With the U.S. election less than a week away, Karen Routledge's phone keeps ringing with clients wondering what will happen to their investments after Tuesday.

The Calgary investment adviser hears wide-ranging concerns about the impact of possible tariffs, rising U.S. debt levels and interest rates. There's curiosity about swings in the value of the loonie and what happens if it takes several days or weeks before results are known.

The election is "definitely on people's minds," said Routledge. "It's not necessarily who's in charge, but what they're going to do once they're in charge."

Not only do many Canadians invest south of the border, but the state of the U.S. economy, currency and trade policies have implications for Canada and many countries around the globe.

"Our view is you don't want to let politics influence what your long-term portfolio strategy should be. It's like many things, it's just market noise. It's not anything you necessarily want to react to," she said.

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Canada and the U.S. are each other's largest trade partners with about $3.6 billion worth of goods and services crossing the border each day in 2023.

The election of Kamala Harris would likely mean a continuation of the status quo, experts say, while a return of Donald Trump could bring back widespread tariffs on exports to the U.S.

Election fallout

Even a Democratic sweep of the presidency, the House of Representatives and the Senate, "wouldn't look much different from a policy perspective," wrote economists at Desjardins in a report last month.

But a Republican sweep could bring a "Trump slump" and hurt both the U.S. and global economies, largely because of the expected drop in trade. Since the 1930s, trade experts say, no president has used tariffs as extensively as Trump did during his time in the White House.

Under President Joe Biden, the two countries have had some trade battles including tariffs on Canadian softwood lumber. However, another Trump presidency is a bigger threat, experts say, because of both his history of favouring significant tariffs (including on Canadian steel and aluminium) and his comments this campaign — calling himself the "tariff man" and saying "tariffs are the greatest thing ever invented."

Combined with higher tariffs on exports to the U.S., the Canadian GDP could drop by as much as 1.7 per cent by the end of 2028, relative to a Harris victory, the Desjardins economists wrote.

"While a recession may be narrowly avoided, it can't be ruled out." 

Low loonie

The Canadian dollar is already trading at relatively low levels. Lacklustre Canadian economic growth could further weaken the loonie, even pushing it below 70 cents, continuing the downward trend of the last few years. 

"The U.S. election could have a major impact on market volatility and the performance of the U.S. dollar and the Canadian dollar," said Shaun Osborne, chief currency strategist at Scotiabank.

Apart from the uncertainty of who will win the election, there is added uncertainty about when the winner will be known. Both candidates are very close and, in 2020, declaring a winner took a few days and even then was disputed by Trump.

"Even more important than who wins is, do we know who won? And is it clear or is it being contested? Should we be in a period of ongoing uncertainty with an uncertain electoral outcome that's going to have destabilizing implications for financial markets," said Travis Shaw, a senior vice-president at DBRS Morningstar, a credit ratings agency. 

Some market experts are hoping for political gridlock by having the White House, Senate and House not controlled by the same party.

"That would be the best so that no one can get any of their maybe reckless ideas passed through and then, all the politicians can focus on what really matters, which is growing the U.S. economy," said Barry Schwartz, chief investment officer at Baskin Wealth Management in Toronto.

Ahead of the 2016 election between Trump and Hillary Clinton, experts had warned that markets would sink if Trump was elected. A few days after his victory, the markets were not a disaster and they ended up performing fine during his time in office.

Investors are again worried about next week's election, but Schwartz urges clients to look further down the road.

"No question, short term, there could be volatility, but it really doesn't matter. If you look at the history of stock market performance, the market did well under Trump. The market did even better under Biden. The market did great under [Barack] Obama," he said.