As the United States begins to face the new reality that their credit rating isn't what it used to be, investors and economists are beginning to measure the potential global ripples caused by the U.S. credit downgrade.
Credit rating agency Standard and Poor's hit the U.S. with its first-ever debt rating demotion on Friday, a decision that BNN host Marty Cej says should concern Canadians.
"There are two main implications: one for the Canadian dollar and the other one just for Canadian exports," he told 麻豆影视 Channel on Saturday.
Cej likened the downgrade to a chain reaction. He explained that investor anxieties surrounding S&P's decision might hurt the American dollar.
An increasingly weak greenback could mean that "all the goods we sell from Canada and into the U.S. are incrementally more expensive and a little less competitive," he said.
"If you have the U.S. economy beginning to slow鈥hat's the end of demand for Canadian goods as well," said Cej, who has followed financial markets in Europe, Canada and the U.S. for more than a decade.
Canada's finance minister said on Friday that the recent economic uncertainty may have some adverse effects on the Canadian economy, but he said the country is well positioned to deal with the "global headwinds."
"Canada is not an island," Jim Flaherty said in a statement. "We are a trading nation, with about a third of output generated by exports and deep linkages with the U.S. economy."
But Flaherty noted that the country's budgetary position is among the strongest in the world and Canada's financial systems remain strong.
The U.S. downgrade announcement came just days after Washington settled on a plan to reduce the nation's debt by $2 trillion.
While the debt-ceiling agreement was meant to lessen anxiety about the nation's $14 trillion national debt, news of the U.S. credit downgrade seems to have overshadowed any economic relief.
A recent report by global research firm JPMorgan Chase & Co. estimates that S&P's downgrade will cost the U.S. $100-billion a year from now on.
Cej maintains that those numbers should matter to Canadians.
"That drags the Canadian economy down, it goes right to Canadian profits and Canadian profits lead to Canadian jobs," he said.
Cej's warning comes a day after Statistics Canada released a report indicating that the Canadian unemployment rate slipped to 7.2 per cent in July -- it's lowest level since December 2008.
Though the long-term effects of the U.S. credit downgrade are still uncertain, Cej warned Canadian job seekers that "if profits aren't rising, companies aren't hiring."
But Ian Lee, a Carleton University business professor, said he believes that Canada could stand to benefit from the U.S. credit rating downgrade.
Lee said he predicts that several businesses in the U.S. will move to Canada in the coming years, seeking a safe refuge from financial uncertainty.
"I predict we're going to see an increased number of businesses relocating to Canada鈥o obtain the lower borrowing rate, lower taxes and the security of the economy," he told 麻豆影视 Channel on Saturday.
While the U.S. lost its top-shelf credit rating on Friday, Canada still has its "AAA" grade from S&P.
With files from the Associated Press and the Canadian Press
