Economists forecast recession
Should these tariffs last for a prolonged period, economists have predicted that Canada will be unable to avoid a recession. Economists surveyed by Bloomberg agreed that these tariffs may shave two to four per cent from Canadian GDP growth.
“A couple of quarterly contractions are likely for Canada, i.e., a moderate recession, before growth gradually resumes,” Sal Guatieri and Shelly Kaushik, economists at the Bank of Montreal, wrote in a report to investors. “Counter-tariffs and a weaker currency could see inflation spike more in Canada.”
There is a risk that these tariffs push Canadia towards stagflation, with both a negative impact to GDP as well as a potentially inflationary impact. Bank of Canada Governor Tiff Macklem has previously signalled that the BoC’s focus would be on the growth impacts of tariffs, implying that more interest rate cuts may come.
Markets fall on both sides of the border
US and Canadian stock markets both continued their sharp falls, which had begun on Monday with Trump’s confirmation that tariffs would be imposed on Tuesday. The S&P 500 was down around 1.7 per cent approaching noon on Tuesday. The Nasdaq Composite was down over 1.4 per cent and the DOW Jones Industrial Average was down nearly 1.8 per cent.
The TSX 60 was down over 2.6 per cent in the same time period.
