A new report from Scotiabank spells out four potential scenarios for Canada if trade tensions with the U.S. continue to escalate, but one of the bank鈥檚 top economists is anticipating a more benign outcome.
Scotiabank said a recession across North America, more tariffs from both the U.S. and Canada, and the collapse of NAFTA are all in the cards. But Brett House, Scotiabank鈥檚 deputy chief economist, is stopping short of using the phrase 鈥渢rade war,鈥� opting instead for softer descriptors.
鈥淲e can call it more of a trade spat or skirmish at this point,鈥� he told CTV鈥檚 Your Morning on Tuesday. 鈥淎 full-on trade war would be where we are slapping tariffs on a wide range of goods and it is really beginning to impede trade not only between our two countries, but trade with the world as well.鈥�
House said the situation is unlikely to reach that point despite the recent barrage hardline rhetoric from U.S. President Donald Trump and his top advisers.
Earlier this month, the U.S. slapped new tariffs on aluminum and steel from countries, including Canada. Trump has hinted that his next move may be against Canada鈥檚 auto sector or supply-managed dairy system. Canada, for its part, has shot back with tariffs on a host of U.S. goods set to take effect in July.
The Scotiabank report warns that an all-out trade war with the U.S. could cause a recession across North American鈥檚 economies, noting that if the U.S. breaks trade ties with its partners and imposes 20 per cent across-the-board tariffs, Canada鈥檚 economy would shrink 1.8 per cent.
A recession is technically defined as two consecutive quarters of negative economic growth as measured by a country鈥檚 gross domestic product. The 2008 recession saw Canada鈥檚 economy contract by 3.4 per cent, according to Statistics Canada.
House said he expects Canada鈥檚 strategic tariffs on products from politically sensitive U.S. regions are likely to have its desired effect, convincing Trump to tone down his tactics in order to shield U.S. business from higher costs.
鈥淚鈥檓 not relying on the logic of the current president. I鈥檓 relying on the self-interest of people across the United States,鈥� he said. 鈥淭heir push-back against the White House is getting stronger and stronger.鈥�
