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CIBC Economics

The Canadian economy entered this year with a lot of momentum, but in the face of a trade war from the United States, that path is now giving way to two alternatives, which aren&#8217;t nearly as good.
In the most favourable one, we are able to get to the negotiating table, work with the US to dial down these trade threats, and hopefully begin to see some growth in the second half of the year, after what’s likely a stall in the economy or decline in the second quarter.
But in a less favourable scenario, the trade war persists.
Canada falls into a significant recession.
And we’ll need deep interest rate cuts and a lot of fiscal stimulus to work our way out of that.
There is still some hope for the more favourable outcome.
Not so much because of Canada&#8217;s retaliatory measures, but because of lobbying in the US, the negative reaction in US financial markets, perhaps sending a message to the US administration that nobody really wins in a trade war.
So, let&#8217;s hope for the best, but brace ourselves for a rocky road for the Canadian economy for the next several months.

What could a prolonged trade dispute mean for the Canadian economy?

CIBC Economics

Avery Shenfeld

Managing Director and Chief Economist

CIBC Capital Markets