Worried about ‘Buy America’ policies? Here’s why you shouldn’t be

Worried about ‘Buy America’ policies? Here’s why you shouldn’t be

If you’re wondering about your company’s sales or investments in the U.S. these days, you’re not alone. Recent developments such as “America First” protectionist policies, as well as talk about renegotiating the North American Free Trade Agreement (NAFTA), have left many Canadian companies with more questions than answers. But Robert Pelletier, EDC’s Chief Representative for the U.S., says there’s good reason for Canadians to be optimistic.

The U.S. knows it has a good thing going with Canadian trade

“Canada is the number one customer in 35 states, the number two customer in another six states,” says Pelletier, “Trade and investment with Canada directly supports over 2.3 million American jobs.”

Every dollar of Canadian exports to the U.S. uses nearly 30 cents of U.S. parts or content.
Every dollar of Canadian exports to the U.S. uses nearly 30 cents of U.S. parts or content

“I’m not downplaying the impact of ‘Buy American’ policies and we’ll be watching and analyzing the situation very closely,” says Pelletier. “But we anticipate the new administration will see the benefits of our mutually-beneficial trade relationship.”

“Canada is the number one customer in 35 states, the number two customer in another six states,”

As well as expecting any changes to have less impact on Canada, protectionist policies may also be short-lived.

Why? Because other countries have tried ‘us-first’ policies – in fact, 1,200 ‘us-first’ policies have been put in place since 2008 – and history shows this approach actually slows down a country’s long-term growth. For example, during the Great Depression, protectionist policies such as tariff hikes and currency devaluations helped erase about one-quarter of world trade in just three years. Eight years later, world trade was still 10 percent below its pre-depression peak, even though production was 10 percent higher. By 1936, US GDP had only clawed its way back to 1929 levels, suggesting that protectionist practices come at a heavy cost.

U.S. goals could create new opportunities for Canadian businesses

At the same time, increased consumer confidence in the U.S., pent-up demand and plans for renewal could bring new opportunities for Canadian exporters, especially in infrastructure, oil and gas and retail.

Consumer confidence soared almost 13 Index points in November and December, the highest since mid-2001, and the National Federation of Independent Businesses says business confidence is also up. When consumers and businesses feel optimistic, they are more likely to spend.

U.S. consumers make up 70% of the world’s largest economy.
U.S. consumers make up 70% of the world’s largest economy

Increased spending would have a positive impact on markets world-wide as well as benefit Canadian business. As consumers and businesses start to spend and invest more, American businesses might not be able to keep up with the demand. Canadian companies can step in to fill the gap.

To top it off, President Trump’s call to rebuild America’s infrastructure and expand energy resources will also create opportunities for Canadian companies.

How to succeed in this new U.S. market

To deal with any doubts and protectionist policies, Canadian companies need to get busy putting plans in place to address possible impacts and outcomes.

“Start by reaching out to your U.S. customers and business partners to discuss a Plan B, including how to deal with different outcomes,” Pelletier advises. ”

“Start by reaching out to your U.S. customers and business partners to discuss a Plan B, including how to deal with different outcomes,” Pelletier advises. ” The clients I speak to in the U.S. feel there is a very positive view of Canadian suppliers, and that there are going to be more opportunities for growth.”

Also talk to trade associations in Canada and the U.S. for their advice and to learn of any plans they may have to deal with the fallout.

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