President Donald Trump has wasted no time enacting trade tariffs on neighbouring countries. Within the first few weeks of his presidency, Trump instigated trade sanctions against Canada, Mexico, and China and set his sights on the European Union and other markets. While Trump is trying to deliver a healthy American economy, with the idea that tariffs will help to repatriate American industry as people will buy domestic to avoid higher prices, there may be certain unforeseen downstream impacts from doing business in this way. The sports industry does not fall under the bracket of trade but will feel the effects of Trump policies on trade as the country navigates to a new, more protectionist trade policy.
The first to feel the effects is Canada. The main sporting export of United States’ neighbour to the north is ice hockey, with seven franchises based in Canada. According to NHL Commissioner Gary Bettman, 25% of NHL revenue comes from the ‘Canada Seven’, with teams in Toronto, Montreal, Calgary, Vancouver, Winnipeg, Ottawa, and Edmonton contributing to the economy of the league. As Bettman pointed out, all players in the NHL get paid in US dollars, so if the tariffs negatively impact the Canadian dollar relative to the US dollar, this could have a detrimental impact on player remuneration.
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The more pressing area of concern for the NHL could be the impact on revenue sharing. The NHL’s collective bargaining agreement has ensured that the revenue-sharing program redistributes 6% of total league revenue, primarily from the top 10 revenue-generating teams to financially struggling teams. The league calculates that hockey-related revenue and the top 10 highest-grossing teams contribute 50% to a pool, which is then redistributed to lower revenue teams or those in smaller markets. This is to maintain competitiveness across the league, allowing teams to compete for players in free agency and, therefore, be more competitive on the ice.
Should the Canadian dollar be impacted by the tariffs, this revenue is likely to suffer. Three of the largest revenue-generating teams are in Canada, with the Toronto Maple Leafs and Edmonton Oilers the teams with the highest revenues in the NHL, and the Montreal Canadians being the fifth largest. Should the revenue from these teams be impacted, the pool would likely shrink, as the calculation is based on total league revenue. While the Trump administration is unlikely to be deterred from its course of action by the detriment caused to the NHL, the impact could be severe. Should the revenue pool shrink, smaller market teams would see their income shrink and, therefore, may make a franchise financially unviable in certain markets, leading to potential team relocation and other downstream impacts, such as job losses and tax revenues for the market in question.
Looking ahead to the FIFA World Cup next year, the trade friction could impact the staging of the event, as Canada and Mexico are hosts along with the US. While soccer is not covered under trade, should the US escalate the trade war or should Canada and Mexico retaliate and escalate, then there could be unforeseen consequences on travel and logistics for teams competing in the competition. The NFL is largely unaffected with no teams in Canada, but both the NBA and MLS will be watching with interest, with the Toronto Raptors and Montreal CF participating in the respective leagues. Bettman has been optimistic that a resolution will present itself, but he will no doubt be nervous about the potential impact on the league.
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