What Canadian Small Businesses Should Watch for with A Trump Presidency

What Canadian Small Businesses Should Watch for with A Trump Presidency

What Canadian Small Businesses Should Watch for with A Trump Presidency

While we as Canadians had no say in the recent US elections, we knew that whatever the outcome, our economy would be impacted. The United States is Canada’s largest trading partner and while a new government usually means new economic policies, the 45th president of the United States has shown himself to be a bit of an unpredictable wild card. According to a report released by the Bank of Canada, Canadians are being confronted with a level of uncertainty we haven’t seen in years. If there is one thing we know for sure, it’s that we can expect big changes - changes that may affect small business owners all across the country.

NAFTA Negotiations

With Trump moving to speed up the renegotiation of the NAFTA, Canadian businesses can expect this to be one of the first changes to impact them directly. NAFTA (The North American Free Trade Agreement) was put into place in 1994 to strengthen economic growth. This was done by allowing free trade between Canada, the United States and Mexico and it has proven largely successful. In fact, trade between Canada and the US has tripled since NAFTA’s inception. Prior to NAFTA, the FTA  (Free Trade Agreement) was in effect between the US and Canada alone. The FTA was replaced by NAFTA but it was never officially terminated. If NAFTA were to dissolve tomorrow; the FTA would come back into effect. However, the likelihood of NAFTA being discarded is low as Trump plans to renegotiate the terms of the agreement (largely in favor of the US, of course).

How will this affect small businesses?

If the Trump administration does pull the US out of NAFTA completely, keep an eye out for the following trends:

  • Stiffer trade barriers
    • It will become harder and more expensive to import or export goods for many industries such as:
      • Retail
      • Alcohol
      • Agriculture
      • Telecommunications
      • Aerospace
  • Tougher immigration controls
    • We can expect the laws around travel for business to become stricter; making trips between the countries more challenging. This will also have an impact on your ability to recruit foreign employees.

The End of the TPP

The TPP (Trans-Pacific Partnership) is very similar to NAFTA, just on a much larger scale - it includes 12 countries spread over 4 continents. One of the more pertinent aspects of the TPP is that importing and exporting goods would become more affordable for all participating countries. The Trump administration has already withdrawn the US from the TPP, less than 12 months from it being signed into effect. Although there is already talk about reforming without the US’s participation, for now, things haven’t changed.

How will this affect small businesses?

Now that importing products won’t become more affordable, Canadian manufacturers will likely see more activity. Without the TPP, Canadian businesses will not be able to access those new markets that Canadian businesses were going to be able to capitalize on for importing and exporting. If your business doesn’t import or export globally, you were never going to be significantly impacted by the TPP, so its reversal won’t make a difference for you either.

The Growing US Economy

Changing how the US conducts trade with other countries is all part of Trump’s platform to grow the US economy. If all goes according to plan, the country’s GDP could double by 2018. However, given that the relationship between the two countries seems to be as strong as ever – it’s possible that Canada won’t feel the sting of Trump’s protectionist agenda, for the time being at least.

How will this affect small businesses?

Less foreign competition

Canadian businesses will have less competition from foreign countries when exporting to the US. There is a lot of talk of shutting Mexico out of trades with the US. Considering they are the only country that exports more to the US than Canada, Canada will become the leader in the category. This will also open up the opportunity for Canada to become a leader in trade with Mexico.

The return of homegrown talent

With POTUS’s focus on creating jobs for American citizens, many Canadians currently working in the US are worried about their job security. As many as 40,000 Canadians are presently working under exemptions created through NAFTA. Considering the uncertainty of their future, you can expect Canadians to flock home. The influx of skilled labour may drive down the cost of acquiring talent for your business.

How can you prepare?

For the time being, there isn’t much that you can do except sit tight. There is a lot of uncertainty surrounding the impacts of the President’s new policies. Making any drastic moves right now might end up being detrimental to your business in the long run. However, to make sure your business won’t be caught in a bad spot, it might be a good idea to start building up that emergency fund. If the President’s first month in office has shown us anything for certain, it’s that for better or worse, we’re in for a wild ride.

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