Uncertainty around NAFTA talks and the possibility of increased U.S. duties will contribute to a significant slowdown in the Canadian economy this year after a stellar 2017, the Conference Board of Canada says in its latest forecast.While household spending will remain the main economic driver, the pace of spending will ease amid rising interest rates, high household debt and moderating employment growth, the board’s 2018 economic outlook for Canada says. It adds that exports and business investment are unlikely to pick up the slack.The forecast notes that GDP growth began to taper off late last year, and the trend is expected to continue, with 2018 growth pegged at 1.9 per cent, down from 3 per cent in 2017.Fears that North American Free Trade Agreement negotiations will fail to produce an agreement and that the Trump administration will impose tariffs on Canadian steel and aluminum “are challenging businesses and exporters alike,” said Matthew Stewart, the economic research and analysis group’s director of national forecasting. On March 8, the U.S. president imposed a 25 per cent tariff on imported steel and a 10 per cent duty on U.S. aluminum imports, but included exemptions for Canada and Mexico that could be rescinded if the free trade talks fail.Recent Conference Board research found that real GDP would lose half a percentage point of growth in the year following the termination of NAFTA, but the impact could be larger if business confidence or foreign investment to Canada is undermined by the loss of free trade.The trade uncertainty has helped keep a lid on investment plans, with business investment spending forecast to expand by just 1 per cent in 2018, down from growth of 2.3 per cent in 2017, despite a more positive outlook for profits and sales. Stewart said some may also find Canada to be a less competitive destination for investment considering the large American tax cuts passed at the end of last year.And even with strong de ...
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