Trump takes aim at Canada’s banking sector as tariffs loom

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Just hours before United States President Donald Trump paused his proposed tariffs on Canadian goods, he began pushing for American banks to have an increased presence in Canada.

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“Canada doesn’t even allow U.S. banks to open or do business there. What’s that all about?” he said in a post on Truth Social, a social media platform, on Monday. “Many such things, but it’s also a DRUG WAR, and hundreds of thousands of people have died in the U.S. from drugs pouring through the borders of Mexico and Canada.”

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Domestic banks, led by the Royal Bank of Canada, dominate the Canadian market, but U.S. banks already have a presence in the country. For example, J.P. Morgan Chase & Co. employs 600 people with teams in Calgary, Montreal, Toronto and Vancouver, according to its website. Similarly, Citibank Inc. in 2019 celebrated 100 years in Canada.

U.S. banks are also members of the Canadian Bankers Association, which represents more than 60 banks.

The CBA said U.S. banks make up half of all foreign banking assets in Canada, with 16 subsidiaries and branches worth around $113 billion in assets. These banks provide financial services, such as corporate and commercial lending, treasury services, credit card products, investment banking and mortgage financing, it said.

Trump has provided several reasons in the past few months for his plan to impose a 25 per cent tariff on Canadian goods and a 10 per cent levy on Canadian energy, including illegal migration, drug smuggling and a supposedly huge trade deficit between the two countries. But this is the first time he has been critical about Canada’s banking system.

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Foreign banks — including U.S. banks — can operate in Canada as either branches or subsidiaries, Jeremy Kronick, vice-president of economic analysis and strategy at the C.D. Howe Institute, said.

Branches cannot accept deposits under $150,000, essentially restricting their ability to be the retail deposit bank of choice for many Canadians, he said. Foreign subsidiaries, on the other hand, can accept smaller deposits and act as a retail deposit-taking institution.

But the downside for a foreign bank operating a subsidiary is that it is a separate legal entity from its parent company, so it requires its own local capital and liquidity structures, Kronick said.

“From the foreign bank’s perspective, this is obviously inefficient,” he said. “Branches, on the other hand, would not need their own capital and liquidity structures and are able to rely (mostly) on the parent.”

Kronick said a case could “probably be made” that the restrictions on both options prevent full competition with Canadian banks, but not that “Canada doesn’t even allow U.S. banks to open or do business there,” as Trump has said.

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Alana Scotchmer, a partner at Gowling WLG, said U.S. banks have been in Canada “for a long time and will continue to be here.”

She said the procedure for applying for any kind of banking institution is “very involved” and long because Canada has generally been a “pretty conservative banking regulatory environment” compared to other jurisdictions and has historically been more risk averse, which has served the country well.

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