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Ontario finance minister: Trump tariffs, 'zombie NAFTA' threatening growth

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Ontario finance minister: Trump tariffs, 'zombie NAFTA' threatening growth

Canada's largest provincial economy faces the "threat of a zombie NAFTA," and uncertain growth given the Trump administration's push for protectionist trade policies, Ontario's Minister of Finance said March 7.

Charles Sousa, during a speech in Toronto, said Ontario's economy is set to grow by 2% next year and thereafter, growth beyond what other provinces expect but stunted by uncertainty of trade relations with the U.S. Ontario faces challenges that include "Buy America campaigns and Trump's attack on our steel and aluminum industries," he said.

Canada, the U.S. and Mexico are in the process of renegotiating the North American Free Trade Agreement, which allows access to those countries for goods manufactured in Ontario. President Donald Trump has also proposed tariffs on steel and aluminum coming into the U.S., although he has not been specific how NAFTA partner countries would be affected. Ontario is the heart of Canada's auto industry and both a consumer and exporter of steel.

"These new, significant risks to our economic outlook have caused us to be more cautious in our revenue expectations," Sousa said. "Two percent economic growth is okay, but it's not good enough."

Ontario politicians have been making campaign-style appearances across the province in light of the prospect of a spring election. Premier Kathleen Wynne's Liberal party has a majority of the seats in the Legislative Assembly of Ontario. The looming election could give the governing party an advantage over the rival Progressive Conservatives, whose leader Patrick Brown resigned in January after alleged sexual misconduct.

Sousa offered hints but no specifics about Ontario's upcoming budget, which he said would be delivered March 28. The province will have a surplus in the current fiscal year and starting next year Ontario will be running a deficit of less than 1% of GDP, he said.

"While we find ourselves in the midst of another election, the decisions we make in this budget go well beyond election cycles," Sousa said in the speech to the Economic Club of Canada. "Our budget will have a clear plan to track back to balance, but let's be clear — we are making this choice deliberately."

Ontario's government has benefited financially from the public sale of shares in Hydro One Ltd., the proceeds of which have been used to finance government infrastructure spending. The province still holds about 47% of the electricity transmission and distribution utility, according to S&P Global Market Intelligence data.