Canada's Commodity Exchange Network An Insight

The United States of America and Canada have historically enjoyed the biggest trading alliance in the world; yet, according to a recent analysis from BMO Capital Markets, this relationship is currently being put to the test. Globalization took a back place to "reshoring, near-shoring, and friend-shoring" after the pandemic caused disruptions. This was because governments, particularly the United States, tried to lock down supply chains in order to protect themselves from the outbreak. From the perspective of BMO economists Michael Gregory and Shelly Kaushik, this pattern has been beneficial to both Canada and Mexico, although Mexico has benefited more than Canada. In the year that ended in the first quarter of 2024, the total amount of trade that took place between Canada and the United States was $920 billion. This equates to an average of $2.5 billion worth of trade that took place across the border each and every day. They stated that the entire amount of trade that took place between the United States and Mexico was $905 billion, and that it is on course to surpass Canada at some point during this year.

The most extensive commercial collaboration in the world is currently being evaluated.

A record tall of $5.3 trillion was come to in two-way exchange between the Joined together States and Mexico in 2022, agreeing to information given by the Joined together States Census Bureau. This happened when the southern country outperformed Canada as the foremost critical exchanging accomplice for the Joined together States. When compared to Canada, the exchange shortfall that the Joined together States has with Mexico is essentially greater. This shortage is characterized as the sum by which the esteem of imports surpasses the esteem of trades. When compared to Canada's shortage of $38 billion, Mexico's shortfall of $167 billion "is the biggest it has ever been," agreeing to the report.  This is partially a reflection of a reducing trade imbalance with China, which is raising alarms in Washington. For the previous year, the total value of products traded between Canada and the United States was close to $780 billion, while the value of services traded was approximately $140 billion. That amounts to a deficit in the trade of products of approximately $70 billion and a surplus in the trade of services of $12 billion.

How much of a blow will Canada take if the United States makes the decision to stop exporting to Canada? How much of a blow will Canada take if the United States makes the decision to stop exporting to Canada?

A thought experiment that is quite fascinating. Canada is the largest market for the United States' exports of automobiles and auto parts. A significant interruption to the production process in both Canada and the United States would result from the flow of parts back and forth, which occurs often throughout the process. In the short run, jobs in manufacturing would be impacted in both the United States and Canada simultaneously. On the other hand, Canada is home to a large number of domestic automobile production factories, which means that even though there would be some discomfort in the short term, Canada would be able to function without American automobiles. It would be necessary to switch to other overseas suppliers in order to import popular sport utility vehicles (SUVs) and light trucks from the United States. Products found in oil. The eastern seaboard of Canada receives a significant amount of its petroleum supply from the United States. Although there would be a change in supply, the oil market is highly volatile, which means that any interruption would be very transitory and would depend on the degree to which shipments would be abruptly shut off. As a result of the American action, it is quite likely that Canada would reconsider the possibility of establishing a transcanadian energy corridor, which would involve the transportation of oil and power across the country.

Taking into consideration the possibility of Canada imposing a retaliatory ban on exports, we can observe the following:

Oil imports from the United States are primarily supplied by Canada. However, in the medium run, the United States would be able to increase output, despite the fact that it would once again become dependent on less secure foreign oil. Natural Gas (NG). As is the case with oil, natural gas is a significant export to the United States. Even if there is a large quantity available on the global market, the United States would be limited in its ability to access all markets until the capacity of the pipeline was enhanced. It is electricity. A significant portion of the electricity that is used in the Northeastern United States comes from sources in Canada. The United States of America would be significantly damaged by this shortfall, which would have a negative influence on economic growth for a lengthy period of time until new power generating facilities could be constructed. Various components of any vehicle. There would be a significant influence on the manufacturing of vehicles, much as there was with the reverse Canadian trade. Up to the point where domestic manufacturers in the United States could retool and reconfigure the supply chain, foreign-owned competitors would gain a footing. It is potash. By a significant margin, Canada is the most important source of potash for fertilizer in the world. The absence of fertilizer would have a significant and detrimental effect on agricultural production in the United States. Timber. Both Canada and the United States continue to struggle with the issue of softwood lumber. The United States of America is unable to meet its own requirements for lumber. In the United States, the cost of housing would skyrocket tremendously.