• Innovation & Transformation
    • COVID-19

What the American Economic Outlook Means for Canadian Cross-Border Business

  • Article

COVID-19 has had a major impact on both developed and emerging economies. At HSBC, we’ve identified about a 7% economic retraction, on average, for developed countries and a 2% drop for developing economies. These economic hits have been difficult to absorb, but we’re now at a significant turning point as nations around the world begin to ease lockdown measures to reopen their economies and kickstart recovery efforts.

At this early stage in the recovery process, no economy is enjoying a dramatic rebound, and a return to pre-coronavirus economic highs is not likely in the cards immediately. In fact, some sectors may never return to those pre-pandemic conditions. Instead, governments at all levels are exhibiting extreme caution as they weigh the health and safety needs of their citizens and labour force with the need to stimulate the economy and get people back to work.

The United States is worth a close examination regarding its recovery efforts as the biggest economy in the world. A recent HSBC webinar delved into the COVID-19 economic situation south of the border and what that means for Canadian businesses with operations, partners and customers in the US.

What lies ahead for the American economy?

By the end of the second quarter on June 30, HSBC forecasts the United States will likely experience at least a 15% drop in Gross Domestic Product (GDP). However, by the end of 2020 the US GDP is expected to only be about 5% lower than it was at the end of 2019. We should see some improvement by the end of 2021, with an expected 1% to 2% drop compared to the end of 2019.

By any measure, that amounts to a significant recession. The losses have wiped out two years of economic growth, and is much worse than the 2008-2009 recession. A major question now is whether the economic damage will be temporary or permanent.

The US labour market

The US unemployment rate has spiked to 15%1 - the highest levels since the Great Depression - mostly fuelled by temporary layoffs that have affected about 25 million American workers. Public opinion surveys suggest most of those laid-off workers believe they’ll get their jobs back2 once COVID-19 is contained.

But if the pandemic drags on further into the remainder of 2020 and into next year, we could see permanent unemployment levels rise as businesses become insolvent.

According to an HSBC analysis, it would be a positive development to see the unemployment rate at 10% by year’s end, and that will determine how robust a recovery we can expect both in the second half of 2020 and in 2021.


Low oil prices, a drop in consumer discretionary spending and a decline in air travel and accommodation is expected to keep inflation at around 1%, and it’s highly unlikely that a return to 2% will happen until at least 2021.

As of mid-May, household spending3 is already improving, particularly in real estate, where mortgage applications4 and property purchases are increasing. Auto sales are also slowly rebounding5, but industries that involve physical crowding, such as concerts, big retail stores and restaurants, can expect a slow recovery.

How HSBC helps its international clients grow in America

Regardless of a company’s size, HSBC has offices dedicated to serving clients
across 14 of the largest American cities, giving it a unique understanding of regional industries and sectors, whether it’s oil in Houston or tech in San Francisco, says Jaron Campbell, Head of International Subsidiary Banking, HSBC Bank US, NA. That sets it apart from its competitors.

HSBC is also a leader in digitization and automation of its cross-border banking solutions, making it easy for customers to do business on both sides of the border.

“For Canadian-owned companies, it’s important to have a physical presence in the US, particularly when it comes to being eligible for stimulus programs like PPP,” says Campbell. “Before setting up shop south of the border, companies need a well-formulated strategy developed well ahead of time, particularly with strategic advisors like banking partners and law and accounting firms.”

While most sectors are similar in Canada and the United States and many supply chains are intertwined, there are still some industries with unique national nuances that HSBC can help its clients navigate, Campbell added.

According to Ryan Wang, US Chief Economist, HSBC Securities, there are opportunities for Canadian companies in tech and innovation to meet the new needs of consumers in sectors where “business as usual” is probably not in the cards, and to focus on industries that have been hit particularly hard. Sectors like health care and tech are providing a lot of opportunity, along with construction and infrastructure projects that put an emphasis on green and sustainable initiatives.

How will US stimulus measures and political realities impact Canadian businesses? Read here.

Contact HSBC to find out how our products and services can help your business be proactive in adapting to change and planning for the future.

Need help?

Get in touch to learn more about our banking solutions and how we can help you drive your business forward.