Rhythmic Reasoning_Full Report_Final_EN - Flipbook - Page 21
THE DRUMMER'S EAR | RHYTHMIC REASONING
investor confidence as the U.S. has abided by the terms of the
agreement by exempting compliant goods from tariffs.
Middle ground: One or more countries push for changes in specific
areas or sectors. Canada may need to make some concessions,
causing uncertainty to rise for a short time during negotiations.
Worst case: One country, likely the U.S., does not agree to renew
the USMCA, triggering annual reviews. The U.S. could use the
review process to extract concessions. Businesses will become
more cautious about investing in Canada due to overhang of
negotiations.
Extreme case: One of the countries withdraws from the USMCA.
The vast majority of goods will likely face high tariff rates. Canadian
export activity faces major disruption, prompting urgent trade
diversification and domestic policy shifts.
UPCOMING BUDGET LIKELY TO SHOW A DEEPER DEFICIT
In the more near-term, Canadians will be watching the Federal
Liberals table the annual budget in early November. Prime Minister
Mark Carney has already announced plans to ramp up military
spending to meet NATO targets for this year and in future
years. The government also passed Bill C-5 which aims to break
down internal trade barriers and accelerate the development of
major infrastructure projects. The initiative includes measures like
creating a framework to recognize provincial standards across
jurisdictions, enable the free and efficient movement of goods,
services, and workers, and fast-track high-impact projects through
a streamlined approval process.
The upcoming budget will likely show how the trade war has
affected Canada’s economy, with the possibility that the deficit has
widened further. During the election, the Liberals campaigned on
a platform that included investments that would grow the deficit
past C$60 billion. That plan also included C$20 billion in revenues
from retaliatory tariffs on the U.S., tariffs that have now largely been
lifted, indicating that there is likely to be a shortfall in tariff revenue
relative to the Liberals’ projections.
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