What price parity?

What price parity?

For the first time since 1976, the Canadian and U.S. Dollars are on par with each other. While the U.S. economy has been lagging, the Canadian economy, bolstered by increasingly strong prices for exports, has been on an upswing

For the first time since 1976, the Canadian and U.S. Dollars are on par with each other. While the U.S. economy has been lagging, the Canadian economy, bolstered by increasingly strong prices for exports, has been on an upswing.

Bob Costello, chief economist for the American Trucking Assns. (ATA), said that having the currencies at par will be a double-edged sword. While it may suppress the volume of imports (or at the very least, keep the level stagnant), it is likely to increase U.S. exports, as these goods will become more desirable in other countries where consumers can take advantage of the low exchange rate.

Because the U.S. economy is so enormous, the change in the value of the dollar will have a far larger impact on Canada, whose economy primarily relies on exports. If one of their major trading partners is not importing as much, it may significantly affect their economy. “They export a lot to us, so they’re going to be very nervous that their exports will not grow as fast,” Costello told FleetOwner.

According to analyst Martin Labbe, president of Martin Labbe Associates, the effect of parity will likely be less severe than might be expected. “What will be more significant is the NAFTA agreement between the two countries,” he said.

U.S. industry as a whole will certainly see some effects of the dollar dropping. As the American dollar has weakened, Canadians have begun to cross the border in greater numbers to buy goods here. Building materials, especially lumber, have become more expensive since so much of it is imported from Canada. That will drive up the cost of house construction in the United States.

However, if a company produces materials in both the United States and Canada, it will be less of an issue. Instead of producing the goods in one country and shipping it to the other, the company will likely produce it in the country it is needed in without needing to ship over the border.

But companies that produce goods in only one of the countries will still need to ship cargo. Despite a possible increase in shipments to border cities, the volume will likely remain relatively steady. So the impact on trucking, especially in the U.S., should be minimal.

Hide comments

Comments

  • Allowed HTML tags: <em> <strong> <blockquote> <br> <p>

Plain text

  • No HTML tags allowed.
  • Web page addresses and e-mail addresses turn into links automatically.
  • Lines and paragraphs break automatically.
Publish