Canada Growth Forecasts Slashed Over U.S. Trade Risks

A gloomy cloud has settled over Canada’s economic outlook as experts trim growth forecasts. Economists now point to brewing trade tensions with the United States as a key culprit stifling business investment. Fresh data shows fears of tariffs and border disputes are spooking companies north of the border. This comes just as Canada grapples with sluggish productivity and a swelling population. The ripple effects could hit workers and families hard if firms pull back on jobs and projects.

The trouble stems from President Donald Trump’s tariff threats. He’s vowed to slap 25 percent duties on Canadian goods over border security and trade imbalances. That’s rattling a nation where 75 percent of exports head south. Economists at RBC warn this could shave up to 4.5 points off Canada’s GDP in a worst-case scenario. Even a milder hit might lop off 1 point they say. Businesses are already freezing plans for new factories or equipment waiting to see if the hammer drops.

Canada’s not in a great spot to weather this storm. GDP per person has slid for eight of the last nine quarters. High interest rates from the Bank of Canada’s inflation fight haven’t helped. Unemployment’s creeping up too hitting 6.5 percent last fall. Now trade woes pile on. Firms in manufacturing which drives 10 percent of investment could take a big hit. If they scale back machinery buys or hiring the pain spreads to everyday Canadians fast.

Trump’s team says it’s about fentanyl and migrants crossing from Canada. Prime Minister Justin Trudeau calls that a flimsy excuse for economic punishment. He’s hinted at retaliatory tariffs if push comes to shove. That could spark a trade war neither side wins. Economists note U.S. consumers would face higher prices too since Canada supplies oil and auto parts. Still the uncertainty alone is enough to stall boardroom decisions on both sides of the line.

This isn’t Canada’s first trade rodeo with the U.S. The 2018 steel tariff spat saw stocks dip 11 percent before rebounding. Today’s stakes feel higher though. Businesses already skittish from years of slow growth might not bounce back so quick. Advocates for working folks say Ottawa needs to cushion the blow. They’re pushing for job programs or tax breaks to keep investment alive. Without it they fear a recession could lock in for years.

The Bank of Canada’s in a bind too. It’s cut rates 200 basis points to spark growth. More easing might come if trade tensions bite harder. But that risks fueling inflation just as it cools to 2 percent. Economists say a prolonged tariff slugfest could slash growth for three years. Unemployment might jump 2 points pushing it near 8.5 percent. That’s a tough pill for a country banking on new immigrants to boost its workforce not shrink it.

Beyond numbers it’s about people. Small firms in Ontario’s auto belt or Alberta’s oil patch could shutter if exports tank. Families relying on those paychecks would feel the squeeze first. Progressive voices argue this mess shows why Canada needs a stronger safety net. They want cash for retraining or green jobs to offset losses. Trudeau’s team says it’s ready to negotiate but won’t bow to bullying. The clock’s ticking as markets brace for what’s next.

This could reshape Canada’s future. A trade standoff might force a pivot from U.S. reliance to new markets. Asia’s on the radar but that takes years. For now firms and workers are stuck in limbo. Economists say avoiding a deep slump needs fast action from Ottawa. Whether it’s tax relief or trade talks the goal’s the same. Keep investment flowing so Canadians don’t pay the price for Washington’s gambit. The forecast’s dim but not set in stone yet.