Donald Trump’s return to the White House is likely to slow deal making activity in Canada, according to one expert, leading to increased uncertainty that could benefit the U.S.
Following Trump’s election victory last week, Canada-U.S. economic ties have come to the forefront, with some saying a more protectionist U.S. posture could complicate trade between the two countries.
Last week, Michael Dobner, a partner and national economics leader at PwC Canada, released a report on the impact another Trump presidency could have on Canada’s deal market. In an interview with BNNBloomberg.ca Tuesday, he said there is a large degree of uncertainty surrounding the actions a Trump administration will take.
“We also know the various policies that they are very supportive of and that there is a tendency for isolationism, reducing the fight against climate change and imposing tariffs on others, and finally also reducing regulation and if possible reducing tax,” he said.
However, exactly what actions the Trump administration will take remain unclear, Dobner noted, saying uncertainty can put people “on the fence” and incentivize people to spend capital elsewhere. He added that Trump is “very good at creating uncertainty” as he knows it “makes the U.S. a default place for investment.”
“The major issue that I see for deals in Canada in the near future is uncertainty regarding what is going to actually happen in the U.S. and when you have uncertainty, that means less deals,” Dobner said.
Despite the overall impact on deal making, he said some industries stand to benefit, while others face more downside risks.
Specifically, Dobner noted some EV battery companies will be negatively impacted, but there is likely to be a positive impact on oil and gas companies as well as others in the minerals industry.
“A very strong Trump agenda is to secure its resources and not rely on so called unfriendly regimes or unstable regimes,” he said.
“So, they would see Canada as a source where they can trade more. So those industries will likely be affected positively. Obviously, that depends also on Canadian policy towards oil and gas.”
The defence sector also stands to benefit, according to Dobner, as Trump has previously stated he would not defend a NATO member that is not meeting agreed-upon defence spending.
“So, Canada will have to make huge investments in defense, because there is a lot to do there, and so that that will create probably quite a bit of deals for companies in the supply chain for defense,” he said.
Dobner said in the report that Canadian companies competing with U.S. companies in labour-intensive sectors, could stand to benefit if labour shortages occur in the U.S. due to changes in immigration policy.
“These may include industries such as: retail/warehousing, food processing, agriculture and labour-intensive manufacturers,” the report said.
“Furthermore, our analysis suggests the actions we expect to be taken by the Trump administration will further weaken the Canadian dollar. This will likely further enhance the prospects of companies in these sectors.”
Bilateral trade
Dobner also said there is a possibility for bilateral trade between Canada and the U.S.
On Tuesday, Bloomberg News reported that Ontario Premier Doug Ford suggested that Canada should negotiate its own trade agreement with the U.S. if Mexico doesn’t crack down harder on Chinese imports.
In a statement on X, Ford said Mexico should, at a minimum, match U.S. and Canadian tariffs on Chinese imports. He characterized Mexico as a “backdoor” for Chinese goods into both Canada and the U.S.
Free trade needs to be fair. Since signing on to the United States-Mexico-Canada Agreement, Mexico has allowed itself to become a backdoor for Chinese cars, auto parts and other products into Canadian and American markets, putting Canadian and American workers’ livelihoods at…
— Doug Ford (@fordnation) November 12, 2024
“While this is a bit of a provocative statement, it wouldn’t surprise me that Trump may consider that seriously,” Dobner said.
He added that during Trump’s campaign, Mexico was frequently mentioned while Canada was rarely if ever brought up on the trail.
“Mexico is definitely the biggest issue for him, and that may be something he would toy with, is to go along just with Canada. Because with Canada, at least there are less issues as far as immigration and low cost of labour (and) things like that,” Dobner said.
“So, it’s a little bit easier, and he does want Canadian resources, so that’s a possibility. I’m not sure it will happen, but that’s a possibility.”