Trump had threatened that his dispute with Canada over tariffs he levied on steel and aluminum would end up costing the Canadian people a lot of money. The consumer confidence level has fallen to the lowest level in two years.
Nick Nanos, the chair of Nanos Research said: “We rarely see an all out economic threat issued by anyone to Canada. It’s probably fair to say a certain proportion of Canadians think that Canada will pay and it won’t be a pleasant experience.”
The survey shows the extent to which the trade tensions are creating anxiety about the Canadian economy. The Canadian economy is highly dependent on that of the US for exports. The heightened uncertainty created by Trump's policies could prompt both consumers and businesses to scale back spending. This uncertainty could have a greater negative threat than the actual tariffs themselves.
Later this week the first survey of business sentiment since the recent G7 meeting in Canada are expected to be released. These should provide more insight into the extent to which the trade dispute is impacting investment decisions. On Thursday the Canadian Federation of Independent Business (CFIB) will release it small business barometer. On Friday, the Bank of Canada publishes a quarterly survey of executives.
The Nanos survey
Each week, Nanos Research polls 250 Canadian asking questions on personal finances, the outlook for the economy, job security. and where real estates prices are going. Bloomberg then publishes four-week rolling averages of the 1,000 telephone responses. The Bloomberg Nanos Canadian Confidence Index is calculated from the rolling averages of the above-mentioned four questions.
For the week ending June 22, the overall index was down to 55.3 the lowest since 2016 and down from the 57.1 of the previous week. The one week gap is the largest since Nanos began its polls in 2013
The results show a decline in sentiment for all questions but the largest drop is in the outlook for the economy. Only 14.7 of those polled thought that the economy would get stronger over the next six months. This is the lowest since 2015 when Canada was technically in a recession. The percentage who thought the economy would weaken was 38.2 the highest since back in 2016.
Nanos chair,
Nik Nanos said: “Of note, there was negative pressure on all four economic indicators – personal finances, future strength of the Canadian economy, job security and future value of real estate. The most pronounced one-week drops in consumer confidence were in the Prairie regions and Ontario.”
US Canada relations are strained
An article in the Star shows the complex events that led ultimately to the Trump outburst against Trudeau at the end of the G7 summit in Canada.
The articleconcludes: "In the end, a summit meant to patch trade rifts ended with a deeper acrimony and questions about the Canada-U.S. relationship and how it could recover in the crucial weeks ahead."
Trudeau had said at a press conference at the end of the conference that the decision to impose tariffs on Canadian aluminum and steel was insulting. Trump and his advisers were angry and Trump tweeted from Air Force one that Trudeau was dishonest and weak. His trade adviser, Peter Navarro even said that there was a special place in hell for leaders such as Trudeau who negotiated in bad faith Navarro later apologized, at least for his wording. Trump refused to accept the final joint communique.
Consumer confidence often a good guide to economic health
The tension with Trump has just added fears to households that were already uneasy about the future. For much of this year consumer confidence has been low. Headwinds have included higher interest rates and a slowing of the real estate market. For three quarters in a row economic growth has been unable to grow above 2 percent. Such a slow growth rate has not happened since 2015.
While most economist expect the economy to grow over 2 percent for the remainder of 2018, the recent tariffs and looming trade war could change the outlook.
Nanos said: “We have to see whether things settle in terms of people thinking this is maybe a one-off or a significant decline is on the way."
