NAFTA exit would lead to year-long recession in Canada — Conference Board

Conference Board report on the fallout from a NAFTA breakup

The Conference Board of Canada attempted to quantify the economic impact of a failure of NAFTA.

They say that in the year following a breakup, the economy would contract 0.5% in a best-case scenario, assuming no other trade-war type moves. That would be followed by a recovery afterwards due to a lower exchange rate and looser monetary policy.

«Higher import prices, the resulting decline in domestic consumption, and the loss of export competitiveness would lead to a C$3.3-billion drop in real business investment spending in Canada in the first year following a NAFTA collapse,» the said.

They estimate a 1.8% decline in imports and exports in the aftermath, with tariffs rising to around 2% under WTO rules for both the US and Canada.

A hit to business confidence could lead to a temporary reduction in near term investment as firms wait and assess how the new trading rules affect them,» The Conference Board said.

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