Re-escalating trade war puts Canada’s economic rebound at risk: economists

OTTAWA — Economists are warning that a re-escalation in the trade war with the United States puts Canada’s burgeoning economic recovery at risk.

The U.S. imposed 50 per cent tariffs on roughly $28 billion worth of Canadian goods over the weekend after trade talks fell apart.

Bank of Montreal expects the new tariffs will carve half a percentage point off Canada’s economic growth as business investment and confidence take a hit.

Prime Minister Mark Carney has pledged to retaliate with dollar-for-dollar tariffs starting Sept. 8, which economists warn could add to inflation in Canada.

Bradley Saunders, North American economist at Capital Economics, says in a note to clients that the new tariffs push Canada closer to a recession, particularly if the United States ramps up attacks in response to Ottawa’s own retaliation.

Economists also say the extent of the hit to the economy will depend on the degree of fiscal stimulus from Canadian governments in response to the new U.S. duties.

On Monday (Aug. 24) U.S. President Donald Trump also said he will hike tariffs on all vehicles, auto parts and steel from Canada to 50 per cent on Jan. 1.