Skip to main content

Willy Kruh is partner-in-charge of high-growth markets, as well as global chair of consumer markets at KPMG.Russell Crawford is the national-service line leader of KPMG's U.S. corporate tax services practice.

According to this quarter's C-suite survey, many Canadian executives are cautiously optimistic about U.S. President Donald Trump's pro-business agenda. Concerns remain, however, about the impact the Trump administration will have on Canada.

Story continues below advertisement

One primary concern revolves around the potential introduction of a border-adjustment tax (BAT). In broad terms, the BAT proposes to deny an income-tax deduction for the import of products, services and intangibles to U.S. companies, while U.S. exports would be exempt from taxation. This policy could effectively raise the cost of U.S. imports by roughly 20 per cent, putting Canadian exporters of goods and services at a severe competitive disadvantage to domestic U.S. suppliers. While apprehension about the BAT is mixed, 30 per cent of resource-sector executives in Canada have voiced concern about its influence.

Read more: Canada's CEOs are optimistic, but not hot on Trump

Read more: Canadian executives offer a mixed bag of perspectives on U.S. President's performance

C-Suite results: Business leaders vary on Keystone's positive impact

Mr. Trump's stated intention to renegotiate the North American free-trade agreement is also raising alarms. Although 86 per cent of Canadian C-suite executives agree that aspects of NAFTA could be reopened and revised in ways that would benefit both countries, a full 71 per cent believe negotiations will likely favour U.S. interests.

Should the BAT come to pass, Canadian organizations may choose to set up U.S. subsidiaries to manufacture goods in the United States and relocate services to the United States that are currently sourced in Canada. Where possible, Canadian manufacturers that sell primarily to U.S. businesses may try to bypass existing distributor networks and sell directly to consumers. Because an end-user consumer is generally not able to "deduct" purchases for personal consumption, the introduction of the BAT would not affect them in the same way it will affect businesses.

It may also benefit Canadian companies to expand to markets beyond the United States. While 46 per cent of C-suite executives think Canada must put all efforts into maintaining – if not improving – trade access with the United States, 52 per cent say Canada should redouble its efforts to reach out to Asia-Pacific markets.

Story continues below advertisement

Despite the pall these potential policies cast, Canadian C-suite opinion has lifted somewhat in light of the Trump administration's support for the Keystone XL pipeline. Not surprisingly, resource-sector companies in Canada's western region anticipate the greatest benefits, with 32 per cent expecting increased market access and improved capacity to export product, 19 per cent predicting an economic boost for Western Canada and 18 per cent hoping for increased support for oil and gas development and investment.

Beyond further intertwining Canada and the United States from an oil-dependency perspective, approval of the pipeline could also position the combined countries as a global oil superpower – a result that would undoubtedly have long-term economic ramifications for Canada's oil and gas sector.

Of course, until these proposals are enacted into law, uncertainty will remain. This should compel Canada's C-suite executives to maintain a close watch on U.S. policy as it evolves, but certainly be good "chess players" by planning for the various possibilities.

Report an error Editorial code of conduct
Tickers mentioned in this story
Unchecking box will stop auto data updates
Comments

Welcome to The Globe and Mail’s comment community. This is a space where subscribers can engage with each other and Globe staff. Non-subscribers can read and sort comments but will not be able to engage with them in any way. Click here to subscribe.

If you would like to write a letter to the editor, please forward it to letters@globeandmail.com. Readers can also interact with The Globe on Facebook and Twitter .

Welcome to The Globe and Mail’s comment community. This is a space where subscribers can engage with each other and Globe staff. Non-subscribers can read and sort comments but will not be able to engage with them in any way. Click here to subscribe.

If you would like to write a letter to the editor, please forward it to letters@globeandmail.com. Readers can also interact with The Globe on Facebook and Twitter .

Welcome to The Globe and Mail’s comment community. This is a space where subscribers can engage with each other and Globe staff.

We aim to create a safe and valuable space for discussion and debate. That means:

  • Treat others as you wish to be treated
  • Criticize ideas, not people
  • Stay on topic
  • Avoid the use of toxic and offensive language
  • Flag bad behaviour

Comments that violate our community guidelines will be removed.

If your comment doesn't appear immediately it has been sent to a member of our moderation team for review

Read our community guidelines here

Discussion loading ...

Due to technical reasons, we have temporarily removed commenting from our articles. We hope to have this fixed soon. Thank you for your patience. If you are looking to give feedback on our new site, please send it along to feedback@globeandmail.com. If you want to write a letter to the editor, please forward to letters@globeandmail.com.