Do your supply chain strategies need to be modified due to the result of the U.S. presidential election?

Donald Trump’s win in last week’s U.S. presidential election will impact supply chain managers for the next four years. While the details are not yet clear, supply chain managers can modify their strategies by anticipating some of the impacts based on his past statements.

Here are some key areas that will be of interest to supply chain professionals:

Energy

Trump indicated during his campaign that he intends to make the U.S. independent of any need to import energy from OPEC or any nations that are hostile to the U.S. One way he can accomplish that is to revive the Keystone XL pipeline, which will greatly benefit Canadian oil producers, especially those in Alberta. These benefits would not be limited to just oil producers, but also to the businesses and industries that support them.

There is also a possibility that under Trump, the U.S.’s relationship with Russia will improve and lead to more energy investments in Russia by U.S. companies.

Currency

It is largely expected that Trump will increase government spending, which can result in increased budget deficits and inflation. With these factors in play, the U.S Federal Reserve will likely raise interest rates more quickly than originally forecasted. On the flip side, Trump’s policies are expected to place pressure on the Bank of Canada to cut interest rates, especially if oil prices stay low. The impact of these factors is expected to keep the Canadian dollar close to its current value of around 75 cents U.S. over the next year.

Trump has been very public about his disapproval of the current Chair of the Federal Reserve Janet Yellen, who he blamed for deliberately keeping interest rates low to benefit the previous administration. Recent presidents have traditionally avoided commenting on monetary policy. Trump, however, has hinted that he may work with Congress to rewrite laws governing the Fed’s structure that can affect its policy-making independence.

Trade

President-elect Trump has been very vocal about renegotiating or eliminating trade agreements, such as the North American Free Trade Agreement (NAFTA) and the Trans-Pacific Partnership (TPP). As a country that relies on exports, this will greatly harm the Canadian economy if Trump follows through with ending or significantly changing these agreements. 

Supply chain professionals who work for companies that rely on open trade with the U.S. should look at strategies to mitigate risk in the event Trump decides to implement election promises to discourage U.S. companies from making products overseas and imposing tariffs on imports from countries such as China, in addition to his pledge to alter trade agreements.

Trump’s protectionist measures may also result in companies moving their production facilities out of Canada and back into the U.S., and/or eliminating any plans to invest in Canada’s manufacturing sector.

Additionally, Trump’s protectionist actions may require the U.S. to withdraw from the World Trade Organization, which will leave Canada without key trade dispute resolution mechanisms with its largest trading partner.