The political paralysis in Washington, D.C., that led to sharp spending cuts and tax hikes March 1 could directly affect Canadian agriculture, says a Farm Credit Canada economist.
Jean-Philippe Gervais, chief FCC agricultural economist, was in Washington for the annual U.S. Department of Agriculture conference last month and came away convinced that the farm economy will remain healthy, even though commodity prices will soften during the next year,
However, he said the draconian budget cuts and tax hikes that took effect last week because of the lack of a congressional deal to avert the so-called “fiscal cliff” will have a direct impact on Canadian food exports to the United States and possibly on Canadian farmers forced to compete against higher American farm subsidies.
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The impact of mandatory $85 billion budget cuts this year mean tens of thousands of government employees, including border agents and food inspectors, will be laid off or forced to take days off.
“I do think we will see additional costs and delays at the border,” he said. “Canadian exporters will definitely be affected.”
Gervais said a sharp increase in U.S. personal taxes under the law will also affect demand in the American market.
