Country Risk: The Impact of the U.S. Presidential Election on Canada and Russia

As American citizens home and abroad cast their votes for the next President of the United States of America, the rest of the world must wait for results along with those who participated in the election.  There remains a lot that can happen between now and the final outcome, and this group of sovereign rating experts are not in the business of predicting political outcomes.  We are, however, keenly interested in how a second term for Donald Trump versus a Joe Biden administration could impact economic, social, and foreign policy.  This piece is a composition of views from the RMA Country Risk Steering Committee on how their differences in policy and approach could impact other countries or regions. 

Canada

If Biden wins:

If Joe Biden wins the U.S. Presidential election, Canada would likely benefit from fewer trade tensions, more orthodox diplomatic relations, and increased predictability in U.S. policy. Biden and Prime Minister Justin Trudeau, leader of the Liberal Party, would be more politically aligned.  Canada's economy is highly trade reliant, and the U.S. is by far Canada's biggest trading partner.  Therefore, the effects on trade policy of the U.S. 2020 presidential elections will by far be the most impactful to Canada.  However, there would be areas in which Canada would not benefit from a Biden election.  Biden has stated he would reverse President Trump's Keystone XL pipeline approval. Former President Barack Obama rejected the portion to be in the U.S., then Trump approved it, but it has been held up in courts and still has not been built.  President Trump has also been more open to allowing U.S. residents to import pharmaceuticals from Canada at cheaper prices.  A Biden victory could bring reversal of this stance, which would affect Canada's pharmaceutical industry.

If Trump wins:

Much of the trade impacts seen since President Trump came to office are now codified in the USMCA.  However, surprises continue.  As recently as August 6, Trump surprised the world by announcing reinstatement of aluminum tariffs that would include Canada’s aluminum exports.  This exemplifies the general practices of Trump not working through traditional channels that enable behind-the-scenes negotiation and predictability needed to support long-term investment.  Canadian sectors affected by Trump’s trade policy include Canada's auto industry; Canada’s dairy industry; and Canada's lumber industry, which are subjected to tariffs that raised disputes still unresolved even after passing the USMCA. 

Russia

If Trump wins:

Russia has a lot at stake in the 2020 U.S. Presidential election, with a clear divide having formed between Republicans and Democrats regarding the threat posed by Russia since the 2016 elections. With Trump having been reluctant to take any significant actions against Russia, including to condemn Russian actions as set forth by the U.S. intelligence community, a second term for Trump would likely see the U.S. continue to take a laissez-faire stance and diverge further from its traditional allies on its policies towards Russia. In addition, Trump’s seeming admiration of Putin’s tactics, his unwillingness to take any meaningful action to punish Putin’s regime, and his various statements creating a moral equivalence between U.S. and Russian political values have allowed Russia to justify its own actions in various domestic and international arenas.

If Biden wins:

A Biden presidency would likely have significant impacts on the course of U.S. policy towards Russia, with this shift more pronounced should the Democratic Party take both houses of Congress. Although, a Biden victory may also remove current limitations Republican policymakers may perceive on their ability to take action against Russia.

Biden’s political career has included a focus on foreign policy with a liberal internationalist bent. This includes working through international organizations and the international legal order. His administration would likely take a much harder line against Russia, providing support of NATO expansion and greater defense of current NATO members against Russian incursions or interference, and/or maintaining Russian suspension from the G8 due to violations of international law in the Ukraine.

Following a carrot and stick approach by taking the lead with allies imposes costs on Russia for its violations of international law and other countries’ sovereignty, including by maintaining and potentially imposing new sanctions on Russia and Russian oligarchs who support Putin, in contrast to actions by the Trump administration to try to lift existing sanctions and oppose newly planned sanctions. This would include opposing Russian interference in the Ukraine, Balkan States, Syria, etc.

In addition, Biden has put forth a proposal to label authoritarian resurgence as a key foreign policy priority for his administration, which would theoretically put the U.S. in a position to confront the current Russian administration on a multitude of additional policy issues. To the extent that the U.S. is able to rekindle existing alliances and build a coalition of the willing, there could be significant pressure brought to bear on Putin’s administration.