BoD OFFSITE | TORONTO REGION BOARD OF TRADE
The U.S. election will take place this November and will be a political "rematch” between two historically significant candidates - Joe Biden and Donald Trump. Both seek to portray themselves as the more competent economic managers while defining their opponent as a source of chaos. As of March, the election is projected to be a tight race.1
For Canadian businesses, the implications of this election are manifold. Canada’s economy is heavily reliant on the US, far more than the US economy is on ours. Three quarters of all Canadian goods exported go to the U.S., accounting for one quarter of all Canadian GDP. Previous attempts to diversify our trading relationships—with China, the EU through CETA, Pacific nations through the CPTPP, and more—have had modest effects at best, and we find ourselves inevitably drawn back to the gravity of the largest economy in the world just across our border.
Canadian companies employ 825,000 Americans and have the potential of being a key supplier of critical minerals needed for semiconductors, EV batteries, and other sectors key to the American economy and security.
However, Canada does help to fuel US manufacturing through our integrated supply chains, with companies like Linamar, Martinrea, and Magna leading the way. Canadian companies employ 825,000 Americans and have the potential of being a key supplier of critical minerals needed for semiconductors, EV batteries, and other sectors key to the American economy and security.
But open trade between our nations is increasingly in jeopardy, as it is all over the world. The trend towards more nationalist economic policies precedes the pandemic, but lockdowns laid bare the risks for countries and businesses who had outsourced critical supply chains to remote providers. Both presidential candidates have a history of an ‘America First’ approach to trade and security, threatening Canadian economic prosperity.
Given each candidate’s proposed economic plans, there is a strong likelihood of the US going further down its path of protectionist policies that risk pulling investments away from Canada.
Biden’s State of the Union Address in March 2024 framed his campaign around a “comeback America” and signaled a second term would continue the policy approach of the first. In comparison to Trump, Biden is expected to be less disruptive to our cross-border relationship and to global stability more broadly. But a Biden administration still poses risks, particularly a US commitment to incentivizing homegrown industries and investment, such as through the Inflation Reduction Act (IRA) and CHIPs and Science Act. These policies provide aggressive subsidies at a scale that is difficult for Canadian governments to match, hurting our competitiveness in key industries and hindering our ability to secure investment.
Donald Trump is more explicitly ‘America First’ when it comes to trade, and a second Trump term will most certainly have implications for Canada and the world. While his focus in his first term was primarily on China, Canada and others were frequently caught in the crosshairs. He has promised an across-the-board 10% tariff if re-elected2, placing the 2026 renewal of the USMCA in peril. In comparison to Biden’s ambitious domestic industrial agenda, Trump’s focus on trade policies presents a different risk to cross-border industries and Canadian investment attraction.
In addition to trade, a Trump presidency creates broader uncertainty for Canada, including with our international relationships. A Trump administration would embolden an expansionist Russia, deepen security threats for important Canadian partners in Europe, and instill a more confrontational stance towards China. This inward turn risks undermining the solidarity of NATO alliances, compelling Canada to consider bolstering its defense expenditures to navigate a potential vacuum of collective security.
During the last Trump administration, Canada employed a united ‘Team Canada’ approach to defending our trading relationship. Provincial and federal politicians teamed up with businesses, unions, civil society groups and political leaders to promote Canada’s interests in the US.
Regardless of the winner this November, Canada should be preparing further robust defense of North American trade in the face of a more protectionist United States. In November, Prime Minister Trudeau announced Minister Champagne and Minister Ng would begin working with Kirsten Hillman, the Ambassador to the US, on reviving this united approach. This strategy must include strengthening Canada’s network of U.S. contacts, and building (or renewing) relationships in a new administration’s inner circle.
It is also important to remember the US is not the only country with an election on the horizon. Mexico heads to the polls in June to choose a successor to López Obrador. As with the U.S., a change in Mexican leadership presents several trade sensitivities. As Canada, and Ontario more specifically, looks to assert its critical mineral wealth in global markets to support the green transition, its ability to leverage western allegiances will be critical as it competes with China’s far cheaper critical mineral resource extraction, albeit via dubious labour and sustainability practices. As such, the business community must prepare for a range of scenarios for Canadian competitiveness and trade based on this election.