The Conference Board of Canada has shared some insights on what the trade war and tariffs launched by the Trump administration in the United States means for the Canadian, US and global economies.
Key insights include:
- The history books are likely to give “liberation day” a different name. While the idea around reciprocal tariffs were dubious even before they were announced, what was announced seems set to maximize U.S. pain
- In practice, these tariffs will have widespread inflationary impacts and weaken U.S. growth. For example, tariffs nearing 50 per cent on Lesotho, Cambodia and Vietnam—countries that primarily export inexpensive goods to the United States—will only make these products more expensive. The United States will not succeed in bringing these industries back in a meaningful way. In fact, relocating clothing production to other countries has significantly increased the purchasing power of U.S. consumers
- Given the widespread nature of these tariffs, U.S. consumers will have no safe haven from tariffs and inflation will surely spike significantly
- From an economic perspective, global growth is also set to weaken. Many companies around the world have moved production to optimize supply chains and take advantage of the relative strengths of different countries, both in terms of costs and productivity
“While Canada was spared from the worst, many other countries were hit with tariffs well above even the highest of expectations. This upheaval in global trade will significantly weigh on economic growth around the world, with the United States likely the biggest loser,” said the Conference Board.
“This means that Canadian exporters of resources, which might have been able to shrug off a 10 per cent tariff given U.S. reliance on these goods, will now face headwinds from weaker global demand.
“Canada has responded by announcing matching tariffs on U.S. content on vehicles, on top of $60 billion in previously announced retaliatory measures that remain in place. Canada is not out of the woods. During his speech, President Trump continued to push the false narrative that Canada is an unfair trade partner and once again called for American farmers, specifically dairy producers, to have more access to Canadian consumers.
“Given the uncertainty surrounding trade with the United States, it remains important for Canada to diversify trade beyond the United States. Overall, while (the recent) tariff announcement seemed to be favourable to Canada, tariffs on key sectors—including others that are likely to follow—coupled with what seems to be a worst-case outlook for U.S. and global growth will hurt Canada’s economy. Consumer and business confidence had already sunk to recession lows, hurting the economy even before what’s now become a global trade war.”
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