Last year was a difficult year for economies worldwide, including Canada. During the pandemic, governments had to impose a series of lockdowns just to curb the spread of COVID-19. Since March 2020, Canada has imposed restrictions and lockdowns, stricter in some provinces than others, and it had resulted in a decrease in hospitalizations and cases. As a result of these restrictions, the country’s GDP for 2020 recorded a decrease of 5.1%. However, the fourth quarter of 2020 saw an annualized increase of 7.8%, according to preliminary estimates by Statistics Canada.
The economy was doing better in the fourth quarter of 2020, mainly in November and December. The goods-producing sector posted an increase of 1.2% in November while the service-producing sector grew by 0.5%. In December, the two biggest provinces, Ontario and Quebec, imposed lockdowns after the holidays. These two-week lockdowns, which were later extended to February 8th, 2021, are going to affect the new year’s economic activity. As if Canadians haven’t had enough bad news, President Biden announced a “Buy American” policy.
In a press release on Monday of last week, President Biden signed an executive order that would prevent foreign companies from obtaining U.S. government contracts. The administration elaborated on the order saying that this will allow us to spend taxpayer dollars on American made goods by American workers with American made component parts. This order also creates an agency to review waivers. The waivers are awarded to foreign companies to work with the U.S. government in limited circumstances such as national security, emergency, and humanitarian needs.
Prime Minister Justin Trudeau tried to negotiate with President Biden to include Canadian companies in the new policy. Economists from the big five Canadian banks say that the “Buy American” order will have little impact on Canadian companies. That is because the “Buy American” policy existed for nearly a century, and the amount of Canada’s economic ties to U.S. government spending has been small to negligible. The Prime Minister said we managed with the America-Mexico-Canada trade agreement, and the steel and aluminum tariffs, therefore we can manage with the newest policy.
References:
1) Friedman, G. (2021, January 27). Biden's 'Buy American' order likely to have little impact on Canadian firms, but U.S. stimulus may lift their fortunes. Retrieved February 01, 2021, from https://financialpost.com/news/economy/bidens-buy-american-order-likely-to-have-little-impact-on-canadian-firms-but-u-s-stimulus-may-lift-their-fortunes
2) Reuters. (2021, January 29). Canada's economy suffered biggest GDP drop ever in 2020, early estimate shows. Retrieved February 01, 2021, from https://financialpost.com/news/economy/canada-economy-sees-biggest-gdp-drop-ever-in-2020-november-gdp-beats
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