Canada: Silver lining to deteriorating U.S.-China trade relations - NBF

Krishen Rangasamy, analyst at National Bank Financial, suggests that they continue to expect a Q2 rebound for Canadian exporters after an ugly first quarter as the purge in U.S. imports, which hurt Canadian exporters in Q1, is more likely than not to be reversed.

Key Quotes

“According to the IMF, Canada stands to benefit from trade diversion effects in the aftermath of the escalating trade war between the U.S. and China.”

“A 1% reciprocal tariff increase between those two economies makes Canadian goods relatively more competitive, with the resulting increase in exports lifting Canada’s real value added by about 0.8%. That’s not to say one should cheer the deteriorating relationship between those two superpowers.”

“There’s a limit to trade diversion and comes a point when global supply chains and world trade volumes, and by extension global GDP growth, will suffer from earlier tariff increases. The resulting hit to commodity prices and negative spillovers on the U.S. economy, won’t be good for Canada. In other words, the U.S.-China trade war can only be beneficial to Canada if it doesn’t escalate beyond a certain point.”

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