When the new B.C. carbon tax kicked in on April 1st, people braced for a jump in already sky-high gas prices at the pump. TV stations interviewed consumers who said they planned on driving across the border to buy their gas because it was so much cheaper.
But considering how low the Canadian dollar is compared with the American dollar, how many actually did that?
With the loonie slumping the way it has been for the past few years, it’s something that gives some Canadians pause when they are considering cross-border shopping for deals.
According to a study by the UBC Sauder School of Business, their research finds that every one per cent increase in the Canadian dollar raises cross-border day trips by between one and two per cent. The reverse is of course true when the loonie drops by the same amount. Further to that, the study also finds that it also depends on the time of year, as cross-border trips are highest during the summer months and aren’t necessarily as affected by the price of the loonie.
An article by the Canadian Press interviewed a man named Crow Smith, who owns a New York-based shipping depot that caters to Canadians who buy items in the U.S.
“The exchange rate absolutely affects us,” said Smith, adding that 2014 (when the Canadian dollar was nearly at par with its U.S. counterpart) was a banner year.
So, yes, the falling loonie definitely has a significant impact, but it doesn’t deter all shoppers.
Other factors are at play when people are deciding on purchases.
1. For one, there is an “experience” factor involved when people cross the U.S. border. It’s a fun road trip, so some people may ignore the exchange rate as they’re perhaps more focused on having a good time. There’s also the issue of selection. U.S. outlets have a far wider array of brands for shoppers to choose from compared to Canadian retailers.
2. Despite the sagging dollar, some U.S. prices are just too good to pass up. Many outlets offer things like laptops and vehicles at hundreds or even thousands of dollars cheaper than Canadian retailers. And if you don’t mind driving to Oregon, you’ll save more because there is no state sales tax.