As tensions escalate in the ongoing trade war between Canada and the US, economists are painting a grim picture of the Canadian economy’s near future. A recent survey conducted by Bloomberg revealed that the country is likely to experience a period of weaker growth and higher inflation, with trade disputes causing significant disruptions to business investments and exports.
According to the survey of 34 economists, Canada’s economic growth is expected to slow drastically, with forecasts slashed across key growth components. The economy is predicted to expand at a meager annualized rate of 0.7% in the second quarter of this year, down from the previously expected 1.7%. Furthermore, exports, investment, and household consumption output are all anticipated to contract during this period.
Economists are now warning of a potential stagflationary scenario, with inflation expected to rise due to retaliatory tariffs and currency fluctuations. The yearly change in the consumer price index is estimated to average at 2.4% this year, indicating a notable uptick from the prior survey’s forecast of 2.1%.
Job losses are also anticipated, with the unemployment rate projected to rise to 7% in the latter half of the year. The looming threat of a recession looms large, with analysts cautioning that a prolonged tariff dispute could significantly harm the Canadian economy.
As the election approaches at the end of April, both Liberal Prime Minister Mark Carney and Conservative Leader Pierre Poilievre are vying to demonstrate their ability to navigate the trade war challenges posed by US President Donald Trump. Both leaders have pledged support for workers and sectors impacted by the trade conflict, with differing proposals on how best to manage the situation.
Following a productive phone call between Trump and Carney, the Canadian dollar saw a temporary boost. However, with additional tariffs from the US expected to be announced soon, the outlook remains uncertain. Early statistics indicate a slowdown, with the economy appearing to stall in February and confidence levels plummeting among consumers and businesses.
The Bank of Canada is set to announce its next interest rate decision on April 16. While officials have signaled a cautious approach to future rate changes, economists in the survey believe that borrowing costs will remain steady at 2.75%.
With the odds of a recession in Canada now standing at a coin flip, the country braces for economic uncertainty as it navigates the turbulent waters of the escalating trade war with its southern neighbor.