Bank of Canada Governor Stephen Poloz has suggested there is still uncertainty surrounding Canadian trade with Trump still yet to finalise plans. At the moment, there is fortunately forecasting models that can provide some insight into the potential fallout by which the bank can plan.
The crash in oil prices last year has already had a major effect on Canada and whilst there has been recovery, things could be about to change for the worse.
There has been several months of positive readings over the last few months for Canadian GDP and whilst its unlikely to change the Banks mind on interest rates, there could be hope for the future. Depending on the effect Trump might have, things could obviously change quickly. Canada export 74% of their total goods over the border to the south and an import tax of 10% could make thousands of businesses no longer economically viable.
Businesses moving south
Canadian manufacturers have already started to consider moving production to the States and there is fears of the consequences to the Canadian economy. There would be a huge loss of jobs which would filter financially through to the general economy over the course of next year. Whilst there does seem to be little the Canadian authorities can do to counteract Trumps plans they might have to come up with something to counter the potential economic loss.
Major businesses could be in a strong position if they end up with the Canadian Government battling to convince them to stay in the US. There may have to be deductions in costs and tax to make Canada’s businesses competitive with a potential 10% export tax.