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CP Rail strike could be ‘detrimental’ to Canada’s economy, experts warn – Global News

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With CP Rail trains ground to a halt nationwide and thousands of workers starting to march picket lines, the anticipated strike at Canada’s second-largest railroad operator has come at one of the worst times for the country’s economy, experts say.

“The hit to the Canadian economy that this can cause is so detrimental,” Richard Powers, associate professor at the University of Toronto’s Rotman School of Management, told Global News. “I don’t know what else we can face without seeing a real collapse.”

The strike, involving nearly 3,000 engineers, conductors and other train employees, took effect early Sunday morning after a lockout initiated by the Calgary-based railway.

Read more:

CP Rail strike begins after workers locked out by employer, threatening supply chains

Following the lockout, the Teamsters Canada Rail Conference said workers were also on strike, with picketing underway at various Canadian Pacific locations. This is the fifth work stoppage since 1993, according to CP Rail.

There are 26 outstanding issues, including wages, benefits and pensions, currently causing turmoil between the two sides. While both parties are still at the table with federal mediators, significant negotiation is still foreseen. Powers doesn’t see the conflict ending before Friday.

“It appears that there are still a lot of issues yet to discuss and to agree upon. A strike coming at this time, it just adds to the confusion and chaos,” Powers said, noting the clash has come off the heels of the COVID-19 pandemic and Russia’s invasion of Ukraine, which have already drastically impacted the economy not only in Canada but across the world.

For Canadians, everything from agricultural and farm products to fuel and vehicles will be impacted, according to Powers.

“Movement of parts is so important and now you’ve just cut that off,” he said.


Click to play video: 'Reactions pour in from the Prairies as possible CP Rail lockout draws closer'



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Reactions pour in from the Prairies as possible CP Rail lockout draws closer


Reactions pour in from the Prairies as possible CP Rail lockout draws closer

According to Dennis Darby, president of the trade association Canadian Manufacturers and Exporters, a survey conducted between Feb. 8 and Feb. 28 found nine out of ten of Canadian manufacturers are facing supply chain issues.

He said Canadian manufacturers have already lost out on an estimated $10.5 billion in sales because of transportation network disruptions and they simply cannot afford another interruption.

“Adding to our concern is the fact that a labour disruption at CP Rail will deal another blow to Canada’s reputation as a good place to do business and as a reliable supply chain partner,” Darby said.

The grain industry, specifically, is anticipated to feel the impact of the strike.

“We have those waiting for the crop off the west coast, feed-lot operators waiting for product, processing facilities across the prairies and in eastern Canada in need of canola and cereal grains in order to provide bread for the store shelves. And, we’re seeing inflation increases,” Western Grain Elevator Association spokesperson Wade Sobkowich said last week.

“Everything is coming at us all at once. There are some things we can control and some things we can’t. We should be able to control a work stoppage and yet here we are facing one. This is the last thing we need right now in the grain sector and as an economy here in Canada.”

Sobkowich said roughly half of annual grain crops are exported on CP rail lines. He said average crop size ranges between 30 and 40 million metric tons.

The beef industry could also be affected as CP Rail imports corn for feeding cattle in the nation, Opher Baron, professor and academic director at the University of Toronto’s Rotman School of Business, told Global News.

“They are basically feeding the beef industry in Canada,” he said, noting much of the country’s ground transportation is done on the rails.

Canadians could pay more when buying food, clothes, and more depending how long the strike lasts, according to Baron.

Read more:

Grain shippers sound alarm amid concern over potential CP rail strike

“This strike is not a small pool. It’s potentially a big one. It can have quite a large effect,” he said.

Even in the United States, the CP rail conflict has interrupted fertilizer and other shipments to and from the country.

Canadian Pacific covers much of the U.S. Midwest and is a large shipper of potash and fertilizer for agriculture. It also carries grain from the U.S. to its northern neighbour for domestic use and exports. The railroad serves the Dakotas, Minnesota, Iowa, Illinois, Wisconsin, Missouri and other states, according to a map on its investor website.

Canadian Pacific also operates in New England and upstate New York, spokesman for CP Patrick Waldron said.

CP got 29 per cent of its 2020 freight revenue from cross-border shipments between the U.S. and Canada, its investor website states.


Locked-out workers picket the Canadian Pacific Railway headquarters in Calgary, Alta., Sunday, March 20, 2022.


THE CANADIAN PRESS/Jeff McIntosh

According to Powers, the federal government needs to be “looking at back to work legislation” to kick start the Canadian economy. However, he added that this type of measure is rarely used in Canada as it is an affront to the collective bargaining process.

“We have to respect the process. Let’s give them a chance. But at the same time, they have to recognize that at some point things have to change,” he said.

— With files from Global News’ Sean Boynton, Connor O’Donovan and The Canadian Press

© 2022 Global News, a division of Corus Entertainment Inc.

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Economy

Here is Trump economy: Slower growth, higher prices and a bigger national debt

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If Donald Trump is re-elected president of the United States in November, Americans can expect higher inflation, slower economic growth and a larger national debt, according to economists.

Trump’s economic agenda for a second term in office includes raising tariffs on imports, cutting taxes and deporting millions of undocumented migrants.

“Inflation will be the main impact” of a second Trump presidency, Bernard Yaros, lead US economist at Oxford Economics, told Al Jazeera.

“That’s ultimately the biggest risk. If Trump is president, tariffs are going up for sure. The question is how high do they go and how widespread are they,” Yaros said.

Trump has proposed imposing a 10 percent across-the-board tariff on all imported goods and levies of 60 percent or higher on Chinese imports.

During Trump’s first term in office from 2017 to 2021, his administration introduced tariff increases that at their peak affected about 10 percent of imports, mostly goods from China, Moody’s Analytics said in a report released in June.

Those levies nonetheless inflicted “measurable economic damage”, particularly to the agriculture, manufacturing and transportation sectors, according to the report.

“A tariff increase covering nearly all goods imports, as Trump recently proposed, goes far beyond any previous action,” Moody’s Analytics said in its report.

Businesses typically pass higher tariffs on to their customers, raising prices for consumers. They could also affect businesses’ decisions about how and where to invest.

“There are three main tenets of Trump’s campaign, and they all point in the same inflationary direction,” Matt Colyar, assistant director at Moody’s Analytics, told Al Jazeera.

“We didn’t even think of including retaliatory tariffs in our modelling because who knows how widespread and what form the tit-for-tat model could involve,” Colyar added.

‘Recession becomes a serious threat’

When the US opened its borders after the COVID-19 pandemic, the inflow of immigrants helped to ease labour shortages in a range of industries such as construction, manufacturing, leisure and hospitality.

The recovery of the labour market in turn helped to bring down inflation from its mid-2022 peak of 9.1 percent.

Trump has not only proposed the mass deportation of 15 million to 20 million undocumented migrants but also restricting the inflow of visa-holding migrant workers too.

That, along with a wave of retiring Baby Boomers – an estimated 10,000 of whom are exiting the workforce every day – would put pressure on wages as it did during the pandemic, a trend that only recently started to ease.

“We can assume he will throw enough sand into the gears of the immigration process so you have meaningfully less immigration, which is inflationary,” Yaros said.

Since labour costs and inflation are two important measures that the US Federal Reserve weighs when setting its benchmark interest rate, the central bank could announce further rate hikes, or at least wait longer to cut rates.

That would make recession a “serious threat once again”, according to Moody’s.

Adding to those inflationary concerns are Trump’s proposals to extend his 2017 tax cuts and further lower the corporate tax rate from 21 percent to 20 percent.

While Trump’s proposed tariff hikes would offset some lost revenue, they would not make up the shortfall entirely.

According to Moody’s, the US government would generate $1.7 trillion in revenue from Trump’s tariffs while his tax cuts would cost $3.4 trillion.

Yaros said government spending is also likely to rise as Republicans seek bigger defence budgets and Democrats push for greater social expenditures, further stoking inflation.

If President Joe Biden is re-elected, economists expect no philosophical change in his approach to import taxes. They think he will continue to use targeted tariff increases, much like the recently announced 100 percent tariffs on Chinese electric vehicles and solar panels, to help US companies compete with government-supported Chinese firms.

With Trump’s tax cuts set to expire in 2025, a second Biden term would see some of those cuts extended, but not all, Colyar said. Primarily, the tax cuts to higher earners like those making more than $400,000 a year would expire.

Although Biden has said he would hike corporate taxes from 21 percent to 28 percent, given the divided Congress, it is unlikely he would be able to push that through.

The contrasting economic visions of the two presidential candidates have created unwelcome uncertainty for businesses, Colyar said.

“Firms and investors are having a hard time staying on top of [their plans] given the two different ways the US elections could go,” Colyar said.

“In my entire tenure, geopolitical risk has never been such an important consideration as it is today,” he added.

 

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Economy

China Stainless Steel Mogul Fights to Avoid a Second Collapse

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Chinese metal tycoon Dai Guofang’s first steel empire was brought down by a government campaign to rein in market exuberance, tax evasion accusations and a spell behind bars. Two decades on, he’s once again fighting for survival.

A one-time scrap-metal collector, he built and rebuilt a fortune as China boomed. Now with the economy cooling, Dai faces a debt crisis that threatens the future of one of the world’s top stainless steel producers, Jiangsu Delong Nickel Industry Co., along with plants held by his wife and son. Its demise would send ripples through the country’s vast manufacturing sector and the embattled global nickel market.

 

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Why Trump’s re-election could hit Europe’s economy by at least €150 billion

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A Trump victory could trigger a 1% GDP hit to the eurozone economy, with Germany, Italy, and Finland most affected. Renewed NATO demands and potential cessation of US aid to Ukraine could further strain Europe.

The potential re-election of Donald Trump as US President poses a significant threat to the eurozone economy, with economists warning of a possible €150 billion hit, equivalent to about 1% of the region’s gross domestic product. This impact stems from anticipated negative trade repercussions and increased defence expenditures.

The recent attack in Butler, Pennsylvania, where former President Trump sustained an ear injury, has boosted his re-election odds. Prediction markets now place Trump’s chances of winning at 71%, a significant rise from earlier figures, while his opponent, Joe Biden, has experienced a sharp decline, with his chances dropping to 18% from a peak of 45% just two months ago.

Rising trade uncertainty and economic impact from tariffs

Economists James Moberly and Sven Jari Stehn from Goldman Sachs have raised alarms over the looming uncertainty in global trade policies, drawing parallels to the volatility experienced in 2018 and 2019. They argue that Trump’s aggressive trade stance could reignite these uncertainties.

“Trump has pledged to impose an across-the-board 10% tariff on all US imports including from Europe,” Goldman Sachs outlined in a recent note.

The economists predict that the surge in trade policy uncertainty, which previously reduced Euro area industrial production by 2% in 2018-19, could now result in a 1% decline in Euro area gross domestic product.

Germany to bear the brunt, followed by Italy

Germany, Europe’s industrial powerhouse, is expected to bear the brunt of this impact.

“We estimate that the negative effects of trade policy uncertainty are larger in Germany than elsewhere in the Euro area, reflecting its greater openness and reliance on industrial activity,” Goldman Sachs explained.

The report highlighted that Germany’s industrial sector is more vulnerable to trade disruptions compared to other major Eurozone economies such as France.

After Germany, Italy and Finland are projected to be the second and third most affected countries respectively, due to the relatively higher weight of manufacturing activity in their economies.

According to a Eurostat study published in February 2024, Germany (€157.7 billion), Italy (€67.3 billion), and Ireland (€51.6 billion) were the three largest European Union exporters to the United States in 2023.

Germany also maintained the largest trade surplus (€85.8 billion), followed by Italy (€42.1 billion).

Defence, security pressures and financial condition shifts

A Trump victory would also be likely to bring renewed defence and security pressures to Europe. Trump has consistently pushed for NATO members to meet their 2% GDP defence spending commitments. Currently, EU members spend about 1.75% of GDP on defence, necessitating an increase of 0.25% to meet the target.

Moreover, Trump has indicated that he might cease US military aid to Ukraine, compelling European nations to step in. The US currently allocates approximately €40bn annually (or 0.25% of EU GDP) for Ukrainian support. Consequently, meeting NATO’s 2% GDP defence spending requirement and offsetting the potential reduction in US military aid could cost the EU an additional 0.5% of GDP per year.

Additional economic shocks from Trump’s potential re-election include heightened US foreign demand due to tax cuts and the risk of tighter financial conditions driven by a stronger dollar.

However, Goldman Sachs believes that the benefits from a looser US fiscal policy would be marginal for the European economy, with by a mere 0.1% boost in economic activity.

“A Trump victory in the November election would likely come with significant financial market shifts,” Goldman Sachs wrote.

Reflecting on the aftermath of the 2016 election, long-term yields surged, equity prices soared, and the dollar appreciated significantly. Despite these movements, the Euro area Financial Conditions Index (FCI) only experienced a slight tightening, as a weaker euro counterbalanced higher interest rates and wider sovereign spreads.

In conclusion, Trump’s potential re-election could have far-reaching economic implications for Europe, exacerbating trade uncertainties and imposing new financial and defence burdens on the continent.

 

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