The trucker convoy has shuttered the Canadian economy, with consequences reaching far beyond cross-border trade and encompassing the supply chain, inflation, the labor market and economic growth.
The protests, which led Prime Minister Justin Trudeau to declare a national public order emergency on Tuesday, threaten to turn Canada’s gross domestic product negative in the first quarter, undermining forecasts of modest growth.
The protesters arrived on Jan. 28 in Ottawa and have since spread across Canada, blocking key border crossings with the United States.
Merchandise trade has seen the most obvious impact. Nearly US $1.7 billion a day in trade flows between the United States and Canada, across the longest border in the world. For a week, protesters blocked important crossings such as between Alberta and Montana, and most notably the Ambassador Bridge linking Windsor, Ontario, to Detroit, the lifeline of the North American auto industry.
The blockades forced vehicles to detour to other crossings, some of them hundreds of kilometers away.
The blockades forced vehicles to detour to other crossings, some of them hundreds of kilometers away. This has caused significant delays in deliveries, amounting to billions of dollars in lost trade.
The result has been a worsened supply chain crisis. Auto production, already hurt by the semiconductor chip shortage and severe weather, could be further curtailed.
The transportation of goods has become costlier. Inflation, which is already at a 30-year high, might inch even higher.
February’s jobs report stands to look no brighter than that of January, which showed the full impact of the omicron variant. Tens of thousands of workers near the border, especially 12,000 in the auto industry, were laid off or had their hours reduced as a result of the blockade.
Nonetheless, we expect the effect on the labor market to be short-lived and all workers to be rehired once manufacturing resumes following the Ambassador Bridge’s clearance.
The economic toll on the nation’s capital, where the protests show little sign of dispersing, is the starkest. Ottawa businesses are on their second month of closure or severely reduced revenue after a January of omicron restrictions that have shuttered indoor dining, gyms and in-person entertainment, and a February of protesters shutting down the urban core.
Although the Ambassador Bridge reopened on Sunday night, the impact of the protests will take some time to dissipate.
In the longer run, what is more concerning is Canada’s reputation as a reliable trade partner. Goods and services have been flowing seamlessly between two countries for decades.
Though the blockade was cleared relatively quickly, it might make some investors hesitate and keep their production domestic—another nod to the trend of localization in response to the pandemic after decades of globalization.
