Posthaste: Canada should have the firepower to fight this trade war — but there's a catch

It looks like the trade war Canada has been fearing for weeks has arrived.

U.S. President Donald Trump confirmed yesterday that his administration will go ahead with tariffs against Canada and Mexico at a minute past midnight last night.

Monday night Prime Justin Trudeau responded, promising a first wave of retaliatory tariffs on $30 billion worth of U.S. goods if the U.S. didn’t back down. A second round on another $125 billion worth of products will follow in three weeks.

This morning it appeared that neither side had budged.

“Our tariffs will remain in place until the U.S. trade action is withdrawn, and should U.S. tariffs not cease, we are in active and ongoing discussions with provinces and territories to pursue several non-tariff measures,” Trudeau said Monday night.

“While we urge the U.S. administration to reconsider their tariffs, Canada remains firm in standing up for our economy, our jobs, our workers, and for a fair deal.”

The predictions that preceded this outcome were dire. Economists forecast that if the worst happened and Canada faced 25-per-cent tariffs on goods, and 10 per cent on energy, the country would be thrown into recession.

Some said Canada would need a pandemic-sized relief package to support struggling businesses and citizens who may lose their jobs because of the tariffs.

But just how much can Canada afford?

Desjardins Group economists reckon the federal government could pitch in $100 billion for one-time aid this year and still keep the federal debt-to-GDP ratio below its pandemic peak.

Turns out our finances aren’t as bad as many thought, according to the economists.

The federal government has a much lower level of debt as a share of GDP than the United States and many other advanced