Canada's Economic Outlook Remains Uncertain Amid Shifts in Global Trade War

The recent de-escalation of the global trade war has improved Canada's economic outlook, but the country's economic trajectory remains largely downhill due to ongoing uncertainty and high U.S. tariffs. Economists warn of a potential recession in the coming quarters, with job losses and manufacturing sales data already showing the impact of tariffs. Canada's highly trade-dependent economy is facing a major shock, with potentially more tariffs on the horizon for key industries such as lumber, copper, and movies.

Key Takeaways:

• Canada's economic trajectory remains largely downhill due to ongoing uncertainty and high U.S. tariffs, despite recent de-escalation of the global trade war.
• Economists predict a potential recession in the coming quarters, with job losses and manufacturing sales data already showing the impact of tariffs.
• The U.S. has granted Canada exemptions for 80-90% of its exports under the United States-Mexico-Canada Agreement (USMCA), but Canada's economic dependence on trade makes it vulnerable to future shocks.
• The Canadian government has watered down its countertariffs on U.S. goods, reducing the potential disruption to Canadian businesses and consumers.
• Economists warn that Canada is no longer a top priority for U.S. trade deals, with China and the EU taking precedence.
• Key industries such as lumber, copper, and movies face potentially more tariffs on the horizon.
• Economic data, such as the April job numbers and manufacturing sales numbers, shows the negative impact of tariffs on Canada's economy.

Statistics:

• 25% tariffs imposed by the U.S. on Canadian goods in early March.
• 80-90% of Canadian exports exempt from tariffs under the USMCA.
• 10% tariff imposed on most countries, dubbed "Liberation Day" by U.S. President Trump.
• 1.4% month-to-month drop in March manufacturing sales numbers.
• 30,000 job losses in manufacturing industries in April.
• 6.9% unemployment rate in April, up from 6.7% the prior month.
• 6.5% fall in primary metal sales in March.
• 100,000 job losses predicted by TD's chief economist, Beata Caranci, by the third quarter.
• 3-quarter recession predicted by Oxford Economics' director of Canada economics, Tony Stillo.
• 90-day reprieve by President Trump for trade deals, set to end in early July.

Sources:

• TD's chief economist, Beata Caranci
• Royal Bank of Canada's assistant chief economist, Nathan Janzen
• Oxford Economics' director of Canada economics, Tony Stillo
• University of Calgary's School of Public Policy director of international policy, Carlo Dade
• Statistics Canada's April job numbers and manufacturing sales numbers
• Globe and Mail article, "Canada's economy still vulnerable to trade war despite Trump's truce"