'We have a stinker of an economy:' Trump's tariff threat is not Canada's only problem, say economists
Canada needs to start fixing its “stinker” of an economy regardless of whether Donald Trump imposes tariffs next month so it can prevent similar threats in the future, economists say.
There’s no “quick fix,” the chief economists of some of Canada’s biggest banks said at an event this month, but the country needs to focus on making it easier to do business across provinces and pivot its economy towards manufacturing products that the rest of the world can’t.
“We’ve never seen such a divergence in economic performance between Canada and the U.S.,” Stéfane Marion, chief economist at National Bank of Canada, said. “If you look at the output gap, we’ve never seen the U.S. operating so much above its speed limit and Canada so much below its speed limit. That’s a made-in-Canada strategy. We have a stinker of an economy.”
Canada’s economy is expected to take a big hit if Trump, who officially took over as United States president on Monday, sticks to his word and imposes a 25 per cent tariff on Canadian goods starting Feb. 1.
The highly integrated nature of both the economies would mean the impact is going to be large and “warrants all the attention” that the issue is being given, Avery Shenfeld, chief economist at the Canadian Imperial Bank of Commerce, said.
“We can look back at what happened when they put a tariff on steel and aluminum,” he said. “The drop in our steel exports during the one year … subtracted about a half a point from Canadian GDP. That’s one product area, so multiply that across the economy. It’s bad.”
Canada’s economy has already been struggling to grow amidst poor productivity levels, which multiplies the challenges, Royal Bank of Canada chief economist Frances Donald said. She compared the situation to a
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