Canada Braces for Trump’s Tariffs as Economic Outlook Darkens

With U.S. President Donald Trump set to impose sweeping tariffs on April 2, Canada faces a grim economic outlook, as hopes of escaping the next round of duties fade. Economists predict that the new tariffs could trigger a shallow recession, increase job losses, and weaken the Canadian dollar, with some forecasting these measures could remain in place for up to a year.

According to TD Economics, Canada has been disproportionately affected by Trump’s tariff policies despite maintaining one of the most balanced trade relationships with the U.S. The looming tariff hikes could see the average rate on Canadian exports rise to 12.5%, remaining at that level for at least six months before potentially easing to 5%. Even after new trade negotiations, the tariff burden is expected to settle at 2.5%—still higher than pre-Trump levels.

BMO Capital Markets analysts warn that the economic impact could be severe, predicting a 1.5 percentage point drop in GDP growth for 2025, bringing it down to just 0.5%. This downturn could result in over 100,000 job losses and push unemployment to 8% by year-end. The Canadian dollar, already struggling, may drop to 67 cents U.S., further exacerbating inflation and economic strain.

The housing market is also expected to feel the effects, with rising building material costs due to retaliatory tariffs and currency depreciation leading to a contraction in residential investment. Meanwhile, industries heavily reliant on U.S. exports, such as automotive manufacturing, could face significant disruption, with the worst-case scenario seeing the sector “decimated.”

While some analysts hold out hope that the most aggressive tariffs will be avoided due to their potential impact on the U.S. economy, TD Economics remains skeptical, noting Trump’s past use of tariffs as a political tool rather than a purely economic one. As the April deadline approaches, Canada faces an unprecedented level of risk, with economists warning that uncertainty remains the only constant in the current trade landscape.