Trade tensions sap productivity

By Susan Yellin | November 22 2019 01:05PM

Photo: Freepik

Countries around the world will collectively lose about $1 trillion in productivity by the end of next year because of trade tensions, the governor of the Bank of Canada told an Ontario Securities Commission (OSC) forum.

Stephen Poloz told about 500 people attending the forum on Nov. 21 that what started out as simply verbal threats on trade became escalated with retaliatory tariffs that have rocked the world over the past year.

Poloz said that $1 trillion can never be retrieved. “You never make up that loss. It’s gone forever…the growth rate of productivity is likely to be lower forever.”

Canada felt the brunt of the intimidation when the Trump administration threatened to tear up what was then the North American Free Trade Agreement. Doing so placed great uncertainty into the Canadian market.

Investment in Canada took a step back

“Investment in Canada took a step back right there and then and has not gone back to the path it was on even now.”

Over the past year, global trade has been shrinking, basically stopping investment until the air clears, not just for Canada but for about another 40-or so countries, said Poloz.

He said officials are keeping a watchful eye for a second wave of tariff disruption. That’s had an impact on Canadian exports and investments – but housing and the service sector seem to be on the way up.

Poloz said that over the past year global financial conditions have eased quite a bit and officials are beginning to see “glimmers of response. We’ll have to watch and see if the worst is behind us -- but it doesn’t mean recovery because the policies that have been put in place have a permanent effect.”

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