Finance Essay: Macroeconomic Events Impacting US & Canadian Industries

This essay examines the impact of significant macroeconomic events, namely the North American Free Trade Agreement (NAFTA), the US-China trade war, and fluctuations in the Canadian dollar, on various industries operating in the USA and Canada. It highlights NAFTA's role in facilitating trade between the US, Canada, and Mexico, noting its positive impact on the US economy, particularly in the automotive, textile, and retail sectors. The essay also discusses the potential negative consequences of NAFTA's termination on Canada's economy. Furthermore, it analyzes the US-China trade war's effects, including increased product prices, inflation, and its impact on energy and agriculture industries. The essay also addresses the Canadian dollar's role and its depreciation due to tariffs, affecting various sectors and stock prices, while some energy sector companies experienced stock price increases. The document concludes by emphasizing the importance of monitoring changes in the Canadian dollar when purchasing company stocks.

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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

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tariffs been put on the steel and aluminium, which are imported from Canada. The decline in
CAD has impacted many industries and their share prices (PoundSterling. 2018).
Impacts on industries
All the above discussed events has affected many industries operating in USA and Canada.
The stock prices mark fluctuations and as a result, some has reported profits and some has
faced losses. The main sector which get impacted by NAFTA is automotive industry. It has
been a major employer in all the three countries. Almost about 40 percent of US two million
vehicles are exported to its partner countries. Therefore, removing NAFTA will increase the
cost for manufactures in USA and lower the investors’ returns. Textile and retail industry is
also positively impacted by this treaty and stock prices of companies like Walmart has gone
up (Industry Insider. 2017).
The US-China trade war has negatively affected the energy and agriculture industry which
forms a major part of employment in United States, specifically for the farmers, coal
producers and crude oil prices. The war put pressures on the oil prices that reported a fall of
5% during the year. However, reverse effect is there on the coal producers as the export
boosted by 61% last year because the shipments made in Asia got doubled. On July 10, the
Trump released a new list of 200 billion dollars goods which will be having a tariff of 10
percent. This directly affected the 500 companies that are engaged in exporting materials to
China and working in the industries such as automotive, food and construction materials.
While purchasing the stocks of companies, the most watched or observed thing is the changes
occurring in Canadian dollar. It is been expected that loonie may depreciate this year with a
fall of 75 cents against US dollars. It is been stated that 10% of Canada economy is been
covered by oil and gas industries and the export of energy products comprise of 14% of US
exports. The demand for the CAD is been generated by the demand for oil and energy

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products in the market. Also it can be seen from the trading done in various stock that
companies operating in energy sector like Bonavista Energy and Crew Energy has
experienced a rise in their stock prices and offers high returns to its investors (BDC. 2018).

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References
BDC. (2018). Monthly Economic Letter. Retrieved from: https://www.bdc.ca/en/articles-
tools/entrepreneur-toolkit/publications/monthly-economwic-letter/pages/1801.aspx
CBC. (2018). NAFTA termination would have modest impact on economy: Conference
Board of Canada. Retrieved from: https://www.cbc.ca/news/politics/nafta-economy-
conference-board-1.4569047
Council on Foreign Relations. (2017). NAFTA’s Economic Impact. Retrieved from:
https://www.cfr.org/backgrounder/naftas-economic-impact
Industry Insider. (2017). 5 Canadian Industries Affected by Potential NAFTA Renegotiations.
Retrieved from: https://www.ibisworld.com/media/2017/08/25/5-canadian-industries-
affected-by-potential-nafta-renegotiations
PoundSterling. (2018). Canadian Dollar Slumps after White House Slaps Tariffs on Canada,
Mexico and GDP Growth Slows in First-quarter. Retrieved from:
https://www.poundsterlinglive.com/cad/9177-canadian-dollar-today-first-quarter-gdp-
data-steel-tariffs-and-nafta-in-focus
The New York Times Retrieved from:
https://www.nytimes.com/2017/04/27/business/economy/nafta-impact-industries-cars-
agriculture-apparel-pharmaceuticals.html