Markets Plus
US-Canada Tariffs: Economics and Markets Impact
Feb 5, 2025
Michael Gregory, Managing Director and Deputy Chief Economist at BMO, shares his insights on U.S. tariffs and their impact on both countries' economies. He discusses the implications for economic growth, inflation, and the Canadian dollar. The conversation reveals how tariffs shape Canada-U.S. trade relations, stressing the need for Canada to diversify its trade partnerships. Gregory also offers strategies for staying optimistic in economic downturns and suggests disciplined investment approaches for 2025, highlighting the potential of both the U.S. and Canadian markets.
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Quick takeaways
- U.S. tariffs have created significant uncertainty for the Canadian economy, impacting growth projections and business investment decisions.
- Market volatility in response to tariff announcements highlights the need for a disciplined investment approach focused on fundamentals and diversification.
Deep dives
Impact of U.S. Tariffs on Canadian Economy
U.S. tariffs have created significant uncertainty for the Canadian economy, leading to adjusted growth expectations. Initially, when tariffs were announced, forecasts suggested a potential mild recession in Canada alongside inflation increases due to retaliatory measures. The Bank of Canada responded with rate cuts to stimulate the economy, but uncertainty surrounding trade policy has continued to dampen business investment, resulting in lowered growth projections from 1.9% to 1.7%. Ultimately, the environment shaped by fluctuating tariff threats fosters an unpredictable economic landscape for both the U.S. and Canada, putting downward pressure on the Canadian dollar.
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