Economy, Political Risk, Week in Review
Canada’s economy slows as Trump’s tariff threat looms over trade relationship
Canada’s economy is cooling down after decent second quarter growth, but Trump’s promise of tariffs could squander the nation’s chances at continued growth. Canada’s gross domestic product data shows a dip in growth during the third quarter compared to the strong second quarter, according to TD Economics. The Bank of Canada will meet in mid-December to discuss a possible change to the interest rate.
Canada’s economy is cooling down after decent second quarter growth, but Trump’s promise of tariffs could squander the nation’s chances at continued growth. Canada’s gross domestic product data shows a dip in growth during the third quarter compared to the strong second quarter, according to TD Economics. The Bank of Canada will meet in mid-December to discuss a possible change to the interest rate.
Why it matters: A cooling economy, coupled with potential tariffs from the U.S., could put Canadian businesses at risk. As Canada’s largest trading partner, any disruption in trade with the United States would have significant implications, especially for industries that depend on cross-border sales.
The Canadian Chamber of Commerce said the national government must deploy resources to brace Canadian businesses for substantial changes to their trading relationship with the U.S., that is currently the neighboring country’s largest trading partner. President-elect Donald Trump has centered his economic policy around heightened tariffs on all trading partners, a move that many fears could lead strain trading relationships across the globe.
At the moment, it is unclear how imminent these tariffs are. Trump promised a 10% tariff on countries like Canada, a move that could hurt both nation’s economies. Canadian economists expect annual Canadian incomes to fall by 1.5% with the tariffs, with the United States falling by 1% as well, according to Newsweek.
Following Trump’s victory, Candance Laing, Canadian Chamber of Commerce President, congratulated the former president and shared hopes that the two nations would continue their mutually beneficial trade relationship.
“With an impressive $3.6 billion in daily trade, Canada and the United States are each other’s closest international partners,” Laing said. “The secure and efficient flow of goods and people across our border−enabled by the Canada-United States-Mexico Agreement (CUSMA)−remains essential for the economies of both countries.”
For credit managers engaging in trade with Canadian customers, it is important to consider how possible tariffs could reshape customer buying habits and inherent risk involved in transactions between the two countries.
According to FCIB’s Credit and Collections Survey, credit managers, often take on Canadian customers. Of the credit managers surveyed, none seemed hesitant about extending credit to these customers, with 60% selling on 1–30-day payment terms and 33% selling on 31–60-day payment terms. On average, Canadian customers are paying 14 days beyond terms.
Survey respondents found that customer payment policies and billing disputes were the largest causes of payment delays. Additionally, 27% of respondents blame cash flow issues and 18% blame unwillingness to pay.
“It is much like dealing in the U.S., unless you are working with a customer in Quebec,” one respondent wrote. “If so, be ready to have to deal with everything in French.” Another respondent wrote that Canada was largely an easy country to do business with, but customers in Quebec can be a bit more difficult in regard to collections.
If you are onboarding a customer from French Canada, it is important to keep in mind that French is the primary language and business materials should be translated in both English and French to ensure that business transactions go smoothly.
FCIB’s Credit and Collections Survey is now open. It covers Mexico, Poland, Turkey and the United States. Participants can earn ICEU/CEU points.