Key Takeaways: The Impact Of The U.S. Presidential Election On Canadian Business (Video) – International Trade & Investment – International Law

McCarthy Tétrault recently held an event on the potential
impact of the U.S. presidential election on Canadian businesses,
focusing on themes such as the application of trade law, economic
sanctions, tariffs, and effects on foreign investment, among other
matters.

The panel of McCarthy Tétrault experts included Paul Zed, Counsel and Strategic Advisor; Awanish Sinha, Partner, Public Sector Group
co-lead; Debbie Salzberger, Partner,
Anti-trust/Competition & Foreign Investment Group; Martha Harrison, Partner, International Trade
and Investment Law and Retail and Consumer Markets Groups; John W. Boscariol, Partner, International
Trade & Investment Law Group head, and also featured a
fascinating fireside chat with Steve Verheul, Canada’s Chief
Trade Negotiator from 2017 to 2021.

The following is Part 1 of a two-part series highlighting key
takeaways from our conversation.

International Trade & Investment

Kamala Harris and Donald Trump have diverging approaches to
trade and tariffs. Harris, continuing the Biden
administration’s policies, seeks to boost trade with allies in
Europe, Asia and North America, while using tariffs and other
economic tools to regulate trade with certain countries, such as
China. On the other hand, Trump is proposing a more aggressive use,
purportedly to protect U.S. industries and raise revenues. Trump
has committed to a 10-20% tariff to be imposed on all imported
goods and a 60% tariff on goods imported from China.

1. Canada’s Strategic Positioning

In the ever-evolving landscape of international trade, Canada is
positioning itself as a steadfast ally to the U.S., regardless of
whether the administration is led by Harris or Trump. This
strategic alignment is crucial, especially in the realms of foreign
and trade policy. However, if Canada is not exempted from the
global tariffs Trump is proposing, Canada has the ability to
respond with retaliatory tariffs against U.S. imports, as it did
during the last Trump administration. Additionally, Canada could
strategically target industries that are important to U.S. members
of congress, making these responses more impactful to address
harmful tariffs.

2. The Risks and Impacts of Trade Measures

The application of tariffs poses a significant risk of
inflation, as studies have demonstrated that tariffs can lead to
increased costs. During former President Trump’s
administration, the tariffs enacted did not impact the trade
deficit to the degree Trump had anticipated. Instead, there was
also an overall job loss in sectors reliant on importing goods,
such as manufacturing. Beyond tariffs, broader economic sanctions
continue to be the “go-to” measure for Canadian and other
western governments responding to geopolitical crises, and business
should be carefully monitoring these developments especially with
respect to their activities involving China.

3. Potential for a Trade War

Under a Trump administration, there is a higher risk of a trade
war. If Trump were to implement across-the-board tariffs, he would
be at risk of breaching U.S. trade treaty obligations, while
causing damage to both the U.S. and Canadian economies. This would
likely lead to retaliation from other countries, further escalating
economic tensions. Businesses need to be prepared for this and
should develop contingency plans. Indeed, there are a myriad of
unintended consequences in trade wars, including negatively
impacting industry sectors tariffs might be used to protect,
including the overall manufacturing sector.

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4. Trend Towards Protectionism

Regardless of whether the election results in a Harris or Trump
administration, the general trend in the U.S. is towards
protectionist policies. The U.S. has generally focused on a more
protectionist industrial policy, including ‘Made in
America’ requirements. This shift puts Canada in a difficult
economic position as it draws investment into the U.S. and away
from Canada.

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Competition/Anti-Trust and Foreign Investment

Both Harris and Trump are expected to be influenced by
“America First” policies, which could have significant
implications for foreign investment. These policies may prioritize
domestic businesses and industries, potentially leading to stricter
scrutiny of foreign investments and mergers involving foreign
entities. In terms of competition and anti-trust policies, Harris
and Trump are both likely to continue the recent trend of vigorous
trust-busting, but their approach is likely to differ in terms of
enforcement priorities and boundaries.

5. Shift in U.S. Investment Focus

Flowing from “America First” and “Made in
America” policies touted by both the Democratic and Republican
platforms, U.S. capital, including private equity investment, may
be expected to increasingly focus on domestic opportunities,
potentially to the detriment of investment in Canadian businesses.
While this may consequently reduce U.S. foreign direct investment
in Canada, Canadian subsidiaries of U.S. businesses and Canadian
sales and distribution partners of U.S. businesses may see indirect
trickle-down benefits.

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6. Antitrust Enforcement Divergences

The Harris administration is expected to continue the Biden
administration’s expansive approach to anti-trust enforcement,
including rigorous scrutiny of mergers and acquisitions and pushing
the boundaries of traditional theories of harm in order to curb the
power of large corporations and crack down on anti-competitive
practices. In contrast, while Trump may be expected to vigorously
pursue anti-competitive conduct, his focus is expected to revert to
a more traditional analytical framework, and applied to a narrower
group of industries.

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guide to the subject matter. Specialist advice should be sought
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