Poloz fears Canada would be 'a lot less' resilient to trade war than it was to pandemic
Canada’s economy could be significantly less resilient to a potential trade war with the US than it was to the outbreak of the COVID-19 pandemic, according to ex-Bank of Canada governor Stephen Poloz.
The former central bank chief, who headed the BoC between 2013 and 2020, told BNN Bloomberg on Wednesday that the economy is currently weaker than it was just before COVID hit, heightening the risk that it could teeter against the force of Donald Trump’s threatened tariffs.
“Unemployment was at a 40-year low, and inflation was right on target; a very healthy economy by contrast, and we absorbed or were quite resilient to that shock at that time,” he said of Canada’s pre-pandemic outlook. “I fear that we would be less so, a lot less so, this time around.”
Prime minister Justin Trudeau struck a late deal to avert a trade war on Monday, with US president Trump agreeing to delay the introduction of planned 25% tariffs on most Canadian imports (except Canadian energy, which faced a 10% charge) for 30 days.
But Poloz highlighted the peril still facing Canada’s economy despite the temporary reprieve on tariffs. “We’ve been in a weak spot for pretty well two years now. It’s been masked by high immigration flows, which kind of buries the data,” he said.
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“So, with household spending per household shrinking for the last two years, and we still have quite a lot of people to renew their mortgages… investment’s been really low for a long time, housing’s been weak, everything’s been weak.”
Is Canada’s economy much weaker than it appears?
Poloz claimed in December that Canada was likely already in a recession and that its economy’s health was probably much worse than official gross domestic product (GDP) figures indicated.
In Wednesday’s interview, he said businesses were having second thoughts about investing in Canada because of Trump’s threats, while tax incentives introduced by Trump’s predecessor Joe Biden are making the US a more appealing place to grow a business.
“That’s a very positive place to be, whereas in contrast we’re just kind of waiting for [growth] to happen,” he said. “And now with that uncertainty around trade… companies put investment plans on the shelf.”
His warning marks the latest indication of the potentially dire impact Trump’s tariffs could have on the Canadian economy if implemented.
He said Ottawa should introduce new measures to encourage investment in Canada to boost its economy and reduce the shock it would face in the event of a trade war.
Trudeau has announced that he will host a Canada-US economic summit in Toronto on Friday, gathering Canadian trade and business leaders to brainstorm ideas for economic growth and dismantling internal trade barriers.
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