Global uncertainty is expected to slow near term economic growth. In 2016, real GDP expanded by only 2.5 per cent and the Conference Board of Canada’s World Outlook: Winter 2017 expects that number to rise to only 2.8 per cent in 2017.
In a statement released Feb. 2, Kip Beckman, Principle Economist for the Conference Board of Canada, said the cause of this weak economic outlook is uncertainty. "A Trump administration, victory by the "leave" side in the Brexit referendum, the rise in popularity of parties on the far right in Europe, and China's ongoing structural adjustments are just some of the factors causing uncertainty on the world stage.”
Threats to get rid of NAFTA
Though the American economy is currently in good shape, Trump’s threats to get rid of NAFTA and impose tariffs on imports from China could start a trade war, ultimately hurting U.S. export growth should China and Mexico implement retaliatory tariffs on U.S. imports, says the outlook report.
With the Trans Pacific Partnership dissolved, there will be concern about the potential for a trade war with the Asia-Pacific region. A result of Trump’s policies is the rise of the U.S. dollar against Asian currencies due to elevated U.S. interest rates, making Asian markets more competitive in the U.S. market. The Asia-Pacific region is overall expected to grow around 4.5 to 5 per cent.
Growth in the European Union expected to decline
The report adds that because of Brexit, growth in the European Union is expected to decline. The biggest concern is if the UK leaves the EU and loses tariff-free access to the EU market. Europe will also be affected if a trade war between the U.S. and China unfolds.