Posthaste: Canada's record economic gap with the United States is about to get wider
financialpost.comCanada’s economy has been falling behind the United States — in fact, most major economies — for some time now, but the election of Donald Trump threatens to widen that record gap even further, say economists.
Just how big is the gap? In 2023, real gross domestic product per capita in the U.S. was 43 per cent higher than in Canada, according to Trevor Tombe, an economics professor at the University of Calgary. This year he estimates that gap will widen to almost 50 per cent — “This stunning divergence is unprecedented in modern history.”
Since Trump was elected, economists have been changing their forecasts for both sides of the border.
Though the actual impact of the new president’s policies remain uncertain, it’s a safe bet that they will boost both GDP and inflation in the near term in the U.S.
Canada, on the other hand, will feel the sting of some of these policies. Royal Bank of Canada economists do not expect America’s northern neighbour will be a direct target of trade disruption, but tariffs Trump has promised on imports from China, Mexico and other parts of the world will have “negative spillover effects on Canada.”
Corporate tax cuts in the United States would also reduce Canada’s competitiveness, said RBC economists Nathan Janzen and Claire Fan.
There are other headwinds at home.
Ottawa’s plan to slash immigration targets will ease housing shortages, but it will also slow GDP growth, “accelerate population aging, and add to a growing government funding gap for public services like healthcare,” said RBC.
Add to this the wave of mortgage renewals at higher interest rates that will squeeze household budgets over the next two years, and the economists at Desjardins Group have revised their outlook for the Canadian
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