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NAFTA Uncertainty Presents Risk for Canadian Railways, Say Analysts


(Canadian Press)

The potential dismantling of the North American Free Trade Agreement poses the biggest risk to Canada’s railways not benefiting this year from healthy economies and higher demand to move crude oil, say industry observers.

“What keeps us up at night?” said analyst Kevin Chiang of CIBC World Markets. “NAFTA renegotiations.”

Chiang said the earnings implications of the U.S. government’s move to disband the continental free trade agreement are unknown, but an almost immediate 10 per cent drop in values in the aftermath of the Brexit vote in the United Kingdom could be a guide post for Canada’s industrial and transportation sectors.

“We would not be surprised to see a similar immediate reaction in the Canadian industrial/transportation complex, especially for those companies tied to North American trade,” he wrote in a report this week. Click here to read more.

Related: Q1/18 Outlook: Remaining Bullish (CIBC Investment Strategy Group)