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Ask an Economist -- If the U.S. goes into a recession, how does this effect Canadians?


The effects on Canada, or any other country, of a recession in the U.S. economy are difficult to predict. Much depends on how much economic interaction occurs between the two countries and how much the exchange rate between the two currencies changes during the recessionary period. For many months now, when the U.S. economy has not been in a recession, the U.S. dollar has fallen compared to other major currencies, including the Canadian dollar. What that means, in everyday terms, is that U.S. goods and services are cheaper to purchase for Canadians. To the extent that a U.S. economic recession causes a further falling of the U.S. dollar compared to the Canadian dollar, then U.S. goods and services should be even cheaper for Canadians to purchase. Therefore, for individual Canadians contemplating a trip to the U.S. for a medical procedure, or just to vacation, it should cost them less as the Canadian dollar becomes stronger compared to the U.S. dollar.

On the other hand, a U.S. recession would hurt Canadian businesses whose success is largely based on sales to the U.S. market. Not only does a falling U.S. dollar make Canadian goods more expensive to buy for U.S. businesses and consumers, but a recession would leave Americans with even less money to purchase overseas goods.



 
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