Canada's economy is heading to contraction-the first since the Covid-19 crisis-if the tariff warfare with the largest commercial partner lasts for a long time.
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Canada's economy is heading to contraction-the first since the Covid-19 crisis-if the tariff warfare with the largest commercial partner lasts for a long time.
Economists have estimated that President Donald Trump's tariff for Canada will fly 2 to 4 percentage of the total growth of local products in the country. The administration imposed 10 % fees on Canadian energy and 25 % on all other commodities, which start on Tuesday.
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This has led Canada to avenge the customs tariff for an initial amount of $ 30 billion ($ 20.8 billion) of American goods, which will expand to $ 155 billion in three weeks. Assuming that the customs tariff remains in place, the procedures will stimulate the economic slowdown and pay prices, as economists say.
“There are likely to be some quarterly contractions for Canada, that is, moderate stagnation, before growth gradually resumed,” said Saltiri and Chile Kaushik, economists at Montreal Bank. “Opponents and the weakest currency can see high inflation in Canada.”
Traders are valid 95 % of Canada Bank, the policy interest rate is reduced next week.
A mixture of increasing price pressures and the slowdown economy – one definition of inflation – the central bank places at Will. Although the economic shock is likely to force it to reduce borrowing costs, officials should also be aware of neglecting inflationary pressures.
Governor Tif Maclim said in a speech last month that a long American tariff war in the United States will reach Canadian product by approximately 3 % over two years and “wiping growth” during that period.
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But in the commercial battle scenario, McLim said that the factors that drive prices to the highest “more than compensation for the low price pressure from poor demand”, caused an increase in inflation than 2 %.
“We cannot leave a tariff problem that becomes an inflation problem,” said Maclim.
The influence in Canada depends on the period when the definitions remain in place. There is a great insecurity about Trump's torque, given that he had previously retracted the customs tariff-which allows Canada and Mexico to postpone one month in early February.
Derek Holt, economist at Nova Scotia Bank, said in a report that investors do not know the duration “and this is the key.” “Trump is an exhibition of patients and self -vision with zero Khasour, so we know that he only puts these definitions so that they can refer to them in his speech tonight, but they may not last.”
“Canada Bank is likely to reduce next week, as definitions are known for the balance in this direction, but it expects a very measured bias due to the potential impact of definitions on supply and inflation chains.”
Even before the customs duties arrived, Trump's threats alone suffocated investment of business and consumer confidence.
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Some economists believe that the retaliatory definitions in Canada make the bad situation worse, which increases growth problems and increased prices of prices for Canadians with little to do the same in the United States.
“The retaliatory movements in Canada are an economic response to the opposite results and the limitation of monetary policy, which hurts me with Canadian government consumers, producers and government resources,” wrote Brian Yu, the Credit Union, Credit Federation at Central 1, in a report by investors.
The Canadian economy was sharply recovering at the end of 2024, as it rose at an annual rate by 2.6 % in the fourth quarter. It was driven to reduce the aggressive interest rates of the Central Bank, which strengthened the local demand, including family consumption and housing activity.
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