Yahoo Finance Trump presidential win in 2024 bullish for Canadian stocks with U.S. exposure: CIBC
Canadian stocks with big U.S. exposure will be a win for investors if former U.S. president Donald Trump secures a second term, according to CIBC Capital Markets analysts.
But for the broader Canadian economy, they say another Trump presidency would be “slightly negative in a world of ‘America First.’”
The 2024 U.S. presidential election is scheduled for Nov. 5. On Thursday, a new Quinnipiac University national poll found President Joe Biden with 50 per cent support among registered voters, ahead of Trump’s 44 per cent. Last week, a Reuters/Ipsos poll put Trump, the Republican frontrunner, ahead of Biden.
“As opposed to 2016, the Trump playbook is relatively well-defined - increased protectionism, tax cuts rather than increased spending, and reduced regulation are likely outcomes,” CIBC Capital Markets analyst Ian de Verteuil wrote in a note to clients. “The silver lining is when America wins, Canada typically experiences some of the economic benefits.”
The first Trump administration passed the Tax Cuts and Jobs Act in 2017, lowering the U.S. federal corporate tax rate from 35 per cent to 21 per cent. The intention was to put U.S. businesses on a more level playing field with most trading nations, after state and other taxes. Trump has argued for a reduction to 15 per cent.
“Unfortunately, possible moves by a Trump administration to lower the overall corporate tax rate, even by a modest one per cent or two per cent, will be devilishly tricky for Canada,” de Verteuil wrote. "A Liberal government propped up by the NDP is already searching for tax dollars for a national pharmacare program, and neither has shown any willingness to reduce corporate taxes."
However, he notes business-friendly U.S. tax policy has benefits for certain Canadian companies. CIBC estimates the average S&P/TSX-listed firm has over 30 per cent of its revenue and activity in the U.S.
On the trade file, CIBC expects a new Trump White House would look to shrink the U.S. deficit with Canada and Mexico, which has widened under President Biden.
“Even with USMCA [United States-Mexico-Canada Agreement] on our side, there is always the possibility of future tariffs on Canadian goods under a Trump presidency,” de Verteuil wrote.
“The first comprehensive trilateral review of USMCA takes place in 2026,” he added. “During this review, any party can announce an intent to not extend the agreement, which would then expire in 2036. While 2036 may seem long away, we note a number of EV and clean energy strategies, all situated around 2030 climate goals, could be negatively impacted given long lead times of mega projects/infrastructure.”
Stocks to buy if Trump wins in 2024
CIBC has picked five Canadian stocks set to benefit from a Trump win in 2024. They include Badger Infrastructure Solutions (BDGI.TO), Boyd Group Services (BYD.TO), GFL Environmental (GFL.TO)(GFL), Waste Connections (WCN.TO)(WCN), and TFI International (TFII.TO)(TFII).
Badger, a Calgary-based excavation services company, Winnipeg-based auto repair firm Boyd Group, and Montreal-based trucking service TFI report their financials in U.S. dollars, reflecting significant exposure to the U.S. market.
Waste management companies GFL Environmental and Waste Connections are also highly reliant on business south of the border. GFL says its services extend beyond Canada to more than half of the United States. Waste Connections services markets in 44 states, in addition to six provinces.
Jeff Lagerquist is a senior reporter at Yahoo Finance Canada. Follow him on Twitter @jefflagerquist.
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