Economists say the Canadian economy is poised to plunge into a recession this year if U.S. tariffs that took effect Tuesday morning remain in place.
U.S. President Donald Trump’s executive order hitting Canada and Mexico with 25 per cent across-the-board tariffs, with a lower 10 per cent levy on Canadian energy, took effect at 12:01 a.m. ET.
Prime Minister Justin Trudeau says Canada’s response will include retaliatory tariffs on $155 billion worth of American goods.
RSM Canada economist Tu Nguyen says Canada’s economic landscape “is set to change dramatically,” as the trade war will mean prices increase, unemployment rises, and consumers begin pulling back.
She says that while the manufacturing, energy, and food sectors would be immediately hit, no sector will be spared and businesses will need to cut jobs.
Capital Economics’ Stephen Brown says financial markets are likely still pricing in a “quick U-turn” from the Trump administration based on the loonie’s limited decline, but the “best-case scenario” now is a sustained period of weaker GDP growth than previously expected.