CANADA
From the MPR’s scenario assuming that the US increases tariffs on all imported goods to 25% and its trading partners respond by increasing tariffs on imported goods from the US to 25%. See in full here.
- Benchmark case: GDP growth is 2.4pps lower than otherwise in year 1 before 1.5pps lower in year 2 and then returns to normal in year 3.
- “In other words, if annual average growth were projected to be 2% in years 1 and 2 with no new tariffs, then the growth forecast would be about -0.5% in year 1 and 0.5% in year 2 with the new tariffs.”
- That 2% in the scenario isn’t random, with the BoC forecasting 1.8% for GDP growth in both 2025 and 2026 (revised down from 2.1% and 2.3% respectively from the Oct MPR).
- Canadian CPI inflation would be just 0.1pp higher in year before a more notable 0.5pp in year 2 and 1.0pp in year 3.
- “Considerable excess supply and declining commodity prices largely offset the direct impact of tariffs in the first year, but inflation rises as excess supply is gradually absorbed in subsequent years.”
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