Business Brief: How the blue wave is rippling across Canada

Good morning. Today, we’re surfing the blue wave of Democratic wins to see where it might wash over the border, from trade talks and oil revenues to data centres and Quebec’s freelance diplomacy.

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In the news

Budget day: The Carney government’s second budget will focus on affordability and cultural sovereignty while continuing its push to make Canada’s economy more independent, Finance Minister François-Philippe Champagne said yesterday.

The Globe will have live coverage of the budget, which will be tabled at 4 p.m. ET.

Deals: AMD will pay US$2.9-billion for AI chip firm Taalas in one of the largest Canadian tech takeovers.

Safety: Manitoba shuts down, for the second time, a trucking company involved in a deadly crash.

In focus

A ‘victory for Canada,’ and a stubborn reality

Canada is about to have more friends in Congress, but Donald Trump is still wielding the veto pen.

The Democrats’ sweep of the Senate and the House of Representatives has stirred hopes that a new Congress will rein in some of Trump’s tariff powers and ease the pressure on the Canadian sectors that have been hit hardest. The dramatic shift in Washington could also influence the oil prices propping up Canada’s exports, Alberta’s push for artificial-intelligence data centres and the next review of the continental trade pact.

It also put a spotlight on a growing rift between Quebec and Ottawa, which have been sparring over how much of a voice the province gets on the world stage. Last week, Quebec Premier Paul St-Pierre Plamondon, whose separatist Parti Québécois won power in October, boycotted the Canada-EU summit in Montreal after Ottawa refused to let him give a speech, and complained that his province was being turned into a “vassal.”

Splitting up: Yesterday, Dominic LeBlanc, Canada’s top trade official, said Ottawa would stay the course in negotiations with Washington, which resumed in recent days after stalling in August. But St-Pierre Plamondon said Quebec, among the provinces hardest hit by U.S. tariffs on softwood lumber, would launch its own diplomatic offensive south of the border.

“I think we’re in a better position to possibly find a solution because Americans have spoken, the situation has changed,” St-Pierre Plamondon said yesterday in Quebec City. “So what we’re going to do is prepare a diplomatic offensive of discussion with the Americans to see if there isn’t a solution.”

Ontario, too, plans on making moves. Premier Doug Ford said he was doing cartwheels, in fact, and told reporters yesterday that he intends to send ministers to Washington to spread Ontario’s message once the new Congress is in place. He called it a “victory for Canada.”

Ottawa will be hoping that Quebec’s charm offensive doesn’t send Washington mixed messages, and that Ontario doesn’t invoke Ronald Reagan again.

Oil watch: Traders are weighing whether a weakened Trump will look for a way out of the U.S.-Israeli war with Iran, which has disrupted global energy supplies for eight months and pushed oil above US$100 a barrel.

Analysts said the market was sending oil prices lower on expectations that Trump might move on from the war, though it would take a breakthrough in peace talks to settle prices. Trump has acknowledged the war played a role in his party’s defeat.

Cheaper crude would cut into the revenue that has propped up Canada’s trade numbers since Washington’s 50-per-cent tariffs took hold in late August. Statistics Canada reported yesterday that the merchandise trade surplus widened to $5.4-billion in September from $5-billion in August, and the surplus with the U.S. grew to $12.3-billion. Higher oil prices lifted energy exports 8.2 per cent, even as export volumes fell 4 per cent and eight of 11 product categories declined.

Today, the federal budget is expected to show billions of dollars in extra revenue from higher oil prices, but Parliamentary Budget Officer Annette Ryan said last month that new spending announcements have already used up all of that room and more.

Donny De-Veto: Trump still sets the tariffs on Canadian goods, and he still runs the trade talks with Ottawa, including over the United States-Mexico-Canada Agreement, which Washington declined to extend in July. Once the new members take their seats in January, a Democratic Congress can haul Trump’s trade officials before committees and put the tariffs to a vote. But it’s highly unlikely they’ll make them disappear: Any bill rolling back taxes on imports would land on Trump’s desk, and Democrats lack the two-thirds majorities in both chambers needed to override his veto.

Here’s what else we learned from the midterms.

• The Canada effect: The trade war shaped some key midterm races.
• Still at war: Don’t lower your elbows just yet, Lawrence Herman says. With Democrats taking Congress, the trade war will continue and could even be worse.
• Keeping it clean: The Democratic sweep of Congress gave the clean-energy industry on both sides of the Atlantic hope that Trump’s war against all things green is about to come to an end, Eric Reguly wrote on The Globe’s election liveblog.
• Data dump: As Texas elected its first Democratic governor in more than three decades, one of the biggest losers of the U.S. midterms was not on the ballot: Elon Musk. The billionaire now faces a resurgent Democratic Party that he has spent years antagonizing.
• Shares of AI-heavy companies SpaceX and Tesla both dropped yesterday. A week or two before the expected blockbuster initial public offering of Anthropic, the developer of the chatbot Claude, other AI-focused companies could be at risk of joining the sell-off.

Charted

Corporate profits are at levels last seen in 1929. Dear Ian McGugan: Please tell me nothing bad happened that year.

Quoted

Scientists trace van Gogh’s The Starry Night to an actual night sky from 1889.

Up next

More files we’re following

Before the committee: Bank of Canada Governor Tiff Macklem and senior deputy governor Carolyn Rogers appear before the standing Senate committee on banking, commerce and the economy.

Corporate results: A busy day on the domestic earnings front includes Canadian Natural Resources, TC Energy, Wheaton Precious Metals, Pembina, Bombardier, BCE, Saputo, AtkinsRéalis Group and Open Text.

Morning update

Global markets saw gains as technology shares lagged, with investors weighing the implications of a Democratic sweep in ​the U.S. midterm elections ‌on the sector.

Wall Street futures were mixed, with the Nasdaq pointing lower, while TSX futures were in positive territory.

Overseas, the pan-European STOXX 600 was up 0.58 per cent. Britain’s FTSE 100 gained 0.75 per cent, Germany’s DAX rose 0.77 per cent and France’s CAC 40 advanced 0.74 per cent.

In Asia, Japan’s Nikkei closed 1.79 per cent lower, while Hong Kong’s Hang Seng jumped 3.67 per cent.

The Canadian dollar traded at 71.61 U.S. cents.