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International trade in 2018: making sense of a ‘tarrifying’ year




CBC News surveyed a dozen Canadian and American researchers, lecturers, lawyers and business advocates to sum up this complicated and often frustrating year in international trade.

Here are a few highlights from what they shared with us.

What was the biggest surprise?

“The fact that Donald Trump carried through with steel and aluminum tariffs,” said Mark Agnew, director of international policy for the Canadian Chamber of Commerce.  “People thought, ‘Surely he’s not going to do this against Canada.'”

They thought wrong.

“That really shocked me,” agreed Debra Steger, a former Canadian trade official now on the University of Ottawa’s law faculty, adding that Trump’s escalating tariff strategy over the last year caused a “ripple effect” of consequences — including retaliatory tariffs from other countries, Canada among them.

“Everything has been driven by the initial tarrifying actions that were deliberately taken by the United States as a cudgel over everyone’s heads to negotiate,” she said.

(Her use of the word ‘tarrifying’ serves double-duty as a pun. Trump’s indiscriminate use of tarrifs is terrifying for those who believe in international trade law.)

The new level of bullying was a surprise, she said. “We had never seen U.S. administrations behave that way before.”

“I thought this government was too pro-business to allow (the tariffs) to stay in place,” said Todd Tucker, a fellow at Washington D.C.’s Roosevelt Institute. “I underestimated the way Republicans rallied around Trump.”

Inu Manak, a Canadian trade researcher who now works at the Cato Institute, said she was caught off-guard by the level of Trump’s hostility toward Canada.

“At first I thought maybe he’s just joking around, and it’s a negotiating tactic,” she said.

But the tariffs persist, even after the revised North American trade agreement was signed.

“It was genuinely shocking, and genuinely negative for the bilateral relationship,” said Meredith Lilly, the Simon Reisman chair at Carleton University’s Norman Paterson School of International Affairs.

What don’t people get?

“I don’t think the average person understood how completely integrated we are with the U.S. economy, and how foolish the idea that we would tell the Americans to bugger off would be,” said Flavio Volpe, president of the Automotive Parts Manufacturer’s Association.

Trump’s presidential powers became a topic of fierce legal debate in 2018. Can he just terminate NAFTA if Congress won’t ratify the revisions he wants?

The U.S. presidency has been given a lot of authority over trade matters over the years, Manak said, but “the fact that this Congress has not pushed back a lot on a lot of stuff he’s done, doesn’t mean they can’t.”

U.S. House Speaker designate Nancy Pelosi and Senate Minority Leader Chuck Schumer met President Trump at the White House earlier this month. The Democratic leaders didn’t shy away from confrontation, and it’s not clear they’ll be willing to work with the administration to ratify the revised NAFTA. (Jonathan Ernst/Reuters)

That’s why the election of a Democratic majority in the House of Representatives in November could be “a little destabilizing,” but good for the democratic process, she said.

“There’s the strong impression that he can just just unilaterally go back to pre-NAFTA tariffs on Canada and Mexico,” Tucker said. “I don’t know any constitutional law professor that thinks that.”

The public and partisan debate over Trump’s powers has generated more “heat than light,” he said, by not properly acknowledging that Congressional authority over tariffs.

Brian Kingston, vice-president for international and fiscal policy with the Business Council of Canada, said he thinks the Canadian public hasn’t properly grasped the role of Congress in trade deals, either.

But the Canadian government gets it, he said, “hence their very comprehensive lobbying and advocacy campaign” — especially important as long as Congressional ratification remains uncertain.

Trade lawyer Mark Warner doesn’t buy the argument that Trump can’t unilaterally terminate a trade treaty and throw everything into chaos.

The Canadian negotiators, Warner said, should have agreed to a deal earlier in the year, before the tariffs landed — even if that meant conceding more.

He said he thinks Ottawa misjudged the dynamics of the NAFTA negotiations from the start.

“The idea that Mexico was joined at the hip with Canada and wouldn’t go out on its own … it just didn’t make a lot of sense,” he said. “Our interests are not completely aligned and it’s something that we have now learned.”

What stories were overblown?

Lilly said she found the NAFTA negotiations were generally overhyped, with a lot of “false drama” coming from the Canadian side before the talks ended with a deal that turned out to be quite predictable.

“Much ado about very little change,” agreed Monica de Bolle, senior fellow at the Peterson Institute for International Economics. “Very anticlimactic.”

Her office did a lot of work trying to anticipate the disruption Trump’s threatened auto tariffs might trigger. But despite the hype, those tariffs haven’t materialized.

At least, not yet. (The U.S. Commerce Department report on whether automotive imports are a “national security” threat is due by February.)

“We were all concerned about ‘carmageddon,'” Volpe said, “but I wonder if the Americans would have pulled that trigger, because the bullet would have gone through both of us.”

The room was a bit tense as the revised North American trade agreement was signed Nov. 30. Outgoing Mexican president Enrique Pena Nieto’s decision to announce a deal with the U.S. before Canada had concluded its negotiations made the final weeks difficult for Prime Minister Justin Trudeau’s government. (Kevin Lamarque/Reuters)

Agnew said the debate over Canada insisting on a cultural exemption also offered more drama than substance.

“In the end it was the dog that didn’t bark, with the retention of the exemption.”

Another new feature in NAFTA 2.0 — article 32.10 on negotiating a trade deal with a “non-market economy” (read: China) — will have “very little impact,” said Carlo Dade, director of the trade and investment centre at the Canada West Foundation.

“I don’t think it’s a total nothing, but it’s certainly not going to take away Canadian sovereignty and Canada’s ability to negotiate with China in the future,” Steger said.

What warranted more discussion?

“If there is a Russian strategy to undermine multilateralism and U.S. leadership of the global economy, it’s really more about economics than it is about defence,” said George Washington University’s Susan Aaronson.

The most competitive Canadian and American exports in the future will be agricultural commodities and services. But for both export sectors to succeed, they need trusted partners in world markets and a strong global consensus on what constitutes appropriate behaviour, Aaronson said.

Trump undermined all this, she said, which hurt Canada’s integrated economy — and left the Trudeau government little choice but to diversify its trade through other deals.

“It’s a good thing Canada’s doing that,” Aaronson said, “but in the long run, it’s a bad thing.” North America, she said, is more competitive when it works together. Plus, the world will miss U.S. leadership on trade — and it might not like what replaces it.

“We haven’t talked enough about what happens to Latin American relations in the middle of the confusion over the China-U.S. relationship,” said de Bolle, an expert on the region. “The region is very complicated right now.”

The new left-leaning, nationalist Mexican administration, for example, has closer ties to China, de Bolle said. The foreign policy of Brazil’s new government, a major economic player, is “crazy to me,” she added. And the Chinese are also securing key oil resources in Venezuela, as that country’s economy continues to implode.

Trade lawyer Cyndee Todgham Cherniak said she thinks businesses are only just beginning to wake up to the consequences of politicians escalating economic sanctions against countries like Iran and Saudi Arabia. The arrest of a Huawei executive in Vancouver, she said, may be only the beginning.

Canada’s new Magnitsky Act — a law allowing Canada to go after the assets of foreign officials implicated in human rights violations — should get more attention, she added, particularly if it’s applied to Saudi Arabia. “It will have a significant effect on companies carrying on business worldwide.”

Long-term consequences?

The effects of what unfolded over the last year may be felt for years to come.

“The hardening American consensus around Chinese trade practices is something that is here to stay,” Warner said, “even if Trump is defeated in 2020.”

“You would have seen Hillary Clinton do some of the same things” on China, said Tucker.

But what the history books will emphasize is Trump’s use of “national security” as an excuse for protecting domestic steel and aluminum industries, Tucker argues. Other countries already have started to follow suit, bringing unprecedented instability to the global trade system Americans once fought to establish.

Chinese President Xi Jinping and U.S. President Donald Trump had a “working dinner” after the G20 leaders summit in Buenos Aires, Argentina earlier this month. They announced a 90-day “truce” in their tariff war while officials attempt to work out a deal to de-escalate the conflict. (Kevin Lamarque/Reuters)

Dade calls Trump’s ongoing tariff war “the nuclear option.”

“The unthinkable has become normalized,” he said.

That puts a lot of pressure on countries like Canada, which are now being forced to pick a side.

“It’s going to affect every trade discussion that we have from now on,” Volpe said. “You’re going to have to know what the American position is before you even attempt a discussion with us.”

The American insistence on a sunset clause for NAFTA (even if it was watered down in the final text) reflects an increasing climate of protectionism in the U.S. that “isn’t a cyclical trend. That’s here to stay,” said Kingston.

“The very negative rhetoric and some of the missteps along the way have created the conditions that we may look back in 20 years and say this fundamentally changed the Canada–U.S. relationship,” Lilly said.

“Down the road we’re going to look back and say, ‘I wish this never happened,'” Manak said. “I’m a little nervous.”


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Real Estate

5 ways to reduce your mortgage amortization




Since the pandemic hit, a lot of Canadians have been affected financially and if you’re on a mortgage, reducing your amortization period can be of great help.

A mortgage amortization period is the amount of time it would take a homeowner to completely pay off their mortgage. The amortization is typically an estimate based on what the interest rate for your current term is. Calculating your amortization is done easily using a loan amortization calculator which shows you the different payment schedules within your amortization period.

 In Canada, if you made a down payment that is less than the recommended 20 per cent of the total cost of your home, then the longest amortization period you’re allowed to have is 25 years. The mortgage amortization period not only affects the length of time it would take to completely repay the loan, but also the amount of interest paid over the lifecycle of the mortgage.

Typically, longer amortization periods involve making smaller monthly payments and having a much higher total interest cost over the duration of the mortgage. While on the other hand, shorter amortization periods entails making larger monthly payments and having lower total interest costs.

It’s the dream of every homeowner to become mortgage-free. A general rule of thumb would be to try and keep your monthly mortgage costs as low as possible—preferably below 30 per cent of your monthly income. Over time, you may become more financially stable by either getting a tax return, a bonus or an additional source of income and want to channel that towards your principal.

There are several ways to keep your monthly mortgage payments low and reduce your amortization. Here are a few ways to achieve that goal:

1. Make a larger down payment

Once you’ve decided to buy a home, always consider putting asides some significant amount of money that would act as a down payment to reduce your monthly mortgage. While the recommended amount to put aside as a down payment is 20 per cent,  if you aren’t in a hurry to purchase the property or are more financial buoyant, you can even pay more.

Essentially, the larger your down payment, the lower your mortgage would be as it means you’re borrowing less money from your lender. However, if you pay at least 20 per cent upfront, there would be no need for you to cover the additional cost of private mortgage insurance which would save you some money.

2. Make bi-weekly payments

Most homeowners make monthly payments which amount to 12 payments every year. But if your bank or lender offers the option of accelerated bi-weekly payment, you will be making an equivalent of one more payment annually. Doing this will further reduce your amortization period by allowing you to pay off your mortgage much faster.

3. Have a fixed renewal payment

It is normal for lenders to offer discounts on interest rate during your amortization period. However, as you continuously renew your mortgage at a lower rate, always keep a fixed repayment sum.

Rather than just making lower payments, you can keep your payments static, since the more money applied to your principal, the faster you can clear your mortgage.

4. Increase your payment amount

Many mortgages give homeowners the option to increase their payment amount at least once a year. Now, this is very ideal for those who have the financial capacity to do so because the extra money would be added to your principal.

Irrespective of how small the increase might be, in the long run, it would make a huge difference. For example, if your monthly mortgage payment is about $2,752 per month. It would be in your best interest to round it up to $2,800 every month. That way, you are much closer to reducing your mortgage amortization period.

5. Leverage on prepayment privileges

The ability for homeowners to make any form of prepayment solely depends on what mortgage features are provided by their lender.

With an open mortgage, you can easily make additional payments at any given time. However, if you have a closed mortgage—which makes up the larger percentage of existing mortgages—you will need to check if you have the option of prepayments which would allow you to make extra lump sum payments.

Additionally, there may also be the option to make extra lump sum payments at the end of your existing mortgage term before its time for renewal.

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Real Estate

Mortgage insurance vs. life insurance: What you need to know




Your home is likely the biggest asset you’ll ever own. So how can you protect it in case something were to happen to you? To start, homeowners have a few options to choose from. You can either:

  • ensure you have mortgage protection with a life insurance policy from an insurance company or
  • get mortgage insurance from a bank or mortgage lender.

Mortgage insurance vs. life insurance: How do they each work?  

The first thing to know is that life insurance can be a great way to make sure you and your family have mortgage protection.

The money from a life insurance policy usually goes right into the hands of your beneficiaries – not the bank or mortgage lender. Your beneficiaries are whoever you choose to receive the benefit or money from your policy after you die.

Life insurance policies, like term life insurance, come with a death benefit. A death benefit is the amount of money given to your beneficiaries after you die. The exact amount they’ll receive depends on the policy you buy.

With term life insurance, you’re covered for a set period, such as 10, 15, 20 or 30 years. The premium – that’s the monthly or annual fee you pay for insurance – is usually low for the first term.

If you die while you’re coved by your life insurance policy, your beneficiaries will receive a tax-free death benefit. They can then use this money to help pay off the mortgage or for any other reason. So not only is your mortgage protected, but your family will also have funds to cover other expenses that they relied on you to pay.

Mortgage insurance works by paying off the outstanding principal balance of your mortgage, up to a certain amount, if you die.

With mortgage insurance, the money goes directly to the bank or lender to pay off the mortgage – and that’s it. There’s no extra money to cover other expenses, and you don’t get to leave any cash behind to your beneficiaries.

What’s the difference between mortgage insurance and life insurance?

The main difference is that mortgage insurance covers only your outstanding mortgage balance. And, that money goes directly to the bank or mortgage lender, not your beneficiary. This means that there’s no cash, payout or benefit given to your beneficiary. 

With life insurance, however, you get mortgage protection and more. Here’s how it works: every life insurance policy provides a tax-free amount of money (the death benefit) to the beneficiary. The payment can cover more than just the mortgage. The beneficiary may then use the money for any purpose. For example, apart from paying off the mortgage, they can also use the funds from the death benefit to cover:

  • any of your remaining debts,
  • the cost of child care,
  • funeral costs,
  • the cost of child care, and
  • any other living expenses. 

But before you decide between life insurance and mortgage insurance, here are some other important differences to keep in mind:

Who gets the money?

With life insurance, the money goes to whomever you name as your beneficiary.

With mortgage insurance, the money goes entirely to the bank.

Can you move your policy?

With life insurance, your policy stays with you even if you transfer your mortgage to another company. There’s no need to re-apply or prove your health is good enough to be insured.

With mortgage insurance, however, your policy doesn’t automatically move with you if you change mortgage providers. If you move your mortgage to another bank, you’ll have to prove that your health is still good.

Which offers more flexibility, life insurance or mortgage insurance?

With life insurance, your beneficiaries have the flexibility to cover the mortgage balance and more after you die. As the policy owner, you can choose how much insurance coverage you want and how long you need it. And, the coverage doesn’t decline unless you want it to.

With mortgage insurance through a bank, you don’t have the flexibility to change your coverage. In this case, you’re only protecting the outstanding balance on your mortgage.

Do you need a medical exam to qualify? 

With a term life insurance policy from Sun Life, you may have to answer some medical questions or take a medical exam before you’re approved for coverage. Once you’re approved, Sun Life won’t ask for any additional medical information later on.

With mortgage insurance, a bank or mortgage lender may ask some medical questions when you apply. However, if you make a claim after you’re approved, your bank may ask for additional medical information.* At that point, they may discover some conditions that disqualify you from receiving payment on a claim.

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Real Estate

5 common mistakes Canadians make with their mortgages




This article was created by MoneyWise. Postmedia and MoneyWise may earn an affiliate commission through links on this page.

Since COVID-19 dragged interest rates to historic lows last year, Canadians have been diving into the real estate market with unprecedented verve.

During a time of extraordinary financial disruption, more than 551,000 properties sold last year — a new annual record, according to the Canadian Real Estate Association. Those sales provided a desperately needed dose of oxygen for the country’s gasping economy.

Given the slew of new mortgages taken out in 2020, there were bound to be slip-ups. So, MoneyWise asked four of the country’s sharpest mortgage minds to share what they feel are the mistakes Canadians most frequently make when securing a home loan.

Mistake 1: Not having your documents ready

One of your mortgage broker’s primary functions is to provide lenders with paperwork confirming your income, assets, source of down payment and overall reliability as a borrower. Without complete and accurate documentation, no reputable lender will be able to process your loan.

But “borrowers often don’t have these documents on hand,” says John Vo of Spicer Vo Mortgages in Halifax, Nova Scotia. “And even when they do provide these documents, they may not be the correct documentation required.”

Some of the most frequent mistakes Vo sees when borrowers send in their paperwork include:

  • Not including a name or other relevant details on key pieces of information.
  • Providing old bank or pay statements instead of those dated within the last 30 days.
  • Sending only a partial document package. If a lender asks for six pages to support your loan, don’t send two. If you’re asked for four months’ worth of bank statements, don’t provide only one.
  • Thinking low-quality or blurry files sent by email or text will be good enough. Lenders need to be able to read what you send them.

If you send your broker an incomplete documents package, the result is inevitable: Your mortgage application will be delayed as long as it takes for you to find the required materials, and your house shopping could be sidetracked for months.

Mistake 2: Blinded by the rate

Ask any mortgage broker and they’ll tell you that the question they’re asked most frequently is: “What’s your lowest rate?”

The interest rate you’ll pay on your mortgage is a massive consideration, so comparing the rates lenders are offering is a good habit once you’ve slipped on your house-hunter hat.

Rates have been on the rise lately given government actions to stimulate the Canadian economy. You may want to lock a low rate now, so you can hold onto it for up to 120 days.

But Chris Kolinski, broker at Saskatoon, Saskatchewan-based iSask Mortgages, says too many borrowers get obsessed with finding the lowest rate and ignore the other aspects of a mortgage that can greatly impact its overall cost.

“I always ask my clients ‘Do you want to get the best rate, or do you want to save the most money?’ because those two things are not always synonymous,” Kolinski says. “That opens a conversation about needs and wants.”

Many of the rock-bottom interest rates on offer from Canadian lenders can be hard to qualify for, come with limited features, or cost borrowers “a ton” of money if they break their terms, Kolinski points out.

Mistake 3: Not reading the fine print

Dalia Barsoum of Streetwise Mortgages in Woodbridge, Ontario, shares a universal message: “Read the fine print. Understand what you’re signing up for.”

Most borrowers don’t expect they’ll ever break their mortgages, but data collected by TD Bank shows that 7 in 10 homeowners move on from their properties earlier than they expect.

It’s critical to understand your loan’s prepayment privileges and the rules around an early departure. “If you exit the mortgage, how much are you going to pay? It’s really, really important,” Barsoum says.

She has seen too borrowers come to her hoping to refinance a mortgage they received from a private or specialty lender, only to find that what they were attempting was impossible.

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