The concept of “border shopping”, i.e., the process of crossing into another country with the sole intention of purchasing items, has been around for a long time; technically ever since the creation of national borders and shops. But certain modern phenomena have put a new spin on things. For instance, you might point to the tens of thousands of Canadians heading south to snap up Black Friday deals in the United States on the day after (US) Thanksgiving. Or, you might look at Germans traveling over to Poland for cheaper gas, a trend that has been common across the entire EU since the implementation of the Schengen Agreement.
Nonetheless, we can point to another one of those phenomena in 2022 – inflation. Few countries have escaped the effects of rampant inflation this year. And while there is some evidence that it’s starting to cool in North America, a return to the much-vaunted 2% that central banks target seems a long way off. Inflation rates in Canada and the United States have been fairly similar across the year, so border shopping might not seem very beneficial. But there are other related factors to consider.
Greenback strength is a boon for traveling shoppers
Top of the list must be the strength of the US dollar over the last year. For context, $1 USD bought $1.26 CAD on January 1st, 2022, whereas across the fall and winter, the greenback has been bouncing around the mid to high $1.30s range. In short, the US dollar has finished the year around 10% stronger. It’s for that reason a shopper somewhere like Chicago might see the logic in traveling to a large department store like Bouclair in Windsor, Ontario, where they can fill up on everything from office furniture to modern living room wall décor using their built-in discount on the exchange rate. That type of activity is border shopping in a nutshell.
Of course, there are other considerations to take in when border shopping. Financial calculations should be made on whether it is worth the time and effort. If gas is a couple of cents cheaper per gallon on one side of the border, but if it takes an hour to get there, well, it might not be worth the trip. Still, those who live in and around national borders will be well aware of this, and they will take these things into consideration before setting off.
Indeed, it’s worth mentioning that the border economy has recognized and distinguishable importance. There was, for instance, an outcry from US-based businesses in 2021 over the closure of the border due to Covid-19 restrictions. Some studies pointed to an average spend of $3000 per Canadian visitor, leading to an overall loss of $4 billion to the economies of the towns and cities in close proximity to the Canadian border.
Cost of living should always be factored in
Certainly, the example of the pandemic spending, or lack thereof, above highlights that Canadians do travel en masse to shop in the US. But with a broader view, the cost of living is cheaper in Canada than it is in its southern neighbor. Some studies have put this at 13% cheaper overall for Canada compared to the US. So that, coupled with the strength of the greenback, means you can make a compelling argument to make the journey northwards across the Canadian border for everything from furniture to daily food items. Although, we should point out that the cost of living calculations will have a lot of disparities, and there are many instances when things can be found cheaper in the United States.
Finally, we should point out that, despite flying the flag for Canadian shopping here, a healthy border economy should always work both ways. To give an example of how it can go wrong, we can look across the Atlantic to the border between Ireland and the UK (Northern Ireland). With the introduction of the Euro currency to the former in 2002, there was a dramatic rise in prices in Ireland. The frictionless border meant that shoppers poured across from Irish border towns to Northern Ireland for cheaper shopping, but that led to economic woes for those towns on the ‘wrong’ side of the border. The consequences of that, such as unemployment, can then eventually hurt businesses on both sides of the border.
Still, if you are in the United States now, you can let the good times roll by enjoying a strong US dollar with a trip to Canada. As we mentioned, it’s always best to do your research and calculations before setting off to fill your trunk full of goods – and you’ll also need to check your obligations in customs and taxes – but circumstances mean there are bargains available when making a quick jaunt north of the border.