Posthaste: Trump's tariff threats could hasten Canada's productivity decline, warns RBC

The trade uncertainty sparked by Donald Trump’s tariff threats could wreak structural damage to Canada’s economy that won’t be easy to reverse, warns Royal Bank of Canada.

Statistics Canada’s survey on business intentions Wednesday showed a slight rebound in planned capital expenditures, but not nearly enough to reverse the slump investment has been in for the past two decades, said RBC senior economist Claire Fan, in a report yesterday.

What’s worse is the survey, taken September to January, largely misses the escalation in trade tensions that have occurred since Trump took power.

Since then the outlook has become “decidedly cloudier,” Fan said. “Investment plans have likely already been dialled back, particularly in trade-exposed sectors like manufacturing.”

Executives at two of Canada’s Big Six banks said this week that clients are taking a more cautious approach to capital spending with the threat of crippling tariffs hanging over the economy.

“People are holding their powder dry and waiting to see what’s going to happen,” Phil Thomas, Bank of Nova Scotia’s chief risk officer, said on a call with analysts Tuesday. “As a result, whether it’s on the retail side, the corporate side or the commercial side, you kind of see a bit of stasis right now. It’s causing people to sort of pause and think about what they’re going to do.”

Even before this latest wave of challenges, business investment was nothing to write home about.

Wednesday’s survey showed private businesses planned to spend 5.5 per cent more on investment in 2025, with much of the increase coming from goods-producing sectors, particularly manufacturing.

Much of this growth, however, was the result of higher prices, said Fan. “Real” investment that excludes price