Recently the Canadian dollar has been trading at $1.05 US.  That is, for every Canadian dollar, you should be able to purchase $1.05 in US currency.  But that change has not reflected itself in the marketplace.

One dramatic example I encountered recently was the tunnel tolls going from Windsor to Detroit.  The toll costs $4.00 US or $4.50 Canadian.  When it should be the other way around.  The $4.00US is worth about $3.80 Canadian, not $4,50.  You would have to be really dumb to pay the toll in Canadian.

The border areas of the US are experiencing a huge increase in Canadian tourism.  Unlike the “tourists” from Mexico, the Canadians are bringing money to these areas and leaving with goods.  The Mexicans are coming and sending money out of the US back home to Mexico creating a huge deficit.  Last year, it is reported, Mexico received more than $17 billion in these remittances home.

Nevertheless, Canadians experience similar attitude as Mexicans when crossing the border, as if the border guards are protecting the US from an invasion as they strut about with machine guns behind concrete barriers with television cameras everywhere.

The change in currency has been happening for more than a year and has not come so far that consumers are noticing that they are not getting much of a deal.  Buy a new car in the US and bring it into Canada and you can save tens of thousands of dollars.  Yes, there are costs in improving emission controls and changing the speedometer to kilometers; but there is an immediate payout.

Sure Canada has higher taxes to support a more secure way of life than the US, and true Canada doesn’t have the same economies of scale as the larger populated US, but the difference has become glaringly evident and the value cannot rationalize the difference.

Sales volume will come rapidly to Canadian retailers who start to roll back their prices to become competitive with nearby US retailers who have always been more aggressive.  After all, the majority of Canadians live within an hour or so drive to the US border.

Marketing and branding can work to a point; but when pricing gets way out of line, there is no holding back the bargain hunters.  Grouchy border guards and overpriced tolls can’t even stop them.

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