3 Likely Canada-US Scenarios and Their Impact on Business

Navigating the 3 Most Likely US-Canadian Relationship Scenarios

The continuing rift between the US and Canada has deepened. Recent developments have ushered in a new wave of debates and debacles. But one thing remains; change is inevitable. From climate change to tax reform, we discuss the implications that the three likely scenarios, as discussed by Dun & Bradstreet's Former Chief Economist, Bodhi Ganguli, will have on both Canadian and American businesses.

1. The Evolving US-Canada Climate Agenda

The U.S.’s recent departure from the Paris Protocol has solidified the US’s stance on climate change. In contrast, Canada’s climate change position remains the same. Trump’s stance on climate change makes Canada’s climate policies difficult to implement given the deep integration between the two nations. To make matters worse, in his 2018 budget, Trump proposed to eliminate the 45-year-old Great Lakes Restoration Initiative. Despite recent developments, Canada should continue to adhere to international climate change policies to remain globally competitive.

2. The Do-Not Harm NAFTA Approach

Recently, the US has stated it will take a “do-not-harm” approach in renegotiating NAFTA as altering the agreement could severely impact the US agricultural sector. However, the Trump administration wants to do more than just refresh NAFTA. Trump has called for big changes with the possibility of eliminating the agreement all together. The negotiations beginning on August 17th, could majorly impact Canadian businesses and affect the American economy as a whole. Should the American government choose to follow an “American-first” agenda, Canada should explore alternative free trade agreements.

3. US Tax Reform Changes the Business Norm

As Bodhi Ganguli notes in his analysis, the Canadian national tax rate ranks third out of the 35 OECD member states. Despite its high tax rate, the US is still viewed as the ideal business hub given its large market and entrepreneurial culture. With proposed US tax reductions, this is subject to increase. Further, Canadian carbon taxes may reduce Canadian competitiveness and increase the cost of doing business. In contrast, US global competitiveness will increase due to the lack of a US carbon tax.