Will Canada’s economic fortunes change after the U.S. presidential elections in November 2020? The two countries have a long-standing relationship. Trump’s re-election or Biden victory could bring new challenges. Thus, the stakes are high. Whoever is the U.S. President, he will influence Canadian trade.
Rapport with Trump
In the Trump presidency, the new or revised North American Free Trade Agreement (NAFTA) helped secure the automotive sector’s longevity in Canada. However, Canadian steel and aluminum products did escape from tariffs.
Mary Lovely, a senior fellow at the Peterson Institute for International Economics, said Trump uses tariffs to build up the U.S. industrial heartland. It has importance to the election. She believes Trump will not hesitate to use tariffs in trade disputes with Canada if re-elected.
Trump’s tariffs directly impacted Canada’s industrial sector, while its commodities sector was indirectly affected by the tensions between the U.S. and China. Beijing imposed bans on Canadian canola and pork products following the arrest of Meng Wanzhou, Huawei’s CFO, in December 2018 at Washington’s request.
According to Statistics Canada, Canada’s trade with the U.S. in 2019 was worth at $991.7 billion. Trade with China in the same was the second-largest at $82.3 billion. In a way, Trump is sensitive when it comes to relations with China. However, Canada must be careful not to antagonize either party.
According to analysts, the advantage of Trump re-election is the ease of securing trade deals. Republicans are generally more open while Democrats and Liberals usually set conditions before agreeing.
Biden might skew toward multilateral deals. His administration, alongside allies like Canada and Europe, will try to influence China’s approach to international trade.
Regardless of who wins, tariff feuds are inevitable. New penalties on aluminum might be forthcoming after Trump’s re-election. Meanwhile, Biden’s “Buy American” pitch indicates a move to greater protectionism.
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No doubt that Canada is over-dependent on the U.S. market. The neighbour buys nearly three-quarters of the country’s exports. Any misstep in dealing with the U.S. President-elect will have considerable trade consequences.
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Fool contributor Christopher Liew has no position in any of the stocks mentioned. The Motley Fool recommends MAXAR TECHNOLOGIES LTD.