Gauging the impact of a Canada-U.S. trade war on cross-border M&A

On May 31, 2018 the United States (U.S.) government announced that it would be imposing tariffs on a number of Canadian products, including steel and aluminum at a rate of 25% and 10% respectively. In response, the Canadian government imposed its own surtaxes of approximately C$16.6 billion on imports of steel, aluminum, and other products from the U.S. These countermeasures came into effect on July 1, 2018 and will remain in force until the U.S. repeals its tariffs on Canadian steel and aluminum. At a market level, this escalating “trade war” between Canada and the U.S. has the potential to significantly impact cross-border M&A activity. With increased barriers to entry into the U.S. market, it is likely that valuations of Canadian companies could fluctuate wildly and risk-adverse investors may be resistant to acquire Canadian companies due to the uncertain geopolitical climate. Steel and aluminium are also essential resources in the oil and gas industry,…

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