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March 9, 2017

The Trump Effect: 5 possible implications for Canada

Love him or hate him, Donald Trump is the 45th president of the United States.

The seemingly endless campaign that brought him to power was a rollercoaster of provocative statements, combative debates and questionable facts. With his first month in the White House behind him, it appears that Trump fully intends to follow through on his promise to shake up the status quo. The big question now is:

What will he do and what impact will his actions have at home and abroad?

With this in mind, we take a closer look at five areas where we think the Trump presidency could have significant implications for Canada.

5 Possible Implications for Canada

the trump effect on canada

1. Tax reform.

Lowering the US corporate tax rate from about 35% to 20% could see a migration of corporations from Canada to the United States – including both companies that are already based here and those that may have been considering locating here. Such a migration would result in a loss of Canadian jobs. Furthermore, since the United States is our largest export market, the implementing of a US border adjustment tax on Canada would have significant implications. Coupled with the possibility of changes to NAFTA, Canada is at significant economic risk.

2. Rise of populism

We’ve already seen Brexit and the electing of Donald Trump. In Canada, Kevin O’Leary is bringing a similar message – which appears to be gaining significant momentum – to his candidacy for leader of the Conservative Party. The status quo is going to be tested by this wave of populism. The potential implications include a national agenda that is more inward looking than globally focused, as well as increased support for the displaced and middle income Canadians.

3. Climate change

We are heading in the exact opposite direction as the United States on climate change. Climate change initiatives increase cost, and while Canada is willing the bear this cost, the United States is not. As a result, US industries will become more competitive at the expense of ours. Despite our efforts, it takes global cooperation to deal with this phenomenon.

4. Immigration

The current US stance on immigration suggests that the United States will be less effective in attracting the best and brightest from around the world than it has been in the past. However, as there is still huge demand among skilled potential immigrants for moving to North America, Canada may have access to a larger pool of talent than before depending on its own policies. This could be a windfall for Canada.

5. Refugees

As Syrian refugees are discovering, Canadian policy and US policy differ widely on this topic. Canada may well increase its intake of refugees, but this will have an economic cost that will put a further strain on the budget deficit. Furthermore, the US administration views Syrian refugees as an increased risk to national security and having them “next door” might result in additional security measures at the borders between our countries. This could affect trade.
Trump is nothing if not contentious, with loud voices on either side calling out in support or disgust. Similarly, the policies that his administration appears to be pursuing are spread across the spectrum, with some likely to support and others likely to hinder Canadian business interests.

How everything will shake out in the end remains unclear, but Canadian businesses would do well to keep a close eye on the Trump effect and assess how possible policies south of the border may impact their operations.

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