MNI INTERVIEW:Canada Exports Resilient Amid US-Iran Strife:EDC

Canadian exporters are poised to show another year of resilience despite ongoing U.S. tariffs and conflict in Iran, as global demand stays solid and higher energy prices create a potential windfall, the government trade bank's chief economist told MNI.

Shipments abroad declined just 2% last year according to calculations by Stuart Bergman of Export Development Canada, a surprise with many investors predicting tariffs would plunge the country into recession. While Donald Trump imposed damaging tariffs on autos, aluminum and steel, in the end 85% of Canada's exports were exempted under USMCA rules that remained in place.

Two-thirds of exporters plan to diversify into new markets to further shield Canada even if Trump takes the unlikely step of shredding bilateral free trade in the face of growing Congressional and CEO resistance, Bergman said.

“The current environment has really done a lot to change the culture around market diversification in Canada,” Bergman said. He sees opportunity in "the sheer growth numbers that you see in parts of the world that you'll never get anymore in our traditional trade partners," adding that "global trade is quite resilient." (See: MNI INTERVIEW: Canada Seeking Fish Exports Beyond China Deal) 

IRAN BUFFER

Canada also has some buffer against economic damage from the conflict in Iran, said Bergman."Higher energy prices, that certainly would be a boon to our energy exporters. We very much still are a resource-based economy." 

"On the downside, there's the risk that this eats into global demand because of the increase in prices -- in energy prices that then filter through to other prices. Consumers are already dealing with a cost of living crisis in most of our traditional trade partners." (See: MNI INTERVIEW: Trade Woes Mean BOC Stagflationary Risk-CD Howe)

Business confidence was weak at the end of last year before U.S. incursions into Venezuela and Iran according to EDC polling. The agency's semi-annual Trade Confidence Index rose 4 points to 69.7 but that's the fourth lowest figure in records back to the 1990s. 

While confidence is likely even lower now, the balance of opinion about the global economy was already -20 in the survey, suggesting less scope for significant new weakness. Questions about actual export sales showed a +36 balance of opinion.

"How this ultimately shakes out really depends on a whole bunch of assumptions right now that we just don't have our heads around -- like how long does this war last?” Bergman said.