Trump’s 25% tariff would mean recession for Canadian economy next year, economists warn

financialpost.com:

Economists are warning the hit to Canada’s economy will be significant if incoming U.S. president Donald Trump makes good on his threat of imposing a 25 per cent tariff on all Canadian and Mexican imports when he takes office.

“If this passes as stated, I think we’re comfortable talking about a recession in 2025,” said Jimmy Jean, chief economist with Desjardins Group.

Trump initially campaigned on imposing a 10 per cent across-the-board tariff on all imports coming into the United States.

The Canadian Chamber of Commerce published a report in early October, noting the impact from such a measure would cost the Canadian economy 0.9 to one per cent of GDP and lead to a loss of $1,100 in real annual income for each Canadian and American.

Late Monday night, following Trump’s announcement, University of Calgary professor Trevor Tombe and author of the report, updated his forecast to include the steeper tariff.

“Updating this to a 25 per cent tariff, and I find that the Canadian economy would take a 2.6 per cent real GDP hit (annually) or $2,000 per person,” Tombe wrote in a post on X. “Next year will be #cdnecon recession.”

Statistics Canada estimates total trade between the United States and Canada amounted to $960.8 billion in 2022, with Canadian energy products making up one-third (33.5 per cent) of the $598.0 billion worth of exports to the U.S.

“About 60 per cent of its (oil) imports are from Canada,” said Pedro Antunes, chief economist at the Conference Board of Canada. “So, it would be very disruptive to the U.S. energy sector, to the U.S. refining industry and to U.S. gasoline prices.”

Not only will the tariffs put a drag on growth but could also pose a risk to the inflation outlooks for Canada, Mexico and the U.S.

“I