Canada’s economy could take a 1.7% hit by the end of 2028 if Donald Trump wins the U.S. presidency, Desjardins economists warn.
With the potential for a Republican sweep in Congress, they foresee slower GDP growth compared to a scenario with Kamala Harris at the helm and a divided Congress.
In their report, economists Jimmy Jean and Randall Bartlett outline the likely economic impact of Trump’s proposed tariffs—10% on all U.S. imports and 60% on goods from China.
Though Canada enjoys a relatively small trade surplus with the U.S., the deep integration of North American supply chains could cushion the blow. Energy, for instance, might escape the harshest tariffs.
Yet, Trump’s “drill, baby, drill” agenda could surge U.S. oil production, pushing prices down and squeezing Canadian corporate profits and household incomes.
Commodities like metals, wood, aluminum, and steel are also at risk, along with manufactured goods like motor vehicles and industrial machinery.
On the bright side, a blanket tariff on imports might drive U.S. companies to stick with Canadian exports rather than scramble for domestic replacements.
But this relief may be short-lived, as Canadian exports are expected to dip by nearly 2.7% by 2026 under the proposed tariffs.
A Republican victory could provide a silver lining for equity markets, boosting corporate tax cuts and deregulation. Still, the drag from lower energy prices may cause Canada’s S&P/TSX Composite Index to lag behind U.S. markets.
Canada’s response to U.S. tariffs would likely mirror Trump’s strategy in the first term—reciprocal tariffs on key U.S. goods.
But this tit-for-tat could hurt Canada as much as it hurts the U.S., say the economists, cautioning policymakers to prepare for a rocky road ahead.
While a recession might not be guaranteed, it’s certainly a possibility. Businesses and policymakers should be ready to navigate these uncertain waters, hoping for the best but planning for the worst.
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