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How worried should you be about the U.S. election?

A new survey suggests Canadian business leaders are concerned about the outcome of the presidential race, but not all observers agree that fear is warranted

Canadian business leaders are worried the upcoming U.S. election will lead to an increase in protectionism, weakened environmental policies and a decrease in Canada’s tax competitiveness, new research suggests. 

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According to the 2024 KPMG Private Enterprise™ Business Survey, eighty-seven per cent of 725 small and mid-sized businesses surveyed say that the Canadian economy could become “collateral damage” after the election. As a result, 85 per cent are revisiting their business strategies to prepare for a new administration.  

That’s just one indication that Canadian business leaders are expecting the outcome of the Nov. 5 U.S. election to have significant ripple effects on this country’s economy. 

“They’re certainly worried about the economic uncertainties related to the U.S. election,” says Dino Infanti, partner and national leader, KPMG Private Enterprise Tax, in Vancouver. “It really comes down to two aspects: trade and taxes. There’s a lot at stake.” 

Infanti says potential tariffs on Canadian imports are troubling the industries with the closest ties to the U.S.: manufacturing, automotive, transportation and warehousing, energy and natural resources, as well as technology, media and telecommunications sectors. 

Photo of Dino Infanti
“There’s a lot at stake,” says KPMG’s Dino Infanti

While Democratic candidate Kamala Harris seems likely to continue President Joe Biden’s targeted approach to trade and tariffs if she wins the presidency, Republican Donald Trump has promised a 10 per cent to 20 per cent tariff on all international imports, which may include those from Canada.  

“A second Trump term could pose some challenges, particularly with the potential impact on trade balance and currency,” says Andy Nasr, senior vice-president and chief investment officer at Scotiabank/Scotia Wealth Management in Toronto. 

 Not everyone, however, thinks a Trump win will necessarily lead to poorer trade relations. Arthur Salzer, chief executive officer and chief investment officer at Northland Wealth Management in Oakville, Ont., believes that a Republican administration could spur increased Canadian oil and gas exports to the U.S.  

“Given Trump’s historical emphasis on energy independence,” Salzer says, “a win could enhance trade relations between Canada and the U.S., potentially boosting our energy sector. This alignment could serve to strengthen economic ties and provide Canadian businesses with expanded market opportunities in the energy sector.”

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Canada’s competitiveness

Both presidential candidates have discussed opening up the United States-Mexico-Canada Agreement (USMCA), a deal that has helped entrench Canada’s position as a top trading partner with the U.S. “When NAFTA was renegotiated, there was a clause built in to review the USMCA within a certain number of years,” notes Infanti. That raises concerns among business leaders that Canada’s close ties to the U.S. could change, with potential increases to duties and tariffs. 

But Salzer is skeptical. “The [USMCA] already provides a framework that makes such tariffs unlikely,” he says. “While tariffs may pose challenges to other trading partners of the U.S., the protective measures in place for North American trade offer reassurance to Canadian businesses.” 

Tax cuts are another area that’s causing uneasiness among Canadian businesses. According to the KPMG survey, nearly nine in 10 respondents agree that major U.S. tax cuts in the future, as both Trump and Harris have promised (although for Americans of different income levels), will leave Canada’s tax rates much higher, impairing competitiveness. And most respondents already believe Canada’s tax regime is uncompetitive compared with other advanced economies, which is making it harder to recruit talent.  

Impact on green investments

Canadian business leaders also believe that environmental policies could fall by the wayside with a new U.S. administration. In the KPMG survey, 84 per cent expect a new government to reduce “green” or “clean” investments and business incentives to decarbonize 

Being diversified … is a great way to mitigate volatility and uncertainty

Andy Nasr

That could prompt Canadian businesses to re-evaluate their own decarbonization plans to remain competitive. Thirty-six per cent of those surveyed report they would look at cutting back on their own decarbonization plans to remain on a level playing field with their U.S. counterparts. 

On the other hand, 88 per cent say that if the U.S. reduces decarbonization incentives, Canada could have more opportunities to play a leadership role in the clean economy. 

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Stability or volatility?

On the geopolitical front, Salzer says he is optimistic that a Trump presidency could restore international stability. “A Trump administration might contribute to resolving the Ukraine conflict, which would provide stability and a positive climate for international business operations,” he says. “Stability in global markets is crucial, and a resolution could mitigate risks for Canadian investors and businesses operating internationally.” 

In the meantime, Salzer adds, Canadian business leaders and wealth managers need to be prepared to adapt to the dynamic global landscape, whatever the outcome of the upcoming election.  

“We must continue to leverage opportunities, advocate for fair trade practices, and pursue growth for our businesses and communities,” he says. 

Infanti says businesses also need to evaluate their supply chains, checking them early and regularly, and making contingency plans should any issues arise. 

As for portfolio management, “being diversified, across asset classes and geographies, is a great way to mitigate volatility and uncertainty,” says Nasr, who is pragmatic about the outcome of next week’s election. 

“If history is any guide,” he says, “election outcomes tend to have a short-lived impact on markets and investor sentiment.” 

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