Canadian executives feel they'll benefit from the new U.S. administration's pro-business stance, but they're "extraordinarily ambivalent" about President Donald Trump and his team.
In the latest C-Suite Survey of Canada's corporate leaders, seven in 10 executives said they likely stand to gain from the President's policies and direction, though only half had faith in his broad economic policy, and fewer than one in five are assured of his ability to handle trade, immigration and foreign policies.
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This push-pull tension runs throughout the country's executive offices, the survey found. Optimism has grown in the past two quarters for both Canadian and U.S. economic growth, but business leaders are more subdued when it comes to Mr. Trump's policies and plans, and concerned about the President himself.
The quarterly survey, conducted by the Gandalf Group, collected responses from 156 chief executives across Canada between Feb. 27 and March 24 of this year.
Here's another angle on the conflicted executives: 61 per cent of business leaders believe the TSX will at least somewhat benefit from the Trump administration, thanks to its low-tax, low-regulation agenda. But nearly half of executives hold a negative view of the President, with three in five fearing he'll have a negative affect on job creation in Canada over the next two years. Three-quarters believe he'll weaken the Canadian dollar.
It's the lack of clear detail on Mr. Trump's policies so far that's throwing off some executives. "On key files, we're seeing a significant degree of unpredictability and uncertainty," says Karen Hamberg, vice-president of strategy at Westport Innovations Inc., a low-emission engine and fuel-system company in Vancouver.
This extends to the Trump administration's protectionist bent. Just over three-quarters of executives surveyed in the first quarter of this year agree global trade levels could decline under Trump . And only 15 per cent of leaders believed the administration was performing well with its trade policy.
"Isolationism generally leads to, maybe not a reduction in trade, but certainly will dampen any increase in trade that would occur when free trade takes place," said John Simmons, CEO of Victoria's Carmanah Technologies Corp., a solar technology company.
Service-sector executives named North American free-trade agreement renegotiations and restrictive free-trade policies as their top concerns, while those in resources worried most about a potential U.S. border-adjustment tax.
"I hope that the desire to have a good trading partner around energy will not draw broad-based use of a border-adjustment tax for the purpose of petroleum products," says David French, CEO of Penn West Petroleum Ltd.
But Mr. French worries that Mr. Trump's unsuccessful early endeavours, such as repealing Obamacare, might push aggressive tax reform higher on his agenda. "I think the challenge will be, can they raise enough funds from [a border adjustment] to fund the type of tax relief they're offering inside the U.S.?"
John Wright, a long-time oilman who will retire as president and CEO of Ridgeback Resources Inc. this summer, believes Mr. Trump's proposed corporate tax changes could put Canada at a disadvantage. Canada's net corporate rate is 15 per cent; Mr. Trump has expressed hope to lower the U.S. federal corporate rate to 20 per cent or lower, from 35 per cent.
If this went through, combined with a border adjustment, "we're going to struggle to compete," Mr. Wright says – as Canada and its provinces have "effectively" raised taxes on his industry through measures such as carbon taxes and changes to tax deductions for high-risk project explorations.
While 86 per cent of the executives surveyed agreed that a renegotiated NAFTA could benefit Canada, seven in 10 believe new trade talks could wind up limiting U.S.-destined exports. While Mr. Trump's team has begun its push for major "America-first" changes, many details remain unclear.
As Canadian envoys fan across the United States to lobby against protectionism, this concern is top of mind in many industries, such as the auto-parts sector, which is heavily integrated across the continent. "Much has been written about how the North American auto sector is the poster child for NAFTA," Westport's Ms. Hamberg, said. "What does this all mean for the auto sector?"
Mr. Simmons says that despite the lingering uncertainty, he expects free-trade changes: "Whether we like or dislike [Mr. Trump's] policies, it's pretty clear that he's determined to do the things he promised he would do."
The C-Suite survey echoed results from the Bank of Canada's own quarterly business-outlook survey, released last week: despite optimism for the Canadian economy and business performance, worries of U.S. protectionism and decreased competitiveness linger in executives' minds.
More business leaders, however, are feeling better about Canada-U.S. relations than before Prime Minister Justin Trudeau visited Washington to meet Mr. Trump: 56 per cent believe the political leaders will have a good relationship, compared with 31 per cent in the previous quarter's survey, largely conducted in November.
"I think there was somewhat of a mutuality of purpose [at the February meeting]," says Willy Kruh, KPMG's global chairman of consumer markets. "It clearly played well to President Trump. … If we can spur a better dialogue and better economy in the U.S., our largest trading partner, it can only be good for us."
Still, he believes Canada should be one step ahead for any trade shakeups. "Like anything in life, you need to be a chess player. You can't wait to react. You need to have a plan in place."