News & Blog

US Government Shutdown and the Canadian Economy

The U.S. government has officially shut down following weeks of deliberations, which ultimately failed to resolve partisan disagreements on immigration and spending. This is the second shutdown since 1996, the previous was during Obama’s presidency in 2013. While American citizens will likely feel the effects of a shutdown more directly, you may be wondering to what extent Canadians will be effected.

Thousands of employees will be given a leave of absence for each day government funds remain suspended (furlough). Certain employees classified as “providing essential services”, such as border patrol agents and U.S. postal workers, as well as military, special counsel, social security services, air traffic control, and the Transportation Security Administration, will continue to work.

This means that we are still able to cross the border and receive packages. In regards to business, however, that depends on how long the U.S. government is shut down for…

Canada’s trade dependency on the United States makes circumstances like these more risky, with 75% of our trades being conducted in the U.S. it’s easy to worry how this will effect our already increased cost for certain goods. With this shutdown a significant amount of trade data and information is unavailable, including the Harmonized Tariff Schedule and the Foreign Trade Regulations. If your corporation does taxes in the U.S., you can expect delays when applying for a U.S. federal tax refund, as well as if you have requested a tax ruling.

As for right now?  Canada’s stock index continues to edge lower as a drop in oil prices weighed on energy stocks while investors are awaiting a resolution to the U.S. government shutdown. With NAFTA negotiations still under way, Trudeau is expected to push for investments in Canada, and emphasize that Canada is prepared should Trump pull the U.S. out of the North American free-trade agreement. The Bank of Canada has warned that NAFTA uncertainty will cause corporations to delay Canadian investment decisions, which in turn could lead to a major hit to the economy. This, combined with the government shutdown, could cause a ripple effect that may be difficult to bounce back from if there is no speedy re-opening.


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