The next few months will be interesting ones for Canadian economists as they try to make sense of the real impact a higher Canadian dollar and weaker U.S. economy will have here.

When our loonie hit par with our southern neighbour’s greenback jubilation seemed to fill the air, especially among Canadian snowbirds and shoppers. Cross-border shoppers are now able to pay in Canadian funds when purchasing goods and services in neighbouring American cities, and while that may instill a certain amount of pride in our loonie, one cannot help but wonder what the real impact a weakening U.S. economy will have here once the dust settles.

As for Muskoka, while we are not an immediate cross-border destination for our American friends to the south (their visits make up just under five per cent of our tourism according to the Muskoka Tourism Marketing Agency), the notion that Canadians will vacation outside of the country given a higher Canadian dollar cannot be positive for our local economy. Given the nature of Muskoka we are highly dependant on those tourism dollars, and the small manufacturing sector we’ve got isn’t immune either.

When we consider that more than 80 per cent of Canadian exports go to the United States, the fact that our number one customer is heading into turbulent financial waters is not welcome news. That coupled with higher energy costs is putting additional strain on a Canadian manufacturing sector already burdened with having to vie for the attention of its number one trading partner while other suitors such as China become increasingly attractive.

Finance Minister Jim Flaherty gave the rise of the loonie a positive spin last week as he told reporters that a stonger Canadian dollar will make it cheaper for Canadian companies to import American technology and upgrade their own equipment. That may be true, but if the trend continues Canadian manufacturers will have to look beyond U.S. markets and start placing more eggs in other baskets, a strategy that is long overdue if the Canadian economy and way of life are to remain resilient in the face of a changing world order, at least under the current U.S. administration.

T.d.V.