The upcoming US Presidential Election is getting a lot of media attention these days, as Trump and Biden are running neck and neck in the most recent opinion polls.
What would a Trump victory mean to Canadian businesses?
Some notable parts of Trump’s economic platform include:
- A 10% tariff on US imports from all countries except China, which would get a 60% tariff.
- Deportation of up to 10 million illegal US immigrants
- A continuation of the tax cut measures begun in his first administration
According to a just released report by Scotiabank Economics, these would have the following effects on the US economy:
- Trump’s protectionism could reduce the US GDP by about 2.2% by 2027.
- This could also raise the US inflation rate by 1.5% above current projections.
According to the same report, these and related factors would have the following effects on the Canadian economy:
- Trump’s protectionism would likely reduce Canada’s GDP by up to 3.6%. This is due in part to the import tariff as Canada exports $440B of goods and services a year to the US. It is also due in part by the effects of the deportations of workers which are critical to the agricultural and transportation sectors of the economy.
- Increased costs and supply disruptions would raise our inflation rate by 1.7% above current projections, which in turn would require a raise in interest rates by an additional 2% to combat inflation.
These projections are lower than some worst case projections as the Scotiabank report did not take into account the potential for deterioration in US federal finances, or any civil unrest in the US due to the negative effects of these policies on the US economy.
All told, these factors would combine to significantly increase the risk of a recession in Canada, which is already suffering from:
- a sluggish economy
- decreasing labour productivity
- high levels of Government debt
- high levels of taxation
- a government regulatory environment which is an impediment to business investment
This is not a rosy picture, but it is better to be aware of the possible consequences of a Trump victory and to begin to prepare for possible counter-measures than to wait and see what happens and then think about how to react.
About the author: Bruce McAlpine is President of Fulcrum Search Science Inc., a Toronto-based executive search firm solving Mission-Critical hiring challenges throughout North America for more than 50 years. He is also a Past President of ACSESS, the Association of Canadian Search, Employment & Staffing Services, and a Past President of the Royal Military Colleges Club of Canada. He can be reached at 416.779.8505 or bruce.mcalpine@fulcrumsearchscience.com .
