Which adds to the pressure on the economy
Geopolitical tensions in the Middle East and rising trade conflicts have become the main threats to the country’s economy, according to a Bank of Canada survey. High oil prices have boosted export earnings and allowed Canada to run a trade surplus for the first time in six months, OilPrice.com notes.
Energy exports rose more than 15% in March, while crude oil shipments rose nearly 19%, thanks to a surge in prices. Additional contribution to exports was provided by demand for gold and metals as protective assets, the publication notes.
At the same time, the Bank of Canada warns that expensive oil accelerates inflation and may force the regulator to tighten monetary policy again. Analysts call the situation the “oil paradox”: oil revenues support the budget and exports, but at the same time increase the costs of business and consumers.
Risks of a trade war with the US
A separate pressure factor remains the uncertainty surrounding the future USMCA agreement between Canada, the US and Mexico. OilPrice notes that the US administration is considering new tariffs and even a shift to bilateral agreements instead of the current trilateral format.
Experts warn that worsening trade relations with the U.S. can slow down Canada’s economic growth and increase the risk of recession. At the same time, the country’s authorities are trying to reduce dependence on the U.S. market by developing infrastructure and investing in the energy sector.
