Canada To Face 2nd Largest Recession Ever If It Enters A Trade War: BoC

Canadians may be facing the largest non-pandemic recession ever, in just a few short weeks. That’s the focus of a new report from National Bank of Canada (NBF), which examines the Bank of Canada (BoC) modeling of a similar tail risk back in 2019. The spat would deliver a blow to both countries, but north of the border is expected to see a much bigger impact. Canada would see 1 in 16 dollars of GDP disappear in a matter of weeks, delivering an unprecedented economic blow to the country. 

Canada To Lose 6% of GDP In A Trade War With The US 

The Big Six bank took a dive into numbers the BoC referenced, which they conducted in 2019. The central bank modeled the impact of the US implementing a 25% trade tariff on Canada, and reciprocal measures being deployed. Coincidentally, that’s what’s being proposed by the incoming American administration.

“The BoC’s estimates paint a grim picture for Canada: exports and investment would take a significant hit, while consumption would weaken due to deteriorating labour market conditions and adverse terms of trade,” explains Matthieu Arseneau, Deputy Chief Economist at NBF. 

Source: NBF. 

The bank’s numbers show this would trigger one of the largest recessions in Canada’s history. The projection shows real GDP falling 6%, exceeding all but the 2020 recession. Though the pandemic recession was a little different considering global trade was paused, inducing the decline and resuming with stimulus a few months later. This hit would be closer to a more traditional recession since the US would look for replacements elsewhere, leading to significant loss of industry.

Six percent may not sound like much to the average person, but it’s astronomical in size. For context, Canada’s economy could lose Nova Scotia, New Brunswick, Prince Edward Island, the Northwest Territories, Nunavut, and Yukon, and it still wouldn’t add up to a loss of 6% of GDP for the country.  

US Economy Would Also Take A Hit, Just Not As Large As Canada

The bank warns that Canada wouldn’t be the only loser in a trade war. “The U.S. would also face challenges, contending with stagflationary pressures marked by sluggish economic growth paired with rising inflation,” notes Arseneau.   

Markets are taking notice of the threats to growth. The 10-year US Treasury yield has climbed a whopping 100 basis points over just a few weeks. This has led to significant uncertainty, which the bank says should serve as a cautionary signal for global trade.  

“One can only hope it acts as a warning to Mr. Trump about the significant negative consequences his aggressive protectionist agenda could impose on corporate America and the broader economy,” he adds. 

30 Comments

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  • Reply
    Mark Bayly 1 week ago

    Trump has a point Canada cannot defend itself Too busy being mother Hubbard to the whole planet Might is right in this world

    • Reply
      Triple B 1 week ago

      Trump clown show. irrumabo

      • Reply
        Dan Foss 6 days ago

        More like Liberal clown show all the way around. I dont care about a recession as it may be cheaper for me to build my new house. No mortgage and all cash. Although mortgage rates may come down to near zero again like in the mid 200os when at one point for about a year I was paying .25% annual interest on my variable at prime minus whatever. This is what happens when there is little demand during a deep recession. The tried and true and only method to mitigate hard times – interest rate manipulation to stave off deflation. Monetary Financial Repression.

    • Reply
      Ray fox 1 week ago

      Nothing trunp says is based in fact. Start there and make your comment.

    • Reply
      D Smith 1 week ago

      Baby coming across the millions illegal immigrants are coming across the border from America. We should share in common that’s Trump weapon

    • Reply
      Stacey 1 week ago

      Canada has been EXTREMELY busy filling Ms Hubbard’s cuboards to everyone while doing very little for Canada over the past 17 years.

  • Reply
    Kevin Bogles 1 week ago

    So we join the BRICS?

  • Reply
    Ibrahim M 1 week ago

    BOC negative estimates will prove wrong however for the time being speak from the place of weakness.
    Tariffs are zero sum game when we look at the bigger picture. It’s time of abundance and Canada 🇨🇦 is full of it

  • Reply
    Barney 1 week ago

    Canada is an export based economy, and lives or dies on its exports.
    Currently our exports and imports are almost balanced and many of the products we use daily and have become to rely on come from the US. This article is bang on and if Trudeau and his bunch thinks otherwise he is smoking something. If Canada looks for a trade war with the US I would suggest we look long and hard on how you and I are going to deal with the recession. Carney is a shorter version of Trudeau same crap different body.

  • Reply
    Warren 1 week ago

    These issues will have ripple effects across Canada: increased stress, job losses, crime, killings, theft, break-ins, homelessness, divorces, and suffering for children. Loan delinquencies for mortgages, cars, and other debts will rise, and more innocent people may feel driven to commit extreme acts. Food and grocery prices continue to soar. This is the harsh reality of the new world we are living in.

    Why can’t we establish stronger friendships with developing countries like India and boost our exports there? It’s time for our leaders to recognize the need for good governance that prioritizes growth and development for the people and the country, instead of constantly pointing fingers at each other.

  • Reply
    Whitney 1 week ago

    I doubt I will even notice a difference since I already struggle to afford food and gas these last couple years

  • Reply
    Eric D’Uva 1 week ago

    Canada must protect housing prices at all costs.
    It is fundamental to the economy.
    People depend on their houses increasing in price.
    This should be the number one focus.
    Lower interest rates immediately.

    • Reply
      Fed up 7 days ago

      Go away, realtor! High housing prices have destroyed the Canadian economy and made everything unaffordable.
      The grocery store has to pay excessive rent, because their landlord got ripped off on the land cost. Every employee demands big raises to pay for their groceries and other rising bills, so their employers have to raise their prices.
      Couples don’t want to have kids, because living costs are so high.
      A very painful correction to fundamentals is desperately needed in Canada.
      Demand our politicians to #LetHomePricesFall !!

      • Reply
        Blake 3 days ago

        Using Loblaws as a reference, they are both landlord *and* grocery store owner.

  • Reply
    Owynn Lahnalampi 1 week ago

    Would be nice if Alberta and Saskatchewan could get significantly more of their O&G to either coast. This trade war is definitely an opportunity for Canada to push diversity amongst its trade partners. I know you can’t build a pipe line in 3 months, but there has to be other ways to harness Canada’s natural resources as a tailwind for other parts of the economy. Also it is absolutely past due that the federal and provincial governments find a policy to make free trade possible between provinces. Why is it easier to trade with the US than between provinces?

  • Reply
    Amit Puri 1 week ago

    Canada deserves this as you are running a country not a asylum for refugees, you don’t have industry, infrastructure, roads , housing , in so many years what were you doing , licking America , now it’s too late, why in soo many years country is not self resilient, Canada a developed nation is that week that there economy is totally dependent on USA , what type of developed nation is this , we’re we sleeping for so many years

    • Reply
      Steve gaspar 6 days ago

      We had plenty of everything for decades until the globalist Trudeau cabal took over our government. Massive migration of illegals and immigrants gaming the system has contributed a lot to your complaints. Immigration should be cut down to Stephen Harper government levels as cutting them to zero would be sending shock waves to Canadian economy. Holding caps such as the ones in Australia resembling prison camps should be built to hold illegals and people who we have to deport. They can cry all they want but they didn’t come here legally so they should be tossed out of the country and only allow legal immigrants in. Also prison should be built to house all the criminals and also camp should be built to house all the homeless drug addicts wondering all over our country.

  • Reply
    Ray fox 1 week ago

    Nothing trunp says is based in fact. Start there and make your comment.

    • Reply
      Steve gaspar 6 days ago

      Don’t look now but we are in the midst of an illegal invasion of our country through the United States coming north. Believe it or not Trump has given us an opportunity to secure our borders not from stuff going to the states but the millions that are coming up here starting now. Basically we have a wide open border right along the 49th parallel that has been on manned and unpolised for years. Can you imagine the turmoil in the United States of the say 11 million illegals hiding out and being hunted down where do you think they want to go? They will never forget Trudeau saying everybody in Canada is welcome and they’re going to take him up on it.

  • Reply
    Malcom 1 week ago

    President Hoover 2.0 thinks the price of tariffs won’t ultimately be paid by American consumers.

    Additionally the GOP still believes in trickle down economics.

    The end stage of all dying empires follow virtually the same script.

    • Reply
      Steve gaspar 6 days ago

      Do you have any idea what it will look like in Canada if we start tariffing everything coming out of the United States by 25% or even 10%? A tariff or countervailing duty as they like to call it will be paid by Canadian consumers driving inflation to the Moon. The absolute worst thing we can do is to apply tariffs on American goods imported into Canada. Right now there is zero and that’s where you’re starting from look up the list on the CRA site. And there’s no doubt in my mind that Trump is going to back off on tariffs on most Canadian goods and all he wants is access to our energy pipelines and and for us to get rid of marketing boards.

  • Reply
    Edward HC Graydon 1 week ago

    Or Canada could contemplate regardless of financial ramifications of Donald Trumps Tariffs of 25% what is a greater threat to society? The drug epidemic facing Canadians that over time will become systemic in society destroying Canadian society over the years making a good portion of Canadians and Americans drug addicts based on close proximity and access to fentanyl a drug so addictive it is hard to cure. That over time will destroy society from within. The Tariffs that Trump is contemplating are designed to protect the United States from a total societal collapse that will ultimately destroy the social fabric of both America and Canada if nothing is done or no action is taken .

    The fact that Donald Trump is trying to deal with the plaque of drugs and drug use while trying to curb the problem by securing the Canadian borders with America by imposing Tariffs was actually inevitable taking into account the stated goals of the CCP .

    The biggest concern that should be asked is whether capitalism and a just and happy society can continue into the future while drugs being sold in both countries are sold with the intent and sole goal to destroy from within.

    The side effects financially of Trumps tariffs are a smaller issue than the societal ruin that is taking place currently in both countries making the political move by trump of applying tariffs of 25% the best possible move at this time in human history. As it would seem most Canadian politicians have not witnessed first hand the goals of the CCP governments stated goal to wipe out North America with a drug so addictive it will eventually consume all. Or complain about the tariffs and do nothing while both countries rot a festor from within based on none action and self centred financial concerns with taking into account the bigger threat .

    • Reply
      Sarah 7 days ago

      What has happened to the smart, proud, and strong Canadians I grew up with?

      Only dimwits think the “drug crisis” is the real reason for the tariff threats. Almost all of the drugs are either manufactured in the US itself BY AMERICANS or manufactured in Mexico and imported BY AMERICANS. Trump is just doing his usual b.s. of deflecting, scapegoating, obfuscating, and distracting.

      Canadians praising or capitulating to Trump are just stupid or disloyal (or paid foreign trolls). Canadians used to be proud and strong while also being smarter and kinder than Americans. Yes, we were just better.

      Grow a spine and start standing up for Canada against a genuine American conspiracy before it’s too late.

      • Reply
        Edward HC Graydon 2 days ago

        What you are stating totally contravenes the actual stated goals of the CCP government! I was personally present in Shanghai and witnessed the outline of the CCP government that detailed back in 2008 how the military goal by China was to produce a society that becomes so dependent and addicted that it collapses from within.

        Because I have witnessed this goal personally and more importantly because I always found the idea scary it has taken place over the years it has become a reality.
        Because I was witness to the goals and because it has remained in my thought process over the years and because the goals of the CCP seem to have come to fruition over the years ! I can say with some confidence that it is you who lack the understanding and not those regardless of country that support him on this issue.

  • Reply
    Anant 1 week ago

    Canada with it’s vast resources and fraction of world population needs to reprioritize itself and it’s citizen as a part of it’s global strategies, become competitive and not be the silly girl anymore, the image it has created at the world stage. Remember, even in the airlines, they say first put your own oxygen mask before helping others, and Canada needs to do the same, else it would never ever recover after this recession!

  • Reply
    Gary 1 week ago

    Trump is living proof there is not much difference betwean a yank and a jerk.

  • Reply
    D Smith 1 week ago

    When Carney becomes p.m. I hear that his plan is to retaliate by opening the floodgates to immigration tenfold to what has been going on and sending them all towards the United States. That I think is real good retaliation something that Trump dreads most of all.

  • Reply
    don smith 1 week ago

    It will be good for Canada. We will have start building things like pipelines, roads and bridges and ignore native artificial concerns and environmental activists. We could supply oil to the East Coast ports by pipeline in months not years if we want. The US sends Canada lots of large polluting vehicles easy enough to switch to tariff free Chinese evs. There is a lot of items like packaged meats and fruit and veg the US sells to Canada that can be sourced elsewhere.
    Canada exports oil, a lot of gold, potash and lumber mostly to the US.
    These products sell quite well anywhere in the world. If the US applies tariffs we can keep them in the ground or find a way to the greater world market. Oil and timber and potash will not devalue if not used. It just becomes future cash flow not current income.
    Might be the best thing to happen to Canada its time to let the US know we are not subserviant.

  • Reply
    Frani 7 days ago

    You get what you give. Time for adults to run the gov.

  • Reply
    Chip 6 days ago

    I see many here have responded with the usual chorus of reflexive anti-Americanism. The problem is that too many Canadians believe sharing the world’s longest undefended border with an economic superpower — while enjoying its military protection — is a right instead of a privilege.

    And Canada could have continued to enjoy this privilege by simply ponying up more for defense and replying seriously to concerns about the border. But no, the fools that have already tipped Canada into economic decline now think they can fight a trade war with the world’s least trade dependent nation.

    At a time when the US is about to unleash an entrepreneurial firestorm via deregulation, lower taxes and new energy production.

    It’s madness. But any nation that elects Trudeau three times has been toying with madness for a while.

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