For the sake of our collective sanity, the following article will make no mention of the pandemic. You’re welcome!
President Donald Trump was no friend of Canadian manufacturers. His unjustified tariffs on steel and aluminum hammered Canadian industry and created investment-sapping uncertainty. His aggressive tax reforms succeeded, to some extent, in drawing investment away from countries like Canada to the United States.
So, President Joe Biden will be welcome news for Edmonton’s vibrant manufacturing sector, right? Well, not necessarily.
One of President Biden’s signature promises is to reverse Trump’s corporate tax reforms. Trump slashed corporate tax rates to 21 per cent. Biden’s plan is to hike it back up to 28 per cent. If he follows through, this will give Canadian manufacturers a bit of an advantage on this one measure. On the other hand, the United States is Canada’s largest market for manufactured goods and a healthy US economy is generally good for Canadian business.
Biden’s platform also includes a 10 per cent advanceable tax credit for companies on a broad range of investments designed to create manufacturing jobs in the U.S. Things like re-opening closed facilities, re-shoring manufacturing jobs and expanding facilities may qualify for this credit. This may make the US a more attractive place to invest and incentivize US companies to move their Canadian facilities back to the United States. Naturally, this will be balanced against the increase in corporate taxes and other policies. Regardless, the Canadian government may want to match this policy.
Biden promises in his first week in office to enforce the 1933 Buy American Act. Among other things, this will tighten and expand Buy America rules for public infrastructure projects. He will issue an executive order to ensure American steel, aluminum, and other critical materials are used across federal-funded American infrastructure products while eliminating current loopholes in implementation of the Buy America Act that covers public transportation projects.
The new administration plans to create a new “Made in America” Office within the White House Office of Management and Budget tasked with managing American procurement policy to ensure compliance with Buy American rules. It will review all potential Buy American waivers to ensure compliance with the Administration’s objectives to protect American jobs. The mission of the office will be to create more high-paying American jobs through procurement policy.
This would have major implications for Canadian manufacturers. Ottawa appears to be pushing back by emphasizing the complex supply chain linkages between Canada and the U.S., and how a “Buy American” plan would be unworkable. We wish them luck.
Finally, Biden promises to rescind federal approval for the $8 billion Keystone XL pipeline project. For this reason alone, Biden is bad news for a wide swath of Alberta manufacturers and the Alberta government’s bottom line.
There are plenty of reasons for Edmonton manufacturers to be both optimistic and concerned about the Biden administration. Good riddance to Trump’s disruptive and protectionist trade policies. Biden’s higher taxes and more regulation may make Canada more competitive, but the fate of Keystone XL will dominate Alberta-US relations for months and possibly years to come.
Canadian Manufacturers & Exporters (CME) is the voice of Canadian manufacturing. CME represents more than 2,500 companies who account for an estimated 82 per cent of manufacturing output and 90 per cent of Canada’s exports.