Macroeconomic Events and Their Impacts on Industries in USA and Canada

RUNNING HEAD: FINANCE
Finance

Finance 2
Macroeconomic events
North American Free Trade Agreement (NAFTA) is a deal between three countries that went
into effect from 1 January 1994 and removes the trade barriers between Canada, USA and
Mexico. The main aim of this pact is to improve the cross border trading in North America
by eliminating and reducing the tariffs and some barriers. As a result, most of the revenue got
generated from the trading between Mexico and U.S and Canada-U.S trade (Council on
Foreign Relations. 2017). As far as U.S economy is concerned, the agreement has a positive
impact on it as it increase the business between USA and its North American neighbours. In
addition, as per the facts and figures, the trade with Canada and Mexico added $80 million
dollars to the economy of United States. However, it is been predicted that 0.5 per cent
decline will be there in the Canada’s economy and a loss of approx. 85000 jobs during the
year will incur if NAFTA got terminated. Nevertheless, this would be a best case scenario for
the post-NAFTA world (CBC. 2018).
Another mega event which has taken place during this year is the China-US trade war. On 6
July 2018, the president Donald Trump placed tariffs worth $34 billion on the Chinese goods
as a part of the new tariff policy. The reason behind such action is to reduce the trade deficit
of USA with China and to increase the national security of the country. Considering the
effects of war, the prices of the products will increase and causes inflation which will
eliminate the purchasing power of the Americans, resulting in weaker economy. The retailers
says that the trade war will affect the price of wide range of consumer goods and the prices
for hardware devices of information technology will fall by 2.3 percent in that time.
The Canadian Dollar also play a major role in becoming one of the big event during 2018. It
was reported on May 31 that as and when the USA put tariffs on Canadian and Mexican
products, the dollar falls. As a result of which, the economy slumps and CAD falls after the