the effect of the high us dollar (canada)
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8/17/2019 The Effect of the High US Dollar (Canada)
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The Efect o the High US Dollar (Lower CAD) on Canada
Figure: Grah Showing the decline o the CAD in ter!" o the USD
The United States is Canada’s largest trading partner with Canada exporting
US$295.1 billion worth of goods and services to the US and i!porting US$2"#.
billion worth of goods and services fro! the!. This trade !ainl% occ&rs within
the energ%' a&to!obile' !an&fact&ring and retail sectors. s the fall of energ%
co!!odit% prices has positivel% a(ected the US)' the reverse has happenedwith the C) with da!!ing e(ects on the econo!% of Canada. To best
&nderstand this' the anal%sis will be done in the view of Canadian cons&!ers'
exporters' and the econo!% in general.
Canadian Con"u!er"
*irstl%' as a res< of the higher US +or lower C),' it was esti!ated b% the -an
of Canada that Canadian cons&!ers lost abo&t $1'"## in disposable inco!e in
2#151. Cons&!ers are expected to pa% increased prices for groceries' clothing
and other prod&cts as the% are i!ported fro! the US2 +in the case of groceries /
fresh prod&ce are i!ported fro! California and *lorida. 0ith "1 per cent of
vegetables' fr&it and n&ts i!ported fro! o&tside or in so!e instances goodsi!ported fro! China are deno!inated in US). n 2#15' fr&its and vegetables
&!ped in price between 9.1 and 1#.1 per cent' according to an ann&al report b%
the *ood nstit&te at the Universit% of 3&elph. 0ith regard to retail prices +non4
food,' prices !a% also rise and in fact' this has alread% occ&rred with apparel
prices increasing b% an overall 2 per cent. owever' it is noteworth% to state that
Canadian retailers have long ter! contracts with s&ppliers and hedge c&rrenc%
ris so the f&ll e(ects of a high Us )ollar !a% not be felt right awa%. Travel to
other co&ntries has also red&ced as a res< of a higher US dollar with cross
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8/17/2019 The Effect of the High US Dollar (Canada)
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border travel declining 1 per cent. dditionall%' the higher dollar can bene:t
investors who invested in Canadian ;<inationals s&ch as T) -an' li!entation
Co&che4Tard who draw a lot of their reven&e awa% fro! Canada.
Canadian #u"ine""e"
n theor%' Canadian !an&fact&ring b&sinesses are s&pposed to see an &pswingin exports d&e to lower C) or higher US)' however exports are growing slowl%.
This is beca&se Canada is not the onl% co&ntr% whose exports are bene:ting fro!
a higher US). Co&ntries lie ;exico and China are also assisted b% the higher US
)ollar. Therefore' the e(ect of the lower C) +or higher US), has not totall%
a(ected Canadian !an&fact&rers. n addition' so!e Canadian !an&fact&rers
have to i!port their raw !aterials fro! the US or co&ntries who <&ote their price
in US)' which !a% increase their raw !aterial costs. -&t in the long r&n'
Canadian !an&fact&rers wo&ld bene:t fro! the higher dollar. Co!!odit%
prod&cers will bene:t the !ost as their all inp&ts will be priced in C) b&t the%
will earn US) which !eans higher ret&rns for the! in ter!s of C).
The econo!$ in general
ccording to Statistics Canada' Canada’s 3)= has shown stead% growth since
2#1 which coincided with the ti!e the Canadian dollar started to lose val&e'
altho&gh this growth has been slow and has been a(ected b% the drop in oil
prices. ;oreover' invest!ent has increased especiall% in the :l! ind&str%' where
the higher dollar !aes it better for US co!panies to do in Canada. dditionall%'
the n&!ber of to&ris! arrivals and sta%cations have also increased d&ring this
period as a res< of the higher US).
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