Original Source: financialpost.com
Economists are sounding alarms about the potential impact of Donald Trump’s planned 25% tariff on imports from Canada and Mexico. They predict that the Canadian economy could face a downturn, possibly leading to a recession next year. Jimmy Jean, chief economist at Desjardins Group, anticipates significant economic contraction if the tariff is enacted. He cited potential GDP losses and falling real income for individuals on both sides of the border.
The Canadian Chamber of Commerce had already highlighted a 0.9 to 1% GDP loss under a proposed 10% tariff. After Trump’s announcement, University of Calgary professor Trevor Tombe revised his estimates to reflect the increased 25% tariff, projecting a 2.6% drop in real GDP, translating to $2,000 lost per person in Canada. He confirmed that Canada would experience a recession next year.
In 2022, total trade between the U.S. and Canada reached $960.8 billion, with energy products constituting a significant part of exports. Pedro Antunes from the Conference Board of Canada expressed concern about disruptions to the energy sector, as 60% of U.S. oil imports come from Canada, thereby affecting gasoline prices and the overall U.S. energy market.
These tariffs not only threaten economic growth but may also increase inflation across North America. Derek Holt from the Bank of Nova Scotia noted that tariffs typically lead to higher consumer costs, prompting central banks to reconsider monetary easing strategies in light of inflation concerns.
Antunes believes that, while Canada’s energy and agricultural sectors may eventually find alternative markets, the auto industry will suffer immensely, potentially facing collapse. This sentiment reflects the U.S.-Canada manufacturing interdependence that could trigger widespread turmoil.
Even if Trump’s tariff threat is merely a negotiation tactic, the implications for Canadian investment are dire. Jean warned that businesses might hesitate on expansion plans, putting the investment climate at risk.
The article discusses potential economic repercussions for Canada if Donald Trump implements a 25% tariff on imports from Canada and Mexico. Economists warn this could lead to a recession, decreased GDP, and rising inflation. The close economic ties between the U.S. and Canada, particularly in energy and manufacturing, mean such tariffs would disrupt trade significantly, impacting businesses and inflation forecasts across North America.
In summation, economists predict that a 25% tariff from Trump could plunge the Canadian economy into recession, causing substantial GDP loss and increased inflation. Key sectors like energy and auto manufacturing face dire consequences, while investment confidence wavers amid uncertainty. The interconnectedness of the U.S. and Canadian economies might amplify the fallout from such tariffs, making it a crucial issue to monitor.
