In recent months, trade policy announcements have begun to reshape business performance across North America, particularly highlighted by February’s S&P Global PMI data. Although tariff changes have yet to fully materialise, the uncertainty surrounding them has already influenced decision-making, indicating that this trend may persist in the coming months.
Manufacturing production in Canada and Mexico has notably contracted due to potential US tariffs on exports. Canada saw a marked reduction in output, the first decline in five months, while Mexican production has shrunk for the eighth consecutive month. Contrastingly, the US manufacturing sector experienced growth at its best pace since May 2022.
Trade uncertainties have led to significant drops in international export orders from Canada and Mexico, primarily due to cautious clients in the US market. Firms report that concerns about tariffs and escalating costs are hindering demand, resulting in Canada experiencing its fastest manufacturing export decline since September. Mexico’s exports also saw a sharp downturn, marking its steepest drop in nearly four years.
February’s data reflects widespread contractions in new export orders in Canada’s manufacturing sectors, with declines noted across consumer and investment goods. This downturn mirrors broader trends in the US, where new export orders also decreased significantly, driven by rising tariff concerns.
Inflationary pressures appear to be rising, especially in Canada, where input cost inflation has accelerated significantly. The strong US dollar is contributing to heightened costs, compelling manufacturers to increase their selling prices. Mexican manufacturers, however, reported easing input price inflation due to dwindling demand, even as input costs slightly rose.
Business sentiment in Canada took a significant hit, revealing pessimism for the first time in almost five years. Manufacturers predict production declines, driven by trade concerns. In contrast, while Mexican business sentiment also reflects some caution, it remains positive, signalling a less severe outlook than in Canada.
The uncertainty surrounding tariffs has also adversely affected the services sector in Canada, leading to decreased new orders and business activities. Simultaneously, the US services sector reported slower growth, highlighting the extensive effects of changing trade policies beyond just manufacturing industries.
Ultimately, the challenges posed by trade uncertainty reveal stark contrasts between the optimistic outlook of the US manufacturing sector and the more anxious sentiment in both Canada and Mexico, where businesses brace for possible declines amid evolving trade dynamics.
Trade policy uncertainty has adversely affected production in Canada and Mexico, as outlined by February’s S&P Global PMI data. Canadian manufacturing saw its first output drop in five months, while Mexico’s production slid for the eighth consecutive month. Both countries reported declines in export orders, driven mainly by cautious US clients amid tariff concerns, while inflationary pressures have also intensified. Business sentiment has notably plummeted in Canada, contrasting with a more tempered outlook in Mexico and a resilient US manufacturing sector.
The trade uncertainty gripping North America, particularly due to potential tariffs, has significantly impacted production and business sentiment in Canada and Mexico. Canadian manufacturing faces marked declines, reflecting deep pessimism and caution among firms. In contrast, US manufacturers remain relatively optimistic despite some dips in sentiment. As trade policies shift, understanding these dynamics is crucial for navigating future economic landscapes, especially in the services sector, which has also shown signs of strain from these developments.
Original Source: www.spglobal.com
