Toronto, ON – Canada’s economy would shrink by 1.8 per cent if the United States breaks all trade ties with its partners and imposes across-the-board tariffs that average 20 per cent, according to a Scotiabank report.
“A ramp-up in protectionism in the U.S. results in a negative impact on growth in each of the NAFTA partners economies,” said the report.
Earlier this month, the U.S. imposed significant tariffs on steel and aluminum imports from other countries including Canada, Mexico and the European Union and threatens to introduce tariffs on automobiles. The reaction from impacted countries was swift with retaliatory tariffs on American imports, with Canada imposing its own set of tariffs to take effect on July 1st. Last Friday, U.S. President Donald Trump imposed a 25 per cent tariff on up to $50 billion worth of goods from China which will take effect July 6th.
The report provides a variety of scenarios and none of them are appealing for our economy. The report predicts Canada’s gross domestic product (GDP) will drop 0.2 per cent in 2019 if NAFTA falls apart and 3.8 per cent tariffs are imposed across the board. That will increased to 0.4 per cent in 2020 under the same circumstances. The report also predicts Canada’s GDP will shrink by 0.2 per cent if NAFTA talks extend past the second quarter of 2019 and tariffs on steel, autos and aluminum are in place.