As Figures 2 and 3 show, aside from publicly listed companies, business insolvency filings in 2018 and 2019 were not markedly more volatile than in more recent years. The average monthly business insolvency filings totalled 230 during the period when tariffs were imposed, contrasted with 232 average monthly filings between January and May 2018 before tariffs were announced. Most Canadian small and medium-sized businesses were only indirectly or minimally affected by steel and aluminum tariffs. It appeared that retailers, service providers, manufacturers – the sectors that tend to engage more in insolvency proceedings – benefited from domestic demand for construction and manufacturing, as well as stable credit conditions. Figure 2: Business Insolvencies in Canada (2018–2019) Figure 2: Business Insolvencies in Canada (2018–2019)
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Business Insolvencies in Canada
As we look ahead, CUSMA is scheduled for a joint review in mid-2026, at which time the parties may negotiate amendments to CUSMA and confirm their intention to extend the term of CUSMA for another 16-year period. An extension would push out the expiry of CUSMA from 2036 to 2052, whereas a decision not to extend will trigger annual reviews for extension for the remainder of CUSMA’s 16-year term. The potential non-extension of CUSMA in 2026, or during subsequent annual review processes, and its continuation under unfavourable terms are both substantial economic risks for Canadian businesses. Tariff negotiations are likely to overlap with CUSMA renewal discussions, centring on steel and aluminum tariff policies, digital services taxation and softwood lumber trade issues. Under CUSMA, over 75% of Canadian exports are currently destined for the United States, a quantity that was last seen in 2006. Aside from automotives, the following sectors all have outsized exposure to the U.S. market: energy, chemical, plastic, rubber manufacturing, forestry products, and machinery. According to economic research conducted by Scotiabank, all goods exporting sectors, other than agriculture and metals and minerals, rely on the U.S. market for 74% to 100% of overall exports.
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Davies Insolvency Now: Issue 12
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