President Donald Trump proved the naysayers wrong when he won a decisive victory on November 5, paving the way for the country’s 45th president to also be its 47th president. President-elect Donald Trump campaigned on a number of policies that will have big implications on both the Canadian economy and Canadian stocks.
Will President Trump Be Good for Canadian Stocks?
When it comes to equities, it’s important to remember that the stock market is not the economy. And there is only so much, if anything, a president can do to influence the stock market. The economy is important for investor optimism and earnings, but so too are public policy, inflation, interest rates, trends, demographics, sentiments, and geopolitical events—all factors that are outside of the control of the White House.
That said, presidents can be more business-friendly than others. And as a businessman, Donald Trump is very business-friendly. For investors, during his first presidency, Donald Trump cut the corporate tax rate to 21% from 35% when he was president and said he was willing to reduce it to 15%.
Trump said he will extend the corporate sales tax cut he introduced in his first term. They begin to phase out in 2025. Had Trump not been re-elected, those taxes would have gone up. According to Goldman Sachs, Trump’s proposed corporate tax cut from 21% to 15% would juice S&P 500 earnings by 4%. Canada’s top corporate tax rate meanwhile is 38%.
A continuation of corporate tax cuts and deregulation is expected to lead to faster economic growth, market-friendly policies, and help energize corporate profits, share prices, and dividends.
Over the long run, a Donal Trump Presidency could be good for Canadian stocks and the TSX too. Why? Donald Trump is a big advocate for the oil & gas and finance sectors—the two biggest sectors on the TSX. Energy is Canada’s top export with the U.S. accounting for 82% of Alberta’s total exports in 2023 alone. Donald Trump is also a big proponent of artificial intelligence (AI). That could bode well for Canada’s many top tech companies.
How Could President Trump’s Policies Affect the Canadian Economy?
There is a caveat to all of this of course, and that is Donald Trump’s proposed 10% to 20% tariff on all imported goods into the U.S., with much steeper levies for products on Chinese products. The U.S. is Canada’s biggest trade partner, with more than 70% of Canadian goods being exported to the U.S.
That would be a big drag on the Canadian economy and corporate earnings. A 10% universal tariff alone, coupled with retaliation from other countries, could reduce Canada’s economy by $45 billion. Though as a major trading partner, President Trump could exempt some products from these tariffs.
On top of that, President Trump said he would take another look at the United States-Mexico-Canada Agreement (USMCA), which was formerly known as the North American Free Trade Agreement, or NAFTA.
It comes up for review in 2026, although chances are good President Trump will want to make changes before that date. Again, a big talking point in those negotiations will be tariffs.
Finally, compared to the U.S. economy, which is doing quite well, the Canadian economy has flatlined. This has resulted in the Bank of Canada cutting interest rates at a much faster pace than the U.S. Federal Reserve, which has resulted in the loonie trading at its lowest level to the U.S. dollar in more than two years. Trump’s win could see the loonie fall even further.
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