TORONTO -- Canada's economists are casting a cautious eye toward the re-election of President Barack Obama as his administration mulls a contentious pipeline and U.S. lawmakers face a potential fiscal crisis that could stall Canadian growth.
The election results Tuesday night generated another round of questions about whether the U.S. is a step closer to putting its fiscal house in order.
The country is heading toward an critical precipice, the so-called fiscal cliff, which would be reached if gridlock in Washington prevents a deal to extend about $600 billion in tax cuts and spending beyond Dec. 31.
Some, including Canada's Finance Minister Jim Flaherty, say if those measures are not extended, the U.S. economy could sink back into recession, which would ultimately hurt Canada as the U.S. is the country's biggest trading partner.
Also still uncertain is the future of TransCanada's contentious Keystone XL pipeline that would connect oilsands crude to U.S. markets, and whether the shaky U.S. economy could weigh further on exports of Canadian goods.
"There will be a period of unease as we now turn from the politicking to the heavy lifting," said Paul Taylor, chief investment officer of BMO Asset Management Inc. in a conference call.
"I think the real question is the extent to which the president will be able to reach across the aisle to, in a bipartisan way, deal with the very heavy lifting related to the fiscal cliff."
Many businesses have been sitting on piles of cash and reluctant to make capital investments or hire new employees as they await the outcome of the fiscal cliff scenario and for some economic certainty.
Concerns include whether Obama can draft, and gain support, for an alternative budget plan before hitting the cliff at the end of the year.
"The Republicans' retention of the House, the Democrats the Senate, means Obama will face the same fractured landscape that impeded the legislative progress during the last two years of his term," said CIBC World Markets senior economist Peter Buchanan.
"That leaves markets with significant policy uncertainty leading into the fiscal cliff and debt ceiling discussions."
While a Romney win would have almost certainly ensured the startup of Calgary-based TransCanada's (TSX:TRP) Keystone pipeline, some observers have suggested that Obama will be more critical of the project.
The president has already delayed a final decision on the pipeline after Republicans sought to force an ultimatum on the State Department, prompting the Obama administration to reject the US$7.6-billion Alberta-to-Texas pipeline in its entirety in February.
The State Department stressed that the rejection was due to the fact that it would not have had enough time to properly weigh the new Nebraska route, not because of the merits of the pipeline itself.
It left the door open for TransCanada to apply for a new permit, which it did in May.
Leaders in the oil and gas industry said Wednesday they are confident that Obama won't hold the project down.
TransCanada issued a statement saying that it still believes it will be approved.
"The facts that support the approval of Keystone XL remain the same -- and the need for this pipeline grows even stronger the longer its approval is delayed," the company said.
And Enbridge (TSX:ENB) CEO Al Monaco told investors on a conference call that he doesn't see much of an impact on the oil and gas industry from the outcome of the leadership race.
"If you look at the fundamentals in the U.S. and Canadian market for crude oil, we're seeing a huge expansion in the volume that's coming forth in new production," he said.
"I think it's in everybody's interest to get new infrastructure built. I think that's been the Obama administration's view to this point and I think we'll see that going forward."
Canadian exporters will still face the uncertainty of whether to bank on an improvement to the struggling U.S. economy, which has had an impact especially on Canadian manufacturing and forestry companies contending with a decline in the U.S. housing sector.
China, once seen as an emerging market alternative for Canadian exports, has been undergoing its own flagging economic growth.
"If you're a Canadian exporter outside the energy sector then your options aren't great," said Capital Economics' chief U.S. economist Paul Ashworth in an interview.
"If exports are flagging to the U.S. then it's hard to see where else you can turn to. It's a very challenging environment globally, not just as far as the U.S. goes."
Exporters got some relief from a ballot in Michigan where voters rejected a proposed referendum on the construction of a new bridge connecting their state and Ontario.
The results of the election wouldn't do much to quell global economic concern, which persisted on Wednesday and pushed the Dow Jones to a 300-point loss, which the Toronto Stock Exchange fell 130 points.
Economic and Monetary Affairs Commissioner Olli Rehn said that the growth of the eurozone economy would grind to a near halt next year, rising a mere 0.1 per cent.
In Greece, lawmakers were set to vote on new austerity measures that could decide whether the country remains part of the eurozone and continues to receive vital bailout funds from its international creditors that would help it avoid bankruptcy.
