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WASHINGTON –
With the failure of U.S. House Speaker Kevin McCarthy’s final effort to keep the government running, a shutdown is looking increasingly certain south of the border.
Economists warn both Canada’s economy and individual Canadians could suffer from impacts of a U.S. government shutdown, and that those impacts will deepen and broaden the longer it lasts.
“Canada and the U.S. are tied at the hips, so even if we are not having a shutdown in Canada…when the U.S. coughs, Canada gets the flu,” Andreas Schotter, professor of international business at Western University, told CTVNews.ca in a phone interview on Friday.
The “flu,” in this case, could feature symptoms like trade slowdowns, cross-border transportation slowdowns, stock market instability, flight disruptions, U.S. visa and work permit delays and, if the shutdown lasts long enough, increased food and fuel prices and other disruptions to the Canadian economy.
In a government shutdown, not every federal department and service goes dark. Instead, services and functions that are considered essential continue to run, while those considered not essential shut down.
How the shutdown impacts Canada will depend on which departments and services are deemed non-essential, and how time causes that list to grow, according to Chetan Dave, professor of economics at the University of Alberta.
“The longer this shutdown continues, what you start seeing is slowly bigger and bigger things are going to get stalled because they will be deemed to be non-essential,” Dave told CTVNews.ca in a phone interview on Friday.
For example, U.S. Customs and Border Protection might consider staffing at the border with Canada to be essential at the beginning of the shutdown. However, feeling the pressure of a prolonged period without funding, the agency might eventually choose to furlough some staff at the border with Canada in order to keep the border with Mexico fully staffed.
“The longer the government stays closed, the more the trade-offs they have to make as to what they will call essential and what they will call non-essential,” Dave said.
ECONOMIC IMPACTS
The United States is Canada’s chief trading partner, and the two countries exchange billions of dollars worth of goods and services each day. In 2022, U.S. imports from Canada totalled $595 billion.
Any impact the shutdown makes on the U.S. Department of State could affect U.S. investment in Canadian exports such as crude oil and natural gas, Dave explained.
“A lot of trade deals work through the State Department at some level,” he said.
“They’re going to have to prioritize their funds, and they (will) probably put those funds towards hot spots in the world as opposed to like France and Canada and Germany.”
But it’s not just a matter of what the Department of State does during the shutdown, because so many other federal departments are also involved with running the U.S. economy.
Any staffing cuts at the Canada-U.S. border could make it harder to get imports like gasoline and food into Canada, potentially driving up the prices of those commodities the longer the shutdown continues.
“If border services shut down or are reduced to minimal, we can’t move goods up and down,” Schotter said. “We will likely see an increase in gas prices…The same may happen to food security. You may feel that on the supermarket shelves, or at the check out.”
TRAVEL AND TOURISM
If imports and exports struggle to get over the land border, the situation probably won’t be any better for Canadians attempting to visit the United States, Schotter said.
Travellers could face delays driving between Canada and the U.S. if a shutdown affects U.S. Customs and Border Protection, and issues flying into and out of the U.S. if it affects the Federal Aviation Administration, which employs most air traffic controllers there.
Dave likened the possible impact on air travel to the time more than 12,000 members of the Professional Air Traffic Controllers Organization went on strike in 1981, leading to the cancellation of 7,000 flights across the country.
“Your travel is going to be quite possibly painful, just going back to the eighties when, for example, the air traffic controllers kind of shut down most airports in the U.S. when they were in a union fight,” he said.
Canadian tourists visiting the U.S. will also see their trips upended if they plan to visit any of America’s 62 national parks.
The U.S. Department of the Interior announced on Friday that most of the parks will close and be made off-limits to the public in the event of a government shutdown.
CITIZENSHIP AND IMMIGRATION
Because the federal government handles visa applications, work permits and anything related to citizenship and immigration, Canadians in the process of getting those applications and documents approved could also face delays.
“And those delays will only compound the longer the government stays closed,” Dave said. “These things have a tendency to pile up. So it’s just going to just be a little bit of an administrative headache.”
CTVNews.ca reached out to Global Affairs Canada and the Canada Border Services Agency for comment but did not receive a response by deadline
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