No matter the result, US election predicted to squeeze Canadian profits

A National Bank of Canada report anticipates that whether Trump wins or Clinton does, corporate profits will take a hit

While the contrasts between Donald Trump and Hillary Clinton suggest two totally different possible futures for the U.S., a geopolitical analyst from the National Bank of Canada predicts one outcome.

“[R]egardless of who wins the U.S. election increased levels protectionism and/or government intervention will be on the menu. This will in turn place downward pressure on corporate profit margins,” says Angelo Katsoras in a report released on July 12.

The report notes that historically in the U.S., free trade has been a polarizing issue between the elites and the working class; the former support it, while the latter see it as a threat. The strong support garnered by Trump and Bernie Sanders, who presented a strong challenge to Clinton, has put this issue in the spotlight.

“In fact, opposition to free trade is now one of the few things that unites an otherwise deeply divided U.S. electorate. According to a March 2016 Bloomberg poll, 65% of Americans prefer more restrictions on imported goods to protect U.S. jobs, while 22% favour fewer restrictions. Another poll conducted by CNBC in the same month found that just 27% of Americans agreed that free trade has helped the United States, versus 43% who say it has hurt the country,” Katsoras notes in the report.

Trump has taken a tough anti-trade stance over his campaign, declaring opposition to the Trans-Pacific Partnership Agreement (TPP) and calling for a renegotiation of NAFTA. Clinton, on the other hand, has been forced to come out against the TPP, and has even said “the U.S. should ‘renegotiate deals that are not working for Americans.’”

With this in mind, the report foresees increased difficulties in international trading, with protectionism anticipated to prevail in the US and a risk of retaliation from other countries in the form of tariff increases. Citing specific political and legislative factors, the report also predicts that the pharmaceutical, energy, and financial sector will be affected.

“Drug companies in particular will face increased political resistance to price increases. As for the fossil fuel and the financial sectors, a Trump victory would mean less regulation, while a Clinton victory would mean tighter regulations.”

Related stories:
Investment will lag in lead up to U.S. election
How long can Brexit market jitters last?