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Bank of Canada Maps Out Potential Impact of Global Trade Wars

10 Jul 2019 13:21 | Divjot S. Mehton (Administrator)

The Bank of Canada has begun to count the potential costs of escalating trade wars on the nation’s economy in a series of analyses released Wednesday as part of a rate decision in which tensions featured prominently.

Here are how their scenarios play out:

Immediate

The trade war is already creating an C$18 billion ($13.7 billion) crater in the Canadian economy, according to the central bank.

The fallout from higher tariffs between the U.S. and China prompted the Bank of Canada to increase its estimate for how much the enduring clash over cross-border commerce is weighing on domestic and global exports as well as business investment relative to April.

These negative effects, plus China’s import restrictions on Canadian canola and meat, more than offset the positive impact from the withdrawal of American tariffs on steel and aluminum and optimism surrounding the passage of the renegotiated North American free trade agreement.

This uncertainty means Canadian exports will be 1.5% lower by the end of 2021 than would otherwise be the case, and capital spending will be curbed by 3% over the same time frame, the bank said.

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