According to Randall Bartlett, Desjardins’ deputy chief economist, Canada faces the risk of recession if the U.S. implements significant tariffs on Canadian goods. He stated that the consequences of such tariffs could be dire, estimating that by mid-year, the economic landscape could deteriorate significantly under these pressures.
Bartlett elaborated that retaliatory tariffs from Canada would exacerbate this predicament, intensifying inflation while hindering the Bank of Canada from efficiently addressing a downturn in gross domestic product (GDP) alongside rising prices. He emphasised that these escalating tariffs would ultimately inflate costs further.
He described the inflationary impacts of a potential tariff war as “multifold,” highlighting how U.S. tariffs could weaken the Canadian dollar. This weakness would subsequently increase the costs of imported goods, further putting pressure on inflation domestically.
Furthermore, Bartlett warned that Canadian retaliatory tariffs would also inflate costs significantly for consumers and businesses alike, stressing that these tariffs would primarily burden the citizens of Canada. The intricate interplay between tariffs and inflation could lead to heightened economic strain on households across the nation.
He noted that while both the U.S. and Canadian economies would suffer under this tariff regime, the popularity of protectionist measures remains politically viable. In Canada, public support for such retaliatory actions exists, despite the economic ramifications they might incite.
In contemplation of these potential tariffs, Bartlett suggested that, should they prevail throughout Trump’s presidency, the Bank of Canada might consider lowering its policy rate significantly by early 2026. However, he warned that the bank would need to tread carefully, balancing inflation against economic weaknesses.
On the government’s fiscal policy approach, Bartlett underlined that while there are available options for stimulus, the focus should lean towards targeted interventions rather than widespread spending strategies adopted during the COVID-19 pandemic. This should tailor support to the industries and households most affected by the economic fallout from tariffs.
Randall Bartlett, deputy chief economist at Desjardins, warns that Canada could face a recession if U.S. tariffs are imposed on Canadian goods. Retaliatory tariffs could exacerbate inflation and complicate economic management for the Bank of Canada. The political popularity of tariffs clashes with their economic consequences, prompting a call for targeted fiscal measures instead of broad spending.
In summary, Randall Bartlett of Desjardins warns that Canada could slip into a recession if the U.S. imposes hefty tariffs. The ensuing retaliatory tariffs may escalate inflation and economic strain, complicating the Bank of Canada’s efforts to manage GDP decline and rising prices. The emphasis should be on targeted support for affected sectors rather than broad fiscal measures, reflecting the need for a refined approach in the face of economic challenges.
Original Source: www.benefitsandpensionsmonitor.com
