No definitive rout of Donald Trump awaited the U.S. president on election night.
And as millions of mail-in ballots continue to be counted across multiple states, Canadians awoke Wednesday (November 4) with few definitive answers about what comes next for their own economy.
BMO economists said the impacts hang on whether there will be a split within U.S. Congress — the Democrats look to retain control of the House of Representatives while the Republicans seem poised to hang onto the Senate.
“[Former U.S. vice-president Joe] Biden’s Buy American policy would weigh on many sectors, while Trump has menaced specific industries with tariffs (e.g, steel and aluminum),” economists said in a note released the morning after the U.S. presidential elections.
“On the multilateral front, a much more constructive international backdrop would be expected under Biden, after the Trump Administration almost paralyzed the WTO [World Trade Organization].
Biden has also floated the idea of joining the Comprehensive and Progressive Agreement for Trans-Pacific Partnership (CPTPP).
The trade agreement was initially spearheaded by the U.S. as a means to push back against China’s economic influence in the Asia-Pacific region.
Trump railed against it during his 2016 presidential election campaign and the U.S. ultimately did not join the CPTPP.
“With China, again, the tone and tactics may change but we suspect that the fractious U.S.-China trade relations will persist. However, the temperature will probably be dialed down a few notches from the drama of the past two years, should Biden emerge victorious,” the BMO report stated.
“On tactics, Biden would be more likely to enlist the support of other major economies in a unified effort to challenge some of China’s trade and industrial policies.”
The economists believe the next most important consideration for the Canadian economy is the energy file, which may be in some danger given Biden’s promise to pull the permit for the Keystone XL pipeline running from Alberta south to refineries in the U.S.
U.S. policies on immigration may also shift should Biden win the presidency.
Ottawa revealed in late October plans to bring in 1.2 million immigrants over the next three years with an eye on addressing labour shortages and boosting the economy.
That same day, Stephen Miller, a senior adviser to U.S. President Donald Trump, told NBC News a second Trump administration would be focused on expanding its controversial travel ban, introducing new limits on work visas, limiting asylum grants and outlawing so-called “sanctuary cities” — municipalities that offer assistance to undocumented immigrants.
“It is debatable to what extent this directly affects the Canadian outlook, but if Biden undoes some of Trump’s policies, it could be more challenging for Canada to hit its new, higher targets post-COVID, and/or to retain talent that would otherwise be moving south,” the BMO report stated.
“Note that the strongest years for non-permanent resident inflows to Canada were 2017 and 2018, with at least two forces at work—a more open Canadian immigration policy at the same time that U.S. was closing the doors. A Biden win could shift the balance back at least somewhat, even if takes a while given the pandemic realities.”
If the Republicans hang onto control of the Senate — a more likely possibility given last night’s preliminary election results — major changes to American corporate tax policies are unlikely to ensue even under a Biden presidency.
The former vice-president had promised to raise the corporate tax rate seven percentage points to 28%.
“It’s safe to say that the absence of tax hikes in our closest competitor will leave Ottawa with little room to manoeuvre. Moreover, we would point out that after the Finance Minister’s [Chrystia Freeland] strong defence last week of ongoing fiscal support should apply every bit as much to keeping taxes in check as it does to keeping the spending taps open,” the economists said.
BMO does not anticipate the loonie being affected much by either a Trump or Biden victory.
They predict the dollar will finish in 2021 close to 77 cents USD.
