International trade tremors troubling Canadian businesses, report shows

iPolitics

Trade tensions around the globe are causing headaches for Canadian businesses, a new report shows. 

The report from Western Union Business Solutions (WU), which manages cross-border payments, found that 57 per cent of Canadian businesses say geopolitical developments are their biggest worries when it comes to managing foreign exchange. Joe Manimbo, senior market analyst for WU, said the report shows how factors in regional corners of the economy can widen into broader concerns for global markets.

“Global developments are some of the main things keeping companies North American companies up at night,” he said. 

The report surveyed 550 Canadian businesses about the biggest foreign exchange risk management challenges they face. Thirty-one per cent of respondents said “international trade (and) geopolitical developments” such as Brexit and U.S. trade wars were their single biggest worry, while 26 per cent pointed to “market volatility (and) timing trades” that encompass occurrences like a slowing Chinese economy or concern over Iran’s nuclear program, as what’s most concerning to them.

“The two answers combined account for 57 [per cent] of the Canadian responses, underlining just how critical it’s become to both understand and address these issues,” the report said. 

Another 22 per cent of respondents expressed concern over “regulatory (and) reporting requirements,” while 20 per cent pointed to “internal processes (and) resource,” with 1 per cent citing other reasons.

Concerns over geopolitical developments was highest for non-governmental organizations and charities, with 41 per cent saying it was there top concern. Thirty-seven per cent of mining, energy and commodity sector businesses said geopolitical developments were their top concern, with 35 per cent of manufacturing businesses also reporting it as their top worry.

Manimbo said businesses hoping to weather trade tensions must monitor international trade talks, as seen currently between the E.U. and its recently-departed U.K., as well as the U.S. and China.

“A lot of these things have just been kind of pushed to the back-burner while the coronavirus really dominates the spotlight,” Manimbo said. 

While the study was conducted before the coronavirus outbreak, Manimbo said the fast-spreading epidemic further complicates the outlook for global growth. 

“It just goes to show that what happens globally can have a major impact for some of the major economies,” he said.

The report also found that Canadian businesses may be looking to do more operations within their own borders in 2020. 

READ MORE: Canadian businesses look to expand at home amid geopolitical tensions

In terms of which countries Canadian companies are predicting less trade with over the next five years, China was ranked second highest by respondents, with nearly one in five (or 17 per cent of respondents), saying they expected a decline in operations with this market.

In the report, Nawaz Ali, Head of Insights at WU in Europe, said Canadian retailers may be reacting to US-China tariffs, pointing to the Canadian retailer ALDO Group as an example of a company that sources its products from China now face a substantial increase in tariffs. 

As well, Manimbo acknowledged that businesses in Canada and elsewhere may be looking for other alternatives as attitudes towards the Asian-power shift.

-with files from Felixe Denson

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