Never before in history has a US election generated so much buzz and coverage as the one held this past November. Discussions around reopening NAFTA and opposition towards the PTP have added to the speculations of what the impact the US President-elect will have on the global economy. Québec- and Canadian-based companies are particularly concerned with how or if actual trade agreements will be maintained. And what will happen with future agreements currently in the works?

Protectionist measures on the horizon 

With the new political party that is about to take office, the United States is bound to become more protectionist. Measures, such as “Buy American” and “Buy America” are likely to come back in full force, promoting the benefits of buying products made in the US. What’s more, these measures may penalize Canadian products and services if they make up all or a major part of a supplier’s quote. According to Jean-Claude Lauzon, Québec’s General Delegate in New York: “protectionism is a global trend that we’re observing elsewhere than just the United States.” 

The end of free trade? 

Donald Trump is seriously questioning whether or not NAFTA should be renegotiated or ripped up altogether. The protectionist measures that the US is seemingly leaning towards could weaken trade agreements, which normally help to stimulate the economy. 

It is important to remember that 72% of Québec exports are for US markets. It is therefore crucial for the province’s economy that NAFTA remain intact. Although Donald Trump has voiced his criticism regarding the agreement, the National Bank of Canada “believes that it will be very difficult for the US to leave NAFTA. The opposition from US Congress would be too strong. However, the President-elect could legally and without Congress’ backing, impose new tariffs and quotas.”

According to Mouvement Desjardins, a recession may very well occur if NAFTA gets the ax under Donald Trump. “The ripple effect would be major for provinces that rely heavily on the manufacturing industry, such as Québec and Ontario.” However, several legal and economic experts indicate that it is very unlikely that the Trump administration will turn its back on NAFTA. The agreement is beneficial for both countries. If Canada threatens to slap tariffs on US products, this could very well sway Donald Trump away from his current mindset.  

Nevertheless, even if NAFTA stays as is, data collected from 1972 until 2015 show that exports decrease when a Republican takes US office. The numbers highlight the fact that exports increase, on average, 10.9% under Democrats and 7.3% under Republicans. 

Softwood lumber: A continuous dispute 

On Friday, November 25, the US filed petitions against Canada for unfair competition and dumping. The Conseil de l’industrie forestière du Québec is expecting taxes on exports, which could vary between 20% and 25%, to come in effect in the spring of 2017. In Québec alone, this tax would represent $250 million. This petition is just one of the many examples of protectionist measures that the US government may take. That’s why lumber producers are hoping that various levels of government will come to their financial aid to weather this potential crisis. 

Undoubtedly, the election of Donald Trump as president is injecting uncertainty into an already precarious global economy. The future could be brighter than anticipated; however, with the surprise election we have just seen, many Québec and Canadian businesspeople are worried. It is important to remain on top of what’s happening in US markets. One recommendation that many specialists offer is for companies to target domestic markets, Western Canada and other international markets to secure revenues and long-term profitability.


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