What Should Canadian Small Businesses Watch out for with A Trump Administration?

Although Canadians had no say in the just concluded US elections, they knew that the resultant outcome would have an effect on their economy. The United States is Canada’s largest trading partner and with the emergence of a new government connotes new economic policies too. The 45th president of the United States can be likened to be a bit of an unpredictable wild card, making erratic changes in economic policies that can have profound impact on Canadian small businesses. The Bank of Canada released a report which stated that Canadians are being faced with a level of uncertainty they haven’t experienced in years. Certainly, they can expect significant changes; changes that are likely to affect all small entrepreneurs across the country.

NAFTA Negotiations

As Trump moves rapidly for the renegotiation of the NAFTA, it is expected that this is one of the first changes that will have a direct impact on Canadian businesses. NAFTA (The North American Free Trade Agreement) was established in 1994 to strengthen economic growth. This was achieved by allowing free trade between Canada, the United States and Mexico and it has been proved to be very successful. Since NAFTA’s establishment, trade between Canada and the US has tripled. Before NAFTA, the FTA (Free Trade Agreement) was effective between the US and Canada alone. NAFTA replaced FTA although it was never officially terminated. If NAFTA were to dissolve in the future, the FTA would become effective again. However, the probability of NAFTA’s dissolution is low as Trump plans to renegotiate the terms of the agreement (definitely in favor of US)

How will this affect small businesses?

If the Trump administration withdraws US out of NAFTA completely, the following are likely to happen:

  • Non-flexible trade barriers
  • It will become more unfavorable and expensive to import or export goods for many industries, for example:
    • Retail
    • Alcohol
    • Agriculture
    • Telecommunications
    • Aerospace

Obstinate immigration measures

Many should expect inflexible travel laws for business; making trips between the countries more challenging. This will also likely affect the ability to employ foreigners

The End of the TPP

The TPP (Trans-Pacific Partnership) can be likened to NAFTA; it only operates on a larger scale which includes 12 countries across four continents. One important aspect of the TPP is that importation and exportation of goods become more affordable for all countries involved. The Trump administration withdrew the US from the TPP, less than 12 months before signed into effect. Although talks on its reform are ongoing without the US’s participation, nothing has changed yet.

How will this affect small businesses?

Since there will be no affordable importation of goods, Canadian manufacturers will likely see more activity. Without the TPP, access to new markets for Canadian businesses to explore for importation and exportation of products will be impossible. The TPP will have no significant impact on businesses that are not involved in global import and export, so its reversal won’t make a difference either.

The Growing US Economy

Part of Trump’s platform to grow the US economy is to change how the US trades with other countries. If the plan is well executed, the country’s GDP could double by 2018. However, because of the increasingly strong relationship existing between both countries, it is possible that Canada will not be adversely affected by Trump’s protectionist agenda, at least for now.

How will this affect small businesses?

Less foreign competition

Canadian businesses will have less foreign competitors when exporting to the US. There has been series of talks about shutting Mexico out of trades with the US. Since they are the only country that exports more to the US than Canada, Canada will take the lead in the category. This will give Canada the opportunity become a leader in trade with Mexico.

The return of homegrown talent

With POTUS’s focus job creation for American citizens, most Canadians currently working in the US are worried about their job security. About 40,000 Canadians are working presently under exemptions created through NAFTA. Due to the uncertainty of their future, a mass movement back home is expected. The influx of skilled labor may reduce the cost of acquiring talent for business.

How can you prepare?

For now, it is important to get ready. Lots of uncertainty lies around the impacts of the President’s new policies. Any drastic action right now might be detrimental to your business in the long run. However, to ensure your business won’t be caught unawares, a good idea is to start building up that emergency fund. From the President’s first month in office, one can certainly conclude that if it is for better or worse, we’re in for a challenging race.
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