How Canada-U.S. trade talks could shape the potential recession risk
Global News
Economists are divided on whether the current state of affairs could push Canada into a recession, but say a lot depends on the contents on Canada's trade deal with the U.S.
As the deadline looms for a new trade deal between Canada and the U.S., economists say what the deal contains could determine a key possibility — how bad a potential recession could be.
On Monday, Prime Minister Mark Carney said he would only sign a deal that was “a good deal for Canada” and that “negotiations are at an intense phase” towards a new trade deal with the U.S.
If one isn’t reached by Aug. 1, U.S. President Donald Trump has threatened to hit Canada with more tariffs of 35 per cent.
At the same time, economists are watching closely for the risk of a recession.
“We are so far sticking to a view that we see a very shallow technical recession in Canada for the second quarter, third quarter. Very mild contraction,” said Sal Guatieri, director and senior economist at BMO Capital Markets.
However, that depends on one key caveat.
“That assumes we do work out a trade deal with the U.S. and it keeps that average effective tariff rate close to six per cent (and) does not pile on too many new sectoral duties in the months ahead,” he added.
With a six per cent effective tariff rate, Canada’s economy could potentially start recovering by the end of the year, Guatieri said.
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