Merchant Advance Blog

Blog Article: The Trump Effect: What Can Canadian Small Businesses Expect?

In a mere three days, the United States of America will inaugurate their next president. You may have heard some mention of him in the news lately… though, this being a business blog rather than a political one, we will steer clear of offering our explicit opinion on the governance of our southern neighbours. However, it’s a “huge!” mistake to assume that Canadian small businesses will not be affected by changes brought on by the “Trump Effect” in the leadership of the United States.

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According to analytics firm PayNet, lending activity to small businesses in Canada picked up noticeably in November on gains in the manufacturing and retail sectors, suggesting that many companies felt more confident with the U.S. election out of the way. American small businesses, according to the National Federation for Independent Business, have seen significant gains in confidence as well.

However, Trump is blatantly protectionist, which runs contrary to Ottawa’s pro-trade stance under Trudeau. Among other things, the new president has pledged to pull the U.S. out of the North American Free Trade Agreement (NAFTA). This decision, if enacted, would have a very significant effect on larger Canadian businesses dependent on trade with the United States. Small businesses, however, would likely feel less pressure from this change, dependent on the volume of import and export they conduct with American suppliers and customers, and on their reliance on traditional trade as opposed to e-commerce solutions.

One of the biggest promises of the Trump campaign was a shakeup of tax policy. Lower income tax in the United States means that economic immigrants – those relocating from around the world to find skilled labour – could be incentivized to move to the United States to look for employment. While the United States already has a slight advantage over Canadian income tax rates, this change would make it tough for Canadian small businesses to compete for labour. The opposite argument would state that lowering taxes for Americans would kick-start their economy, which, in combination with a strong dollar, would incentivize more purchasing of Canadian goods.

Which of these scenarios, among many others, will play out remains to be seen. After all, this early in the term (in fact, before the term has even started) of Donald Trump, the majority of commentary is speculative at best and the “Trump Effect” is largely being borne out as a series of reactionary measures to this speculation. Canadian small businesses would be wiser than ever to keep one eye on the policy and economic activity of American neighbours, and be strategically and financially prepared to react to any changes to the status quo.

 

 

 

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