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Canadian Business Confidence Knocked By US Tax Changes

Thursday, April 12, 2018

The Bank of Canada has published the findings of its latest business outlook survey, which shows some concern among firms over the impact of US trade and tax policies.

Since the spring of 2017, the Bank has asked firms whether policy announcements from the Trump administration – or the uncertainty around them – have had, or are expected to have, an impact on their business.

The Bank said that, over the past year, most companies have reported no impact to date and do not consider one likely over the next twelve months. Those reporting an impact were generally negative about such.

20.6 percent of respondents in the Q1 2018 survey, and 19.8 percent in the Q4 2017 survey said that the announcements have already had an "unfavorable" impact on their company. In the first relevant survey, for the first quarter of 2017, 10 percent reported an impact as a result of US policy.

With regards to the year ahead, 32.3 percent anticipated an unfavorable impact, broadly similar to the percentage recorded at the end of 2017.

The Bank said that firms that reported a hit "mainly referred to rising US protectionism, including changes to softwood lumber policy, the North American Free Trade Agreement (NAFTA) renegotiations, or 'Buy America' sentiments."

"These firms cited adverse effects on their sales or an increase in their costs (for example, due to tariffs.) Others reported challenges moving staff or goods across the border. Some firms in recent surveys, including those in the energy sector, also noted reduced relative competitiveness vis-a-vis US firms, pointing to US tax cuts and regulatory differences."