I wrote last time how we begin the year with no shortage of uncertainty. It’s time for cautious investors to tread carefully and even the most daring to check and recheck their facts before signing on the dotted line.

The more I look around to better gauge what direction fickle economic winds might blow, the more it all comes back to political uncertainties in North America and abroad.

The brightest spot may be tourism

Winter weather notwithstanding, civil strife around the planet may make Canada an even more attractive vacation/staycation destination. Media broadcasts seem to be doing a good job of making much of the rest of the world seem unsafe.

The numbers also look good thanks to our weaker dollar (not to mention that New York Times article that sang the praises of spending 36 hours in Ottawa ahead of the 150^th.)

The latest numbers from Statistics Canada show a surge in tourism spending in the third quarter of 2016. Total spending by foreign and domestic tourists grew by 2.2 percent from the second quarter to hit $21.3 billion. That’s the largest percentage increase in 20 years.

Meanwhile, other reports suggest the outcome of the U.S. election may turn Canadians away from travel south of the border. Check out this poll by Probe Research and the Winnipeg Free Press in Manitoba. Sentiment of this sort can only be good for the domestic tourism economy.

The windstorm of international trade

China is reopening the 2,200-year-old Silk Road from Asia to Europe by rail. This is the first direct rail link between China and Great Britain, from Beijing to London through the Channel Tunnel.

China has changed from a closed and insular society of the mid 20^th century to a country that is looking to take centre stage on the world scene. Trade between China and Canada may continue to rise with our west coast sea ports providing the fastest trade route between North America and the Orient.

Both countries are primed for a fresh round of trade talks in 2017. In September, Prime Minister Justin Trudeau and China’s Premier Li Keqiang announced plans to double trade by 2025. They also mentioned an eventual free trade agreement.

On the other hand, uncertainty looms thanks to that change of government across the border. There is the threat by the U.S. of tariffs on Chinese imports, in response to allegations of currency manipulation and other tactics by Beijing to encourage Chinese imports and discourage American exports. If this were to escalate into a tit-for-tat scenario, it could have far reaching consequences for global trade, reports the Globe and Mail.

Combine that with the prospect of the U.S. also seeking to renegotiate some aspects of NAFTA and Canada could very well be caught in a trade crossfire.

That black gold to regain its lustre?

Our oil patch, on the other hand, could be in for some relief in 2017. Oil prices are primed to track up this year, thanks to OPEC’s intent to curb production and curtail the oil glut. We also have new pipeline projects moving ahead, with a pro-oil, pro-industry administration coming into office south of the border. The most obvious risk stems from that same administration boosting U.S. oil output and cancelling out OPEC’s cutbacks. We’ll just have to wait and see.

Carbon tax pinch

And then there is the impact of Canada’s new carbon taxes, which promise to drive up the cost of fuel and any goods that rely on fossil fuels for production and shipping. How will expected increases in the cost of groceries and other necessities impact consumer spending?

Those of us in Ontario were already witness to the price increase at the pump last week as a result of the province’s new cap and trade regime on gasoline prices. Carbon taxes are a must to help reflect the real cost of fossil fuels, but changes in price always have an impact, some unforeseen.

The combination of political uncertainty abroad, coupled with new policy measures that could impact consumer spending on the home front, promise to make it an interesting year.

Sleeping with that elephant

If you don’t think Canada’s economic fortunes rest in large part with a different person at the helm south of the border, consider the motivation for this week’s Cabinet shuffle by our PM. And take a fresh look at the classic quote by his father about living next to the U.S.:

“Living next to you is in some ways like sleeping with an elephant. No matter how friendly and even-tempered is the beast, if I can call it that, one is affected by every twitch and grunt.”

To discuss this or any valuation topic in the context of your property, please contact me at jclark@regionalgroup.com. I am also interested in your feedback and suggestions for future articles.