Global chairman, consumer and retail, KPMG International and national leader of consumer and retail at KPMG in Canada
This quarter's C-Suite Survey is a pendulum of opinions. While respondents remain optimists about their own business prospects, they also show growing concern over the larger economy, particularly around interest rates, trade friction and the impact of U.S. President Donald Trump's policies.
For instance, the majority of the C-Suite are worried about the implications of politics on trade and trade agreements. Seventy-five per cent believe major changes to the North American free-trade agreement are at least somewhat likely. And overall confidence in the U.S. President's performance has waned by almost half since last quarter.
On the other hand, some see a potential "brain gain" of talented U.S. immigrants should some U.S. policies currently being bandied about come to pass. Many are also confident our value as a U.S. trade partner (nine million U.S. jobs hang in the balance with Canada, the leading trade partner for 35 states and the United States over all) will soften the NAFTA blow. Reopening NAFTA could also resolve numerous endemic challenges, such as unwieldy dispute resolution mechanisms and U.S. complaints about Canadian agricultural marketing boards.
Despite the optimism, however, concerns remain. Although one-third of the executives surveyed expect strong business growth and the majority anticipate moderate growth, they remain concerned about the potential business impacts of geopolitical uncertainty and commodity prices. They also fear rising interest rates could limit access to capital, affect debt repayment and increase borrowing costs.
Concerns also surround NAFTA. If the agreement is reopened, it's unlikely that all issues can be resolved amicably. While executives are inclined against any sort of trade war, the majority are willing to fight U.S.-imposed softwood-lumber duties. Fifty-nine per cent even advocate implementing a "Buy Canadian" policy as a retaliatory measure should the United States enact its "Buy American" provisions.
Yet, the biggest worry of all may still be under the radar. According to recent reports, Canadian businesses continue to undervalue technology disruption let alone geopolitical or demographic disruption.
Whether apprehensive or confident, political unpredictability warrants caution for Canadian businesses. It also underscores the imperative to act. Notably, more than 90 per cent of Canada's C-Suite strongly or moderately support joining other signatory countries to the Trans-Pacific Partnership in a free-trade agreement, while 86 per cent say the same about China – none of which will ultimately diminish the United States' and Canada's relationship as the close, top trading partners and allies across the world's largest undefended border. However, it strongly highlights the C-Suite's view that the current political climate should be a wake-up call that Canada can't put all its eggs in the U.S. trade basket. We have and produce much more than 35 million people need, and our agreement with the European Union should be a template for trade on the global stage.
To truly thrive into the future, Canadian businesses must look beyond trade policies to become more globally competitive. The opportunities presented by emerging technologies such as artificial intelligence, robotics, mobility, automation and analytics are significant, and could help mitigate economic risk and drive competitiveness. Failure to keep pace with this revolution is akin to getting so distracted by the weather that you miss climate change: NAFTA tweaks and microadjustments in rates won't matter if we let the opportunities of technological disruption pass us by.