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A Biden Presidency?

What would it mean for the markets?

Gordon Pape ponders a Biden presidency.By Gordon Pape, Editor and Publisher

If the public opinion surveys are right, the majority of Canadians would prefer to see Joe Biden defeat Donald Trump in the November U.S. elections.

And if the pollsters in the States are correct, that’s exactly what is going to happen. Biden appears to have a wide lead at this point.

Of course, a lot can happen in four months. But if the status quo holds, what would a Biden win mean for investors and the Canadian economy? Potentially, a lot.

So far, the former vice-president hasn’t unveiled much in terms of his platform. But his first major policy statement sent shock waves through the oil patch and cheered environmentalists.


In mid-May, the Biden campaign announced that one of his first acts as President would be to rescind the permit allowing TC Energy to build the Keystone XL pipeline. That action would kill the project once and for all.

President Barack Obama rejected Keystone on the grounds that it would contribute significantly to climate change. As his VP, Biden strongly supported the move, so it’s no surprise he would act quickly to reverse Donald Trump’s approval of the project.

That would be a huge blow to heavy oil producers and to the province of Alberta, which is investing $1.5 billion to cover construction costs to the end of 2020. That’s a lot of tax dollars down the drain if Biden indeed pulls the plug.

The Keystone XL announcement is a clear tip-off to what else we might expect from a Biden presidency. It would probably be the greenest administration in U.S. history, especially if the Democrats are able to retain control of the House and wrest the Senate from the Republicans.


The Green New Deal put forward by the party’s left wing is a smorgasbord of ideas aimed at tackling climate change on a grand scale. Some of the proposals are probably unworkable, such as upgrading every building in the U.S. to meet specific environmental standards. But it is likely a Biden administration would promote some of its key goals, including the use of green energy at the expense of fossil fuels and subsidizing electric vehicles and low-emission high-speed trains.

Under Biden, the U.S. would almost certainly rejoin the Paris Climate Agreement and we should expect a lot of re-regulation in the environmental sector, reversing the deregulation of the Trump years.


Relations with Canada should improve significantly. Biden does not believe in using tariffs as a political lever. He and Prime Minister Trudeau share many of the same views and profess to be good friends.

In other areas, I would expect a Biden government to roll back some or all of Donald Trump’s prized US$1.5 trillion corporate and personal tax cuts. The plan was passed in 2017, when the Republicans still controlled the House. Not one Democrat voted for it.

The cuts provided a huge boost for corporate profits, but instead of investing the money in plant, equipment, and jobs as the government hoped, billions were spent on share buybacks and raising dividends. That caused a backlash that extended to Capitol Hill and is still simmering.

The Trump administration was running a huge deficit even before the emergency spending for the pandemic. The Congressional Budget Office now projects a shortfall of close to $4 trillion this year. That means the cupboard will be bare if Biden takes office in January. What better way to start replenishing it than by rolling back those tax cuts?

Canada would be an indirect beneficiary if that were to happen as it would restore the tax advantage we offered to corporations prior to the Trump cuts.


How would stocks react to all this? If recent history is any indication, the markets would rise in the first year of a Biden presidency. That has been the pattern in every year but one since 1985. The exception was 2001, the first year that George W. Bush was in office, when 9/11 sent the market tumbling.

Stocks will not respond well to a boost in corporate taxes or an over-aggressive climate policy. But they would get a big lift if a coronavirus vaccine is developed and an economic recovery appears to be underway if and when Biden takes office.

One thing we can say with certainty: a Biden presidency would be light-years removed from the turmoil of the Trump years. That would come as a relief for a lot of people.


This article was originally published in The Toronto Star.