For Canada, U.S. election has stakes beyond trade

With protectionism here to stay under Trump or Biden, greater infrastructure spending could benefit some corners of the Canadian trucking industry.

Nate Tabak

· Friday, October 30, 2020

The U.S. presidential election probably won't mean big changes to trade policy with Canada. But the winner's economic policies could affect the freight moving across the border. (Photo: U.S. Customs and Border Protection)

If Canadians could vote in the U.S. presidential election, more than 70% would choose Joe Biden over President Donald Trump, recent polls show. A major reason: Trump’s propensity to pick trade fights with Canada from aluminum and steel tariffs to restrictions on personal protective equipment exports.

“It’s more predictable with Biden. With Trump, you just never know,” Barry Prentice, a professor of supply chain management at the University of Manitoba, told FreightWaves.

Despite starkly different approaches to international trade and foreign relations, the implications of a Biden administration or four more years of Trump may not be as significant for Canada.

“They are both pretty protectionist, so I don’t think it’s going to make a big difference for Canada there,” he said, noting that the United States-Mexico-Canada Agreement (USMCA) ultimately provides the basis for how the U.S. and Canada trade with each other.

But looking beyond trade policy, Prentice said the election outcome could affect Canada and its Canada transportation and logistics sector in terms of how the next president and Congress handle the recovery from COVID-19.

How a blue wave could boost specialized trucking in Canada

In the short and medium term, Prentice sees the sector benefiting from a Biden victory, especially a blue wave with Democrats securing control of Congress. It would bring billions of dollars in infrastructure spending. Canada stands to benefit despite Biden’s commitment to spending $400 billion in the Buy American procurement plan.

“Democrats are willing to spend more money,” Prentice said.

Beneficiaries include specialized trucking fleets in Canada that do significant flatbed operations. That sector took a major hit during the first wave of COVID-19 lockdowns, and to some extent from Trump’s tariffs on steel and aluminum.

“Any kind of infrastructure spending is going to involve steel, and the U.S. is not self-sufficient in steel. We are supplying it,” Prentice said.

Future infrastructure spending in the U.S. also could explain why TFI International (NYSE:TFII), Canada’s largest trucking and logistics company, is keeping the size of its specialized fleet relatively steady. During the third quarter of 2020, TFI reported that its U.S.- and Canada-based specialized segment had about 2,200 tractors and 6,600 trailers.

Compared to a year ago, TFI’s specialized tractor count was up 1.1% while the trailer count had increased by 4%. Its owner-operator count, however, was down 8.4%. The specialty segment reported a 6% drop in revenue versus a year ago. But the segment also took C$8.8 million in Canada Emergency Wage Subsidy payments, which would have allowed it to keep more drivers on the payroll in a better operating environment.

While Canada may benefit from additional infrastructure spending, Prentice cautioned that Biden’s plan to raise taxes on corporations and top earners could put more downward pressure on the U.S. economy.

“Moving goods depends on the economy,” Prentice said.