The replacement for NAFTA has addressed the top concern of Canadian exporters but there are plenty of other trade concerns.
The trilateral deal between Canada, the US, and Mexico – CUSMA – has reduced some fears and led to a notable impact on investment intentions according to a new survey of 1,000 exporters by Export Development Canada.
But the Trade Confidence Index has lost the buzz of mid-year when it reached 76.5; it has slipped back to 73.8 at year-end.
"There was a lot of excitement going into the last TCI survey," said Peter Hall, Chief Economist, EDC. "Business was good and the tide of global economic growth was lifting Canadian exporters, despite the uncertainty surrounding NAFTA renegotiations at the time."
The latest TCI reading is in line with historic norms but all five major elements - domestic sales, domestic economic conditions, export sales, world economic conditions, and international business opportunities – saw weaker confidence.
“EDC's latest survey shows that trade confidence lost this early-year lift. Even with the CUSMA deal in the works, trade turbulence elsewhere seems to have undercut the overall feel-good factor. It's unfortunate because the global economy remains strong, and this is exactly the time when Canadian companies should be out there taking advantage," added Hall.
Outside of transportation which saw a modest increase, the TCI has dropped in all major Canadian sectors.
Businesses in provinces east of Ontario are feeling more confident than those to the West. The TCI is lowest in Western Canada, at 72.9, compared with 74.9 in Quebec and 74.3 in Atlantic Canada. At 73.5, Ontario is close to the national average.
Protectionism affecting global strategy
One-third of respondents said that increased protectionism was affecting their global strategy. Of those respondents, the main concerns cited were higher tariffs, the 'buy American' attitude south of the border, and reduced competitiveness.
Foreign tariffs or trade barriers were cited by respondents as the top challenge facing Canadian exporters (14%). Obtaining financing and finding skilled talent tied for the second biggest challenge (11%).
Meanwhile, the share of companies looking to increase investment more than doubled from 18% at mid-year to 41% at year-end.