Senior executives cite Trump tax reform, NAFTA renegotiations as factors affecting their business and the economy

Almost two-thirds of Canadian C-suite executives believe that recent US tax reform and ongoing uncertainty surrounding the North American Free Trade Agreement (NAFTA) renegotiations will have a negative impact on the Canadian economy, according to the EY Capital allocation and Canadian competitiveness report.

While 52% of respondents said US tax reform is unlikely to have a significant impact on their business and capital allocation decisions, 61% agree that it will have negative repercussions for the Canadian economy.

Further, 51% believe that their US based competitors may now have an edge when it comes to competing for new business, in the wake of the new tax policy south of the border, the study found.  Their concern is not just focused on the Trump Administration. Executives are equally concerned about recent changes to Canadian tax, regulatory and fiscal policies, with 59% citing their potentially negative impact on Canadian companies and the overall economy (61%).

Conducted in spring 2018, the survey gauged the reactions of 165 business leaders on a host of Canadian and US tax and regulatory changes, NAFTA renegotiation, the Trans-Pacific Partnership (TPP), Brexit and other policy developments.

“Canadian executives are clearly already feeling the impact of the significant policy shifts we have seen from the Trump Administration, as well as other geopolitical events,” said Fred O’Riordan, National Tax Policy Leader for EY. “The response of the federal government to these concerns, and the speed of that response, will dictate how competitive Canada will remain in the short term, and could have a significant impact on business leaders’ decisions to recruit and retain, or even remain in Canada for the long term.”

When asked about cross-border or international issues, only 39% believe ongoing NAFTA renegotiation will have a negative impact on their company overall competitiveness. However, a far greater number (62%) expect the ongoing uncertainty around NAFTA to have a similar effect on the Canadian economy. On a more positive note, the report revealed that most companies are “neutral” when it comes to the implications of other trade agreements, including the Comprehensive Economic and Trade Agreement and TPP. About 60% said they expect TPP to positively impact Canadians.

Few respondents also expressed concern about Brexit renegotiations, with only 22% indicating that it will directly affect their business plans.

Access more insights from the complete Capital allocation and Canadian competitiveness report.