Nipissing (-3.8 percent) and Western King’s (-17.5 percent). Finally, Figure 3 plots the percentage changes in total university undergraduate application statistics. While L’Ontario Francais and Hearst are at the top here, their extremely low application totals effectively move us to the next top performer which is Guelph at 8.6 percent followed by Western-Huron (8.1 percent), Queen’s (7.7 percent), Carleton (7.5 percent) and then Nipissing and Lakehead at 7.5 percent and 7.3 percent respectively.  Declines mark Trent, Windsor, Waterloo, OCAD and Western-Kings.  

 

As noted, while the number of application statistics are important, the conversion to bums in seats is more important and the chief indicator there is whether the application is a first, second or third choice and those statistics do not appear to have been posted yet.   However, what is important is that the growth in applications this year has been quite good despite the challenges.  The total number of applicants is up 6 percent even though the provincial government announced the end of the tuition freeze and a reorientation of the Ontario Student Assistance Program towards loans as opposed to grants. However, the Ontario economy has slowed considerably, and post-secondary attendance tends to rise during tougher economic times.  The ultimate test is not the number of applications, but what actual enrolment will be come September. Still, it looks a lot better than one might have expected.

How is That Trade War Going?

  

It is now well over a year since President Trump took office for the second time and began his tariff war on both Canada and the world.  Indeed, on his first day in office, Trump said that he expected “to put 25 percent tariffs on Canada and Mexico starting on Feb. 1, while declining to immediately flesh out plans for taxing Chinese imports.”  On February 1^st, 2025, Trump signed an executive order to impose tariffs on imports from Mexico, Canada and China with a 10 percent on all imports from China and 25 percent on imports from Mexico and Canada starting Feb. 4, 2025 justified by declaring a national emergency over undocumented immigration and drug trafficking.  Indeed, President Trump soon decreed that all the world should be taxed via tariffs with some unlikely targets.

Steel and aluminum tariffs were hiked on February 10^th and by March both Canada and Mexico retaliated with tariff measures of their own.  In the aftermath, there have been retreats and some moderation of tariffs with Canadian steel, autos and lumber remaining hit rather hard but overall the impacts on the Canadian economy have not been as dire as expected largely because 90 percent of Canadian trade with the United States remained tariff free under CUSMA. Indeed, some of the estimates of Canada’s economy shrinking were as high as 5.6 percent which did not come to pass in 2025.

So, one year down the road, how is the trade war affecting Canada and the United States?  This can be done via a comparison of some basic indicators with the indicators using data from both Statistics Canada and FRED. The obvious place to start is a look at how Canada’s merchandise trade has fared. Figure 1 plots the percentage change in Canadian merchandise trade with the United States and the World between 2024 and 2025.  With nearly three quarters of Canadian export trade occurring with the United States going into the trade war, it is not surprising that total Canadian merchandise exports are down but only by about one tenth of one percent. Meanwhile our total merchandise imports are up by 2.8 percent in 2025.  However, our exports to the United States are down 5.1 percent while our imports from the United States are also down 4.1 percent. What is more interesting is what has happened to the remainder of our trade – exports to the rest of the world are up 15.8 percent while imports are up 9.6 percent.  This suggests that 2025 did indeed see a measure of trade diversification away from the United States and towards the rest of the World.

 

However, there is still a way to go in terms of shifting trade away from the United States as Figures 2 and 3 illustrate.  Figure 2 looks at the distribution of Canadian merchandise exports while Figure 3 plots the distribution of merchandise imports.  The share of Canadian goods going to the United States has indeed declined going from nearly 80 percent in early 2025 to 69 percent by February of 2026.  Meanwhile, the share going to the rest of the World rose from 22 percent in January 2025 to nearly 32 percent by February 2026.  It remains to be seen if this performance merely reflects the picking of low hanging fruit and will level off or the trend will continue.  Meanwhile, the performance of imports was somewhat more abrupt.  Whereas prior to the trade war, there was an approximately 50/50 split between imports from the United States and the rest of the world, there was a sudden shift by March of 2025 with the US share dropping to 46 percent by February 2026 and the rest of the World climbing up to 54 percent. However, the gap after this sudden shift has remained relatively constant.

 

 

The Trump tariffs were sold to the American public as necessary to create jobs and particularly retain manufacturing jobs. Figure 4 looks at the percent change in total employment and manufacturing employment between January 2025 and January 2026.  During this period, Canada saw an increase in employment of 134,300 jobs – an increase in employment of 0.6 percent - though it shed 50,500 manufacturing jobs for a decrease in that sector of 2.6 percent.  Meanwhile, the United States saw an increase in total employment of 324,000 jobs or 0.2 percent and a 0.7 percent decline in manufacturing employment totalling 91,000 jobs.  For an economy ten times the size of the United States, one would have expected its total employment increase all things given to be about ten times that of Canada, but it is barely three-fold.  Moreover, its manufacturing sector has shed nearly twice the total number of jobs that Canada did though its percentage decline is substantially less.

 

When one looks at the unemployment rate between the two countries as shown in Figure 5, the traditional gap between US and Canadian unemployment rates continues but the Canadian unemployment rate essentially trended flat in 2025 starting at 6.7 percent in January 2025 and was still at 6.7 percent in February of 2026. Meanwhile over the same period, the Us unemployment rate rose from 4 percent to 4.3 percent.  Both countries have seen their unemployment rates decline from highs in mid 2025.

 

How about economic growth as measured by real GDP?  Well, the most interesting result displayed here in Figure 6 is that Canada saw its real GDP rise in 2025 rather than decline sharply as many had forecast displaying an unforeseen resilience.  Nevertheless, in 2025, Canada’s quarterly real GDP growth averaged 0.8 percent while that of the United States averaged 2 percent. Still, 0.8 percent growth is much better than a 5.6 percent decline. And as for the United States, it grew more slowly in 2025 than it did in either 2023 or 2024.

 

The reasons for Canada’s economy remaining as resilient are fourfold.  First, there has been a plethora of deficit spending at the provincial and federal government levels as well as efforts to prioritize government spending on Canadian producers. Second, 90 percent of Canadian trade with the United States remains tariff free under CUSMA and this will likely continue even after the deal is reviewed and re-negotiated given the United States is more dependent on trade with Canada and Mexico than the current federal administration is willing to publicly admit. Third, Canadian firms and business exporters are busily looking for new customers outside the United States while they are also looking for other import clients.  Fourth, Canadians themselves have responded by either shopping Canadian or looking for imported goods from elsewhere in their daily purchases and by making more of an effort to either spend their travel dollars domestically or anywhere but the United States.

The travel data is quite intriguing and presented in Figure 7 and 8. When monthly vehicles entering Canada are examined, Canadian vehicles re-entering Canada from the United States have shown a noticeable declining trend while Americans entering Canada are trending flat. Yet, in 2024, 8.4 million American crossed into Canada whereas in 2025 the total was 8.1 million for a decline of 3.7 percent.  As for Canadians, they continue to visit the United States at a much higher rate than Americans visit Canada – as they always have – but in 2024 there were 19.3 million vehicle re-entries and in 2025 there were 16.3 million – a decline of about 15.6 percent.  Needless to say, the impact on American border communities from the decline in Canadian shoppers and travellers has had a multi-billion dollar negative effect.

 

 

Figure 8 looks at air travel and here the numbers also show a shift in Canadian travel both by Canadians as well as the rest of the world with respect to Canada.  In 2025, Canadians returning to Canada by air from the United States was down nearly 14 percent while Canadians returning by air to Canada from the rest of the World was up nearly 17 percent.  Meanwhile, Americans entering Canada by air in 2025 was up nearly 6 percent while entry by non-Americans was up nearly 10 percent.  Between more Canadians staying home and more American and other international visitors coming to Canada, the Canadian tourism and hospitality industry has had a banner year with benefits to the economy and employment.

So, where does this leave us?  After one year of the Canada-US trade dispute, the sky has not fallen but there are noticeable effects.  Both countries are worse off in that their economic and employment growth could be better.  More to the point, President's Trump's claims that he is making America great again are falling somewhat short.  And while Canada has taken some steps to diversify its trade and business activities away from the United States, it stands that Canada is still heavily reliant on the US economy.  Still, it is remarkable that the share of Canadian merchandise exports going to the United States has fallen below 70 percent which  is the lowest it has been in twenty years. While our exports to the United States are down, so are our imports from them, and given that for many American states their largest trade partner is Canada, this is undoubtedly a contributor to their slower employment and GDP growth. 

What will 2026 bring?  Good question.  CUSMA will likely be retained in some form even if it involves separate bilateral pacts between Canada and Mexico with the United States as the current administration is hinting. However, the efforts at Canadian diversification away from the United States will continue given the increasingly erratic state of world economic and political affairs though the rate of diversification will be slow and incremental.  The United States will remain Canada’s largest trade partner but with our export share with the Americans falling below 70 percent and imports below 50 percent in just one year, it is apparent that Canada can generate new economic opportunities that do not involve the United States.  However, the pace is slow and a good economic trading relationship with the United States remains important. Completely reversing fifty years of economic integration is not going to happen overnight nor should it given the traditional links between two countries that share the North American continent. Still, going forward, things will  be different and new patterns of travel and consumption once established will persist to some extent.

Port Activity Will Help Stabilize Thunder Bay's Economy in 2026

  

Despite the snow on the ground, spring has arrived at the Port of Thunder Bay and that means two things.  First, the arrival of the first vessel with the  MV Kathy McKeil passing the breakwall at on March 26.  Second, there is the annual Opening of Navigation Luncheon which will take place this year on April 8^th at the Italian Cultural Centre in Thunder Bay. These annual events always remind us of the importance of the Port of Thunder Bay, not only in the past when the twin ports of Port Arthur and Fort William were the largest grain port in the world but at present given the revitalization of the port’s activity since 2000 and especially over the last decade.  As of 2024, the Port provided approximately 1,000 direct jobs and an annual economic impact of $370 million.

It bears looking at some of the recent trends in the main cargo that passes through the port. Figure 1 presents a plot of total tonnage through the port since 2000 along with a LOWESS smooth to isolate the trends and there has been a pronounced upward trend since 2010 with an average annual growth rate in total tonnage of 1.3 percent annually since 2000 and 3.3 percent since 2010.  In 2025, total tonnage through the Port of Thunder Bay was 10.8 million tonnes. 

 

Of course, the main commodity remains grain accounting in 2025 for 84 percent of total tonnage shipped. Figure 2 presents grain tonnage through the port since 2000 and again with the trend shows an increase after 2010 with a plateauing from about 2016 to 2020 and then another surge bringing total grain tonnage shipped in 2025 to almost 9 million tonnes. From 2000 to 2025, grain tonnage shipped has grown at an annual rate of 1.9 percent but since 2010 the growth rate averaged 4.1 percent annually. Figures 3 and 4 repeat the plots for potash and dry bulk. Since 2000, potash shipments in tonnes have grown at an annual rate of 9.6 percent but since 2010 the growth rate has been 20 percent. Meanwhile, dry bulk since 2000 grew at an annual rate of 7.1 percent with the period since 2010 seeing annual growth of 5.7 percent.  

 

 

With the renewed emphasis on east-west trade within Canada along with the disruption in world markets and shipping as a result the ongoing wars in the crucial cross-roads of the Middle East, one expects the demand for Canadian resource products as well as shipments through Thunder Bay to increase in 2026.  This will be a boon to the Thunder Bay economy and a counterweight to the forecasts of tepid growth in 2026 from Signal49 research.The Port of Thunder Bay remains an important component of local and regional economic activity.