A new analysis of trade disputes with the United States warns that a deterioration into an all-out, global trade war would knock economies like ours, into recession.
The report says that if the US imposes across-the-board tariffs that average 20 per cent — then Canada would see its economy shrink by 1.8 per cent.
This worst-case scenario is one of several potential outcomes examined by Scotiabank as the experts try to figure out what the economic consequences may be if the trade fights that have started, continue between the states and other allies like Canada.
Earlier this month, the U.S. imposed significant tariffs on steel and aluminum imports from other countries, including Canada, Mexico and the European Union. Washington is now threatening to introduce more duties — this time on cars.
The move has infuriated allies and has prompted them to retaliate with tariffs of their own on U.S. imports.
On Friday, U.S. President Donald Trump pushed the envelope even further by slapping a 25 per cent tariff on up to US$50-billion worth of goods from China. The tariffs are set to take effect July 6 and would push the world’s two largest economies closer to a trade war.
Throughout this turbulence, a separate economic sting related to uncertainty has persisted as Canada, Mexico and the U.S. have largely stalled in their efforts to renegotiate the North American Free Trade Agreement.
By the numbers
As experts try to get a handle on the economic impacts, here are some telling numbers about the deepening trade battle:
0.2 percentage points — the reduction to Canada’s growth in gross domestic product in 2019, if NAFTA falls apart and 3.8 per cent tariffs are imposed across the board, according to Scotiabank’s recent report.
0.4 percentage points — the reduction to Canada’s GDP growth in 2020, if NAFTA falls apart and 3.8 per cent tariffs are imposed across the board.
0.2 percentage points — the reduction to Canada’s GDP growth next year, if NAFTA talks extend past the second quarter of 2019 and tariffs on steel, aluminum and autos are in place, Scotiabank estimates.
1.8 per cent — the size of the contraction for the Canadian economy in 2020 if the U.S. launches an “all out” global trade war with an average of 20 per cent tariffs across the board with all partners, according to Scotiabank.
3.1 per cent — the share of Canada’s total merchandise exports affected by U.S. steel and aluminum tariffs, according to reports
0.7 per cent — the share of Mexico’s total merchandise exports affected by U.S. steel and aluminum tariffs.
0.4 per cent — the share of the E.U.’s total merchandise exports affected by U.S. steel and aluminum tariffs.
0.1 per cent — the share of China’s total merchandise exports affected by U.S. steel and aluminum tariffs.
US$12.4 billion — the value of Canada’s steel and aluminum exports to the U.S. in 2017
US$2.9 billion — the value of Mexico’s steel and aluminum exports to the U.S. in 2017.
US$7.7 billion — the value of the E.U.’s steel and aluminum exports to the U.S. in 2017.
US$2.8 billion — the value of China’s steel and aluminum exports to the U.S. in 2017.
Bottom Line: A ramp-up in protectionism in the U.S. could have a big negative impact on growth in Canada’s economy as well as many other countries.
For more on the report visit the link HERE.
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