Against all expectations, the economy should continue to improve in Canada and Quebec in 2025, despite Donald Trump’s tariff threats.
Posted at 6:37 p.m.
Updated at 6:47 p.m.
This is what the trio of economists brought together on Thursday by the Council on International Relations of Montreal to discuss what to expect in 2025 put forward yesterday. There are certainly positive elements to highlight in the context current pessimist, said from the outset the moderator of this debate, Mia Homs, vice-president of Investissement Québec. With the pandemic, inflation, rising interest rates and the risk of recession, we have been predicting the worst for four years and it has not happened, she said. There are positive elements, according to the participants.
Stronger growth
Before the imposition of the tariffs promised by Donald Trump, the Canadian economy will benefit from an increase in exports to the United States. American companies have already started to increase their inventories to protect themselves against possible price increases for Canadian products, said Jimmy Jean, chief economist at Desjardins. He expects an acceleration in growth fueled by the temporary elimination of the GST and by checks that will be sent to taxpayers by the Ontario government and possibly also by Ottawa.
Lower interest rates
The decline in interest rates is expected to continue in Canada, at least as long as inflation remains under control. The possible impact of American tariffs and a possible Canadian response could take some time to generate more inflation. It will be difficult for the American president to put tariffs into force before the second half of 2025, believes Jimmy Jean. Until then, the drop in interest rates will give impetus to the economy next year, predicts Pierre Cléroux, chief economist of the BDC. It will stimulate consumption and increase construction starts, which will give momentum to the real estate market, he predicts.
Resilient markets
The Canadian and American stock markets have weathered the last roller coaster years very well, noted Vincent Delisle, first vice-president and head of liquid markets at the Caisse de dépôt et placement du Québec. And this should continue in 2025, according to him. Market enthusiasm for Donald Trump’s promises of tax cuts and deregulation may be difficult to maintain, he said, but the ability of markets to adapt should not be underestimated. . “We know Trump, we know that there will be tweets in the evening and exaggerated statements,” he said. He believes that Canada, which has a lot of energy and a lot of banks, remains attractive to investors.
Deglobalization and investment
In the longer term, once the Trump period of turbulence has passed, Canada should benefit from the realignment of international trade, noted Pierre Cléroux. The two blocs that are forming, one made up of the United States and the most industrialized countries and the other by China, Russia and around thirty other countries, define a new world order “and this is not bad news for Canada,” he said. Investments will go to countries that have resources, but are politically stable and where the rule of law exists. It has already started, according to him. 15 years ago, investments in transportation electrification that were announced in Canada would have gone to China, he noted.
A disaster scenario in figures
The uncertainty surrounding the intentions of the next President of the United States regarding the tariffs that will be imposed on Canadian imports does not prevent economists from making predictions on the impact that these tariffs would have on the Canadian economy. Those at Scotiabank developed different scenarios, including this one: tariffs of 25% followed by a response from Canada on American imports. If that happened, Canada’s gross domestic product would fall by 5.6%, inflation would rise by 4.1%, the central bank’s key rate would rise by 2.8% and the unemployment rate would rise by 3%. based on Scotia’s modeled calculation.
