- All eyes are on the U.S. debt ceiling crisis and its potential impact on Canadian markets
- Given how interconnected our two economies are, under a bilateral relationship worth $3.2 billion of daily business, the potential ripple effects are immense
- President Joe Biden met with congressional leaders this week, including Speaker Kevin McCarthy, his chief antagonist in this debt ceiling standoff — a legislative limit on the U.S. government’s borrowing power
- Since the Canadian and U.S. economies are so tightly linked, volatility trends, trader sentiment, and exchange rates south of the border influence what happens north of the 49th parallel, meaning borrowing costs and mortgage rates could rise further
All eyes are on the U.S. debt ceiling crisis and its potential impact on Canadian markets.
Given how interconnected our two economies are, as the United States’ top trading partner under a bilateral relationship worth $3.2 billion of daily business, the potential ripple effects are immense.
President Joe Biden met with congressional leaders this week, including Speaker Kevin McCarthy, his chief antagonist in this debt ceiling standoff — a legislative limit on the U.S. government’s borrowing power.
Treasury Secretary Janet Yellen warned last week that the current ceiling could be reached as early as June 1, at which point the U.S. would not have enough money at its disposal to pay all its bills.
In an interview with Global News, Andreas Schotter, a professor of international business at Western University’s Ivey Business School in London, Ontario, explained that Canadian companies and institutions that sell products or services or lend money to the U.S. government would feel the impact of a default almost instantly. He added that the stock markets in both countries would feel deep, negative effects.
He added that interest rates, already on the rise, would shoot higher, which would be especially hard for taxpayers and private borrowers.
In a statement, the Canadian Embassy said it has been following this issue “very closely”.
“The potential consequences of a U.S. default on its debt would be global and discussions are ongoing among the president and the executive branch and Congress.”
Canadian Associate Finance Minister, Randy Boissonnault called this a “sovereign issue” for the U.S. to deal with itself.
House Republicans have declared that they won’t agree to raise the limit without significant cuts to government spending.
Since the Canadian and U.S. economies are so tightly linked, volatility trends, trader sentiment, and exchange rates south of the border influence what happens north of the 49th parallel, meaning borrowing costs and mortgage rates could rise further.
More news will likely come to light as G7 finance ministers meet this week in Japan.
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