Canada will take bigger economic hit than U.S. if Trump wins election: report

Canada stands to bear a greater economic burden than the United States if Donald Trump wins the upcoming presidential election and imposes promised tax cuts and tariffs on all U.S. imports, a new report warns.

The analysis released Tuesday by Scotiabank Economics says if Trump returns to the White House and follows through on his vow to slap a 10-per cent tariff on all imported goods — with the exception of China, which would face a 60-per cent carve-out on its U.S. exports — and countries retaliate with their own, there would be “substantial negative impacts” on the U.S. economy. GDP would likely fall by more than two per cent by 2027 relative to current forecasts, while inflation would rise 1.5 per cent, leading to a two per cent interest rate hike.

In Canada, the economic impact would be even more stark with an expected GDP drop of 3.6 per cent, given its reliance on trade with the U.S. Inflation and interest rates would also be pushed up for the next two years — 1.7 per cent and 190 basis points, respectively — the report suggests.

“What Trump is looking to do is much broader, and much more concerning, than the tariffs he imposed during his first term,” said Scotiabank’s chief economist Jean-François Perrault, who authored the report.

The report also serves as another reminder that Canada needs to urgently address its issues with lagging productivity, warning the problem makes Canada more vulnerable to economic shocks brought by trade policy changes in the U.S. and abroad.

Perrault says it’s far too late to fix the problem in time for the U.S. election in November.

“It takes a long time to change direction on productivity,” he said in an interview. “Maybe you can make up some ground over the next few quarters, but we need