U.S. President Donald Trump has offended Canada enough, and now, Canadian consumers are fighting back in the most effective way they know how to: boycotts.
According to CTV News, angry Canadian consumers are starting to shop “Trump-free.” That means Canadian consumers are boycotting U.S. products, companies, travel and just about anything that could potentially result in dollars flowing from Canadian consumers to U.S. corporations.
At risk to this boycott are multinational U.S. corporations with a big Canadian presence, such as McDonald’s Corporation (NYSE:MCD), Starbucks Corporation (NASDAQ:SBUX) and Walmart Inc (NYSE:WMT). Also at risk are U.S. companies that benefit big from tourism, like Macy’s Inc (NYSE:M), Nordstrom, Inc. (NYSE:JWN) and Walt Disney Co (NYSE:DIS).
But McDonald’s just reported global comparable sales growth of 5.5% and highlighted Canada was one of the markets that saw huge improvements in customer satisfaction. Macy’s reported strong growth in tourism sales last quarter. And Disney’s Parks business remains red-hot, reporting 13% growth last quarter.
So are these boycotts actually happening?
Yes. But in limited scale. And for big U.S. companies, they are nothing more than a big “so what”.
Investment takeaway? These boycotts shouldn’t impact anything. If you like MCD, SBUX or DIS, continue to stick with them. If you don’t, continue to stay away.
Here’s a deeper look.
A Canadian Boycott Won’t Last
Trade war talk is just that. Talk. Considering how globally connected the economy is today, and how reliant countries are on one another, I highly doubt that the outcome of present trade war talk is isolationism and lasting geopolitical trade tensions.
Instead, political leaders will fire egotistical remarks at one another, puff their chests, and not much will materialize in the form of long-term legislation. And with respect to Canada, if anything does change for the U.S., such change will likely be beneficial.
Just look at the numbers. Canada accounts for under 20% of America’s total exports. The United States accounts for 80% of Canada’s total exports. Clearly, the United States has significant trade negotiation leverage over Canada, and as such, any trade war banter will likely result in positive financial outcomes for big U.S. companies.
In the meantime, boycotts will happen. Some Canadian consumers will stop buying American-made goods and stop visiting American-based stores as #BuyCanadian, #BoycottUSProducts, #BoycottUSA, and #BuyLocal trend on social media.
But how long can this boycott reasonably last? Boycotts normally don’t last long. And when it comes to a situation like this — where Canadian consumers source a majority of their goods from U.S. consumers — boycott duration will be unusually short.
Therefore, whatever impact results from these Canadian boycotts will be short-lived and just a blip on the radar.
The Impact Will Be Small
Although some consumers will jump head-first into the boycotts with unrivaled Canadian patriotism (like this guy), most won’t. That is just the nature of boycotts when you have a few upset consumers going after big U.S. companies that, in the bigger picture, are simply providing goods and services that help society everywhere.
This all just sounds exceptionally familiar to the #deleteFacebook movement that supposedly swept through social media a few weeks ago. Following that movement, Facebook, Inc. (NASDAQ:FB) reported arguably its best earnings report ever, underscoring that not only was the #deleteFacebook movement small and short-lived, but it was actually meaningless in the big picture.
The Canadian boycotts are the same rodeo.
At the end of the day, Canada only accounts for 20% of America’s exports. At most, 1 out of every 100 people will participate in this boycott. Thus, the net negative impact is 0.2% on exports. But these mega U.S. companies sell most of their goods in the U.S. For example, McDonald’s gets about 36% of its revenues from the U.S. and 64% from abroad.
In this example, then, you are talking about a 0.01% impact on sales, at-most (0.2% of 67%).
That is, almost literally, nothing.
Bottom Line on Canadian Boycotts
They are happening, and they aren’t a big deal, much like the #deleteFacebook movement.
Therefore, if you like MCD, SBUX or DIS, keep liking them. If you don’t, keep not liking them. Don’t let noise surrounding Canadian boycotts impact your investment thesis.
As of this writing, Luke Lango was long MCD, M, DIS, and FB.
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