How Global Markets Shape Canadian Businesses & Currency

Meta Description: Can global markets affect local Canadian businesses and currency fluctuations? We explore the impacts here.

Running a local business allows you to be your own boss and build a recurring source of income that could outlast you. However, to succeed in Canada, knowing how the global markets affect local businesses and the Canadian dollar is important for a profitable business. This guide outlines the concepts of how the global markets and trends affect Canadian business operations.

Understanding Globalization and the Global Markets

In the global economy, businesses across different nations are interconnected; it encourages the sharing of information, technology, goods, and jobs across nations and cultures. This gives corporations like investing or CFD broker firms, as well as local businesses, several competitive advantages, such as reduced operating costs and access to new customers across the globe. However, due to how interconnected the business world is, a crisis in one region often has an aftermath in other regions. For instance, a crisis in the UK’s export economy can hurt small business owners and e-commerce retailers in Canada depending on those imported goods.

Global Trends Shaping Local Canadian Businesses

Global trends affect the global markets, which in turn affect local businesses. Staying updated with what is happening in the global space will inform you on what to expect in terms of national economic policies and how businesses will be impacted. Here are the top global trends shaping local Canadian businesses:

1.   Sustainability

Countries worldwide are signing up for the net-zero emission goal to get to a point where enough greenhouse gas emissions are removed from the atmosphere to cancel out the amount humans produce. Some countries that are part of the net-zero sustainability mission include the United States, Paris, and Canada, and businesses in these regions must invest in renewable energy and sustainability practices and create solutions that reduce their carbon footprint.

Prioritizing sustainable practices is important to stay relevant to the communities your business serves. Canadian consumers are more likely to choose eco-friendly products and goods that promote social responsibility than others that are proven to endanger the environment. Aside from attracting a new segment of customers, using green technology will also help you cut down costs in your business, even though your initial investment may be costly.

2.   Geopolitical Affairs

Nothing influences the prices of goods and currencies like worldwide geopolitical events, especially those from the world’s most powerful nations. From the Russian invasion of Ukraine to the economic tensions between the US and China, several geopolitical events have had powerful rippling effects on global markets. These events can interrupt free trade and stop the flow of goods across industries.

Effect on Exports

For example, if the US were to place trade tariffs on Canada like it did on Mexico, small businesses that export their goods or serve as intermediaries to companies that do will have to increase their costs to avoid getting shut out of the US market. If this happens, businesses affected may have no choice but to try entering new markets. While they would be losing a significant market, establishing in other regions opens up the opportunity as more resources will be available to scale in new domains.

Effect on Supply Chain

Geopolitical conflicts can also slow down local Canadian businesses if the scale of the event affects supply chains like sea transportation. Delays in shipping, disruption in the shipping routes, and higher tariffs will all increase shipping costs. This may cause the price of raw materials to rise, leaving Canadian local businesses to raise prices or reduce their profit margins.

Effect on Labor

Another important point is how the uncertainty associated with negative geopolitical events affects employment rates. Fear of uncertain political policies by world powers like the US can influence businesses to pause hiring, leading to lower employment opportunities. This can slow productivity and increase operating and labour costs. Canada’s automotive industry has shrunk in recent years due to high labour costs, with most automakers moving to Mexico and the US to access better manufacturing environments with those willing to work for less than a living wage.

Effect on Business Financing and Consumer Demand

Local businesses may also struggle to win grants or secure loans or insurance to cater to business needs. At the same time, uncertainty in the economy can lead to consumers reducing their demand for certain goods and services, slowing down sales.

3.   Technology and AI

AI is the most trending theme in the global markets. Technology and AI have made local businesses accessible to customers beyond their regions. With online tools like Google My Business, local Canadian businesses can create an online presence to expand to new audiences and land new customers. Local business owners can also leverage AI tools to speed up routines like social media post automation or automated invoicing.

How the Global Markets Impact Currency Fluctuations in Canada

The Canadian dollar (CAD) has declined against the US dollar since last October due to rising uncertainty in global markets around trade policies. US assets appear more profitable, and demand for the Canadian dollar and treasury bills is reduced. A weaker Canadian dollar means importing will be expensive, which will, in turn, negatively affect local businesses that depend on imported raw materials and goods.

On the other hand, local businesses that are into exporting may record more sales as consumers overseas in countries with a stronger currency will find the goods cheaper to buy. When the global markets are unstable, it causes currency fluctuations that pose various risks, including depreciating investments and an unpredictable economy.

Why Global Trends Matter for Local Businesses

Trends in the global markets have a significant impact on smaller Canadian businesses and the dollar. If you’re running a small- to medium-sized business in Canada, staying on top of global news, especially those on world economic policies, will help you understand the factors controlling inflation and how to respond to economic changes creatively.