Trump Trades and Tariffs Update

After months of negotiations and looming tariffs, Canada finally agreed to a revamped trade deal with the U.S. and Mexico. The “United States-Mexico-Canada Agreement” (USMCA for short) will replace NAFTA. Financial markets were indifferent to the new NAFTA, as Canada averted deepened trade wars and was able to protect the essential auto industry from steel and aluminum trade impacts “NBF Economics Canadian GDP growth forecast for 2019, which had assumed a deal would be reached, is unchanged at 1.9%. But with this earlier than-expected agreement, we’ve brought forward the timing for C$ appreciation, now expecting USD:CAD to reach 1.25 by the first quarter of next year. While the trade deal is good news, that’s not to say the job of the Canadian government is done. There are competitiveness issues to tackle.”

Despite Tariffs, Business Remains Optimistic As Bond Yields Rise

Our partners at NBF Economics offer a remarkably detailed view of current economic conditions in the U.S., Canada and the Emerging Markets. Much of the outlook remains positive, lead by the “hot” U.S. economy.

Source: GMP Economics

A sixth consecutive quarter of above-2% real GDP growth is in the cards for the U.S. economy. Consumption spending remained strong in Q3 buoyed by a healthy labour market and personal income tax cuts. Understandably U.S. Business remains optimistic while Bond Markets anticipate a rise in rates to combat inflation expectations.

Enjoy the excellent Economic Report from NBF Economics HERE.

Oh, Canada? Business Is Positive But …

Trade wars and tariffs, and many other aliments don’t seem to be impacting Canada’s business owners, but? Gross Domestic Product (GDP) crept up mildly by .1% or 10 basis points with the Friday, June 29 Statistics Canada announcement. Results were modestly in-line with Canada’s economic expectations for April 2018. These results coincided with Bank of Canada (BoC) survey taken BEFORE the G7 June kerfuffle which also offered positive sentiment from private business, as outlined by Investment Executive Canada.

How have trade talks impacted business sentiment?

While we have no formal data yet, the Globe and Mail offer an opinion that Canada’s outlook would be rosy “if it wasn’t for that U.S. trade war.”  Before the ‘Trump’ tariff and trade friction, a focus towards full-employment and hiring had increased substantially. As outlined by the NBF Economics chart below Canadian firms were eager to hire at the expense of investment. However, the business outlook has weakened.

“Despite an upbeat outlook, the balance of opinion on investment moved downward and that even though “almost all interviews” were conducted before the announcement of tariffs on steel and aluminum imports from Canada by the U.S. Business optimism likely took a subsequent dive, especially after the disastrous G7 meeting of June 8th/9th when Canada-U.S. trade relations took a turn for the worse.”

Oh Canada! Business Sentiment Survey Before G7 Meetings and Tariff Talk

It may have become ‘Oh, Oh’ Canada as business sentiment survey before the G7 meetings enjoyed some of the most positive sentiment since 2011. What is next? For a fulsome discussion on how the recent geopolitical trade wars may impact our future economic outlook, enjoy the detailed discussion from our partners at NBF Economics, HERE.

Trade wars and counter measures never result in positive outcomes with the exception of local sourcing. Here’s a quick review of the potential provincial impacts from CTV News. As consumers we may wish to spend your summer travels and vacation supporting local producers to the benefit of many.