US tax & trade reforms will affect Canadian jobs: Roy Mendes

17 May 2018 6:00 PM | Mayank Bhatt
US tax and trade reforms will affect Canadian jobs: CIBC’s Roy Mendes
 
 
 ICCC and CIBC teams

The Indo-Canada Chamber of Commerce (ICCC) in collaboration with the CIBC organised the annual state of the economy talk at the Courtyard by Marriott in Brampton on May 17. Roy Mendes, Director and Senior Economist, CIBC made a presentation on global economic trends.

In his introductory remarks, Kanwar Dhanjal, President, ICCC, said that the relationship that the ICCC and the CIBC have developed over the years has benefitted both the institutions. Venki Raman of the CIBC in his remarks welcomed the CIBC clients, the ICCC members, and other guests to the program. He said the CIBC was proud to be ICCC’s lead sponsor.

Roy Mendes in his presentation covered the global economy and focused on specific areas of the Canadian economy. The global economy has experienced 3.6 % growth and Canada has experienced 3 % growth. “We have come all the way back from the days of recession. We may have a little less growth in the future,” he said.

Speaking about the upsurge in the US economy, Mendes said, the economic expansion has been one of the largest and most sustained. In terms of the GDP per capita, we will have a couple of good years before we hit recession again. It will be in 2020 when we get a headwind from fiscal and monetary policies.  

This is now the second largest expansion in the US history. Donald Trump’s recent tax reformation and tax cut will be fuel of growth and the tax cut is the eighth largest tax cut in US history. The growth impetus is good. But while the US economy will definitely improve, it will in fact give rise to a larger trade deficit, and that may lead to a more drastic line on trade policy by the US President.

He said that it is estimated that nearly three quarters of a million to a million Canadian jobs would be lost to the US economy because of the US tax and trade policy reforms.

 
 CIBC team

About the ongoing tariff war between the US and China, Mendes said, the $150 billion tariff on Chinese imports by the US will lead to retaliatory action by China on US imports. For instance, the import tariff on soya beans that China has levied on US imports. This will give rise to an opportunity for Canada.

Speaking about the predominant sector of the Canadian economy, Mendes said, “What we are facing in the oil and gas sector in Canada is a constraint in terms of both capacity and investments. We may not be doing too well in the next two years.”

He said the volatility in oil prices will continue but it won’t necessarily help Canada. Even if the US imposes fresh sanctions on Iran, its oil exports to India, China, Turkey will continue as at present making little or no dent to its oil production. Transportation of oil down south through pipelines and through railroad is mired by political and logistical bottlenecks.

On the ongoing NAFTA negotiations, he said that If the NAFTA is not signed, Canada will revert to the WTO defined most favoured nation status in its trade with the US. But the US is selectively targeting industries where Canada has an advantage – such as aviation (Bombardier), oil pipeline, paper and pulp and lumber.

Mendes was of the opinion that NAFTA appears to be a 2019 story and the continued indecision will affect small businesses. And it will also affect investment decisions, with more corporations preferring to stay invested in the US. To add to this is the overall reformed tax regime in the US, which is making the US economy more attractive for investors.

Interest rates in Canada will continue to rise and this will affect consumers drastically. It has been estimated that a one percentage point rise in the interest rate will affect consumer spending by nearly 50 percent. Interest rate hike will also affect the housing market more this time around than before. The housing market has been able to rise three times after facing a contraction because of interest rate hike. However, it will take longer to recover the next time.

Markets have been on the decline but are expected to recover within the next two to three years. Inflation is steadily rising from 2 to 2.5 percent but what is new this time is that the inflation is rising because of artificial factors such as wage rise.

The presentation was followed by a lengthy Q&A.

   
 Naresh Chawda, Kanwar Dhanjal, 
Venki Raman and Pramod Goyal
 CIBC officials and clients 
   
   
 Venki Raman, Imtiaz Seyid, 
Kanwar Dhanjal & Sudhir Anand
Venki Raman and Kanwar Dhanjal 
with CIBC officials

 


Indo-Canada Chamber of Commerce
924 The East Mall Toronto ON M9B 6K1
Tel: 416-224-0090. 

Fax: 416-916-0086. 
E-mail: iccc@iccconline.org 

Website: www.iccconline.org



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