Return of Trump: what impacts for the Quebec economy?

President Trump won the presidency of the United States again on Tuesday. During the campaign, he often stated his intention to impose tariffs on his country’s trading partners, including Canada.

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He also declared his intentions to cut taxes on American companies and increase oil production.

Several businesses here are nervous. A survey conducted last week by Manufacturers and Exporters of Quebec (MEQ) shows that nearly 60% of respondents fear the imposition of tariffs on Canadian products and services following the Republican election.

More than 75% of Quebec exports are destined for the United States. A return to protectionism would therefore hit the Quebec economy head-on. “When we look at our economy, we see that we are dependent on the American economy, which has been very strong recently. So if we want to take advantage of it, we have to make sure that we maintain our achievements,” says Simon Gaudreault, of the Canadian Federation of Independent Business (CFIB).

Several files will be monitored in the coming months. Here are four.

Four economic issues to watch with the arrival of Donald Trump

Prices everywhere!

During the campaign, Donald Trump suggested that if elected, he would impose tariffs ranging from 10% to 20% on all goods from all countries.

According to Angelo Katsoras of the National Bank, a large-scale implementation of this tariff plan could lead to a reduction of almost 5% in Canadian export volumes to the United States by the beginning of 2027. Even worse if Canada retaliates, because this would also increase costs for domestic producers and lead to a drop in import volumes, underlines the economist.

According to Desjardins, the real impact of this policy would take a year to be realized, because American companies will want to stock up on Canadian goods before the said tariffs are put in place.

Mr. Katsoras points out, however, that if he were to move forward with such a plan, Donald Trump would likely face legal challenges, significant political opposition from both parties and the risk of retaliatory tariffs from from other countries.

The battery industry

Trump, who called President Joe Biden’s climate policies the “new green scam,” has repeatedly promised to end generous federal subsidies for electric vehicles, including the Inflation Reduction Act (IRA), which has greatly helped the battery industry in the United States. Should we be worried about the battery industry here in Quebec, which is already struggling?

“It’s too early to say. But several of these factories are under construction or already open, and are located in Republican states. Senators and governors who have opened electric vehicle battery factories in their states will not say “we are scrapping everything”,” explains Daniel Breton, CEO of Electric Mobility Canada. “These people are very happy that there is an industrial renaissance in the United States thanks to the electric vehicle sector. And with the fact that we have someone like Elon Musk who strongly supported Donald Trump, this is far from saying that the carrots are cooked for the electrification of transport,” he says.

Gasoline prices

With his slogan Drill, baby drill!Donald Trump wants to increase oil production in the United States and promises to lower prices at the pump for Americans. Could Quebecers also benefit from a possible drop in fuel prices thanks to the new president?

“I don’t think so, for the simple reason that the United States is already producing almost at maximum capacity. They can’t produce much more,” says Dan McTeague, president of Canadians for Affordable Energy. “It’s rhetoric more than anything else,” he said. He adds that Trump could even cause the price of a barrel to jump if he carries out his threats against Iran, a major oil producer.

Dan McTeague instead expects the price of gasoline to increase by the time Trump takes office in January.

On the energy front, the election of Donald Trump could still be positive for the economy. “Let’s not forget that Donald Trump positioned himself in favor of the Keystone XL oil pipeline in Western Canada,” recalls Simon Gaudreault of the CFIB. That’s a more positive element. A revival of the project can result in more investment and more growth in the country, and not just in the west. Quebec would also benefit from spinoffs,” he said.

Business tax

Trump also promised to cut the corporate tax rate, from 21% to 15%, for companies that manufacture their products in the United States. In Canada, the federal corporate tax rate is generally 26.5% to 31%. This could therefore encourage businesses to move their investments and profits south of the border.

“This raises the question of competitiveness with the United States. If that happens, will our government react to that?” asks Simon Gaudreault of the CFIB.

“The re-election of Donald Trump takes place in a context of rising protectionism in the United States, which we observed during his first presidency,” adds Vincent Geloso, senior economist at the MEI. “The best way to deal with this threat to our producers is to lower our own protectionist barriers – such as supply management – ​​which would also have the merit of helping our consumers.”