How the upcoming U.S. election could impact Canadian companies

With wars in Europe, the Middle East and Africa, growing economic sanctions, and heightened geopolitical tensions around the world, we’re living in uncertain times. We’ve all been impacted by the ensuing supply chain uncertainty, inflation, higher interest rates, and increased volatility in equity and commodity markets.

And 2024 will be a record-breaking year, in terms of national elections with more than two billion voters expected to go to the polls in 50 countries. Some of those elections will be consequential and bring about significant policy shifts with the potential to disrupt the status quo both in and outside each of those country’s borders.

This is certainly the case in the United States, where we send about 78% of our merchandised exports and from where we source close to half of our merchandised imports.

The U.S. also accounts for the largest source of foreign direct investment (FDI) stock in Canada and is the largest destination for Canadian investment abroad. More than C$3.3 billion in bilateral trade crosses the Canada-U.S. border on a daily basis.

The U.S. has become increasingly polarized along political lines in recent years and the latest cycle of election results—especially this century—have been won by narrow margins. In fact, two of the last six presidential elections were won by candidates who lost the popular vote. All signs currently point to equally close presidential and congressional election races this year.

Without a clear majority in either house, there could be protracted periods of legislative gridlock. Depending on the outcome of the elections, we may see more protectionist policies in the U.S. CUSMA is up for its first review in 2026 and one or more of the signatories could decide to push for changes to the agreement.
 

When navigating uncertain times, companies need to have a detailed risk mitigation strategy in place based on a thorough risk assessment. Companies need to remain vigilant in detecting emerging or potential risk and remain nimble to adjust tactics as new scenarios emerge. Export Development Canada (EDC) has a mandate to help Canadian businesses manage international business risk and we offer several solutions for this purpose. Chief among them is EDC Credit Insurance. This accounts receivable insurance protects Canadian companies against default of payments when a customer:

• declares bankruptcy;
• refuses to accept the goods you sent them;
• terminates a contract before you ship;
• can’t pay due to hostilities in their country, or export/import permits have been cancelled.

Uncertainty can also lead to greater volatility in exchange rates. An unexpected shift in exchange rates can wipe out profits, or even generate a loss when margins are small. To mitigate against this risk, companies should have a foreign exchange hedging strategy in place to budget both revenues and costs in Canadian funds. This will give them confidence when pricing their contracts, knowing their profit margins, and paying suppliers without the fear of losing money. If your company uses foreign exchange hedge instruments, EDC’s Foreign Exchange Facility Guarantee eliminates the need to post collateral as payment assurance for foreign exchange contracts, freeing up cash for operations.

Some companies may decide to expand into the U.S. to mitigate against potential market access and supply chain risk. If they do, EDC has financing solutions to help companies through that process. Through the Export Guarantee Program and our Mid-Market Lending solution, Canadian companies can get the capital they need to set up a U.S. sales office, locate a warehouse closer to their American customers, or acquire a U.S. company using its Canadian or American assets. In addition, the same accounts receivable insurance we offer the Canadian parent can be extended to its U.S. affiliate.  

And with representations in Dallas, Atlanta, and Chicago, we can also provide on-the-ground support to Canadian businesses with market assessments, knowledge products, introductions to potential buyers, and advisory on setting up a U.S. affiliate. For more information, contact our U.S. team at support@edc.ca.
 

As in any new business venture, a solid U.S. market strategy is essential. Companies need to take the time to thoroughly assess the potential opportunities and risks of entering a new market and have a growth strategy in place before tackling the market.

The United States is similar to Canada in many ways, but the following differences are worth noting:

• The U.S. is a very large market, and the level of competition can be far greater than it is in Canada.
• Companies need to factor in differences in regulation and legislation and have a plan in place to adapt accordingly.
• Generally, companies that are in the market frequently and meet with prospective customers regularly are the most likely to succeed and less likely to run into unanticipated complications.
• Because of the sheer size of the United States, some companies find taking a regional approach helpful, often concentrating in key centres along the Canada-U.S. border before venturing further afield.

Depending on their product mix, some companies may wish to probe and build the market through online sales, which can be less costly and risky than other approaches. Another good way to access the U.S. market is by leveraging your customers—Canadian, American, or foreign-owned companies. Connections in Canada can often put you in touch with their counterparts in the U.S.

Also, a Canadian company that’s already the supplier to an American company’s affiliate poses far less risk to that company than an unknown supplier. The stringent onboarding or vetting process that companies have in place for their suppliers on one side of the border is often identical to those in the other country.

For certified women- and minority-owned businesses in Canada, participation in U.S. supplier diversity programs is another excellent way to tap the U.S. market. Reciprocity agreements are in place between some Canadian and American certification organizations to facilitate the process. In all cases, companies should contact our U.S. representations for more information.

David Weiner is EDC’s regional vice-president for the United States and is based in Dallas, Texas.