After four years of frosty bilateral trade relations between Canada and the United States, the election of President Joe Biden signaled a return to a form of normalcy that had many Canadian businesses with operations south of the border breathing a sigh of relief.
But while the warm relationship between the two leaders was on full display during their first bilateral meeting in February, it may not be enough to thaw the chilled trade file. Since his election, President Biden has signed executive orders doubling down on Trump’s Buy American policies, has cancelled the Keystone XL pipeline and by all indications remains committed to putting American interests first.
So, what does this new climate-conscious and protectionist U.S. administration mean for Canadian trade? Let’s take a look.
Buy American explained
Buy American measures are intended to prioritize U.S. companies as the primary beneficiaries of federal spending while also taking aim at those who rely on foreign suppliers. It’s important to note that protectionist trade measures are nothing new in the United States and have been in place in some form or another before the Trump administration took an isolationist posture to international trade.
During the financial crisis in 2008, former president Barack Obama put forward a program that directed federal departments to buy domestically produced goods over foreign alternatives, which irritated Ottawa given how integrated the supply chain is between the two neighbours.
While Canadian officials have had some success in the past securing exemptions from some of these policies, it’s unclear whether that will be replicated this time around, even though Biden has told Trudeau the policies aren’t aimed at Canada. Nonetheless, many companies are worried — and for good reason.
Simply put, the stakes are extremely high for Canadian businesses seeking lucrative federal U.S. contracts. In 2015, Canadian firms of all sizes secured $674 million out of the $290 billion Washington awarded that year alone, which may be surprising given the harsh anti-trade talk from Trump.1 But according to the new administration, it was just that: talk. U.S. federal government contracts to foreign companies actually increased 30% under Trump, and Biden is vowing to get tough on this front.2