If Donald Trump returns to power in the United States, it will be very difficult for Canada and Quebec to avoid a recession, predicts Desjardins chief economist Jimmy Jean.
Published at 6:00 a.m.
The imposition of 10% tariffs promised by Donald Trump on all American imports will seriously hurt a small open economy like Canada, for which the United States is the main trading partner.
Desjardins estimates that we should expect a 2.5% drop in Canadian exports to the United States if Trump is elected.
The economies of Canada and Quebec would be hit from all sides by the trade war triggered by the imposition of all-out American tariffs. Tariff retaliation from affected countries is expected, which would increase the price of imported products and fuel inflation in the United States and Canada.
PHOTO ALAIN ROBERGE, LA PRESSE ARCHIVES
Desjardins chief economist Jimmy Jean
The cost of living would increase for everyone. This would be a hard blow for the Canadian economy which is already facing a headwind.
Jimmy Jean, chief economist of Desjardins, on Donald Trump’s economic program
Economic uncertainty would increase globally; this would favor the American dollar and lower the value of the Canadian currency, which would also fuel inflation in Canada.
Immigration
We must also expect that the toughening of immigration policies of a possible Trump government, which wants to resume the construction of a wall to close the southern border and undertake the largest operation to expel immigrants from the history of the United States, has repercussions in Canada.
“Trump’s threat to deport several million illegal immigrants could increase the number of asylum seekers in Canada,” predicts the chief economist at Desjardins.
Kamala Harris’ agenda is less threatening, but it would be virtually impossible to achieve if Congress is divided or controlled by the Republican Party. The tax increases proposed by the Democratic candidate would be difficult to get elected officials to accept, including those from her own party.
Trump’s election platform may be eccentric, but it is the easiest to execute because it relies on imposing tariffs, which can be done without having to negotiate with Congress, Jimmy Jean points out.
Canada has been making intense diplomatic efforts for months to try to escape Trump’s promised tariffs. Jimmy Jean thinks they will be difficult to avoid completely. “It’s too central an element in Trump’s program,” he recalls.
The main proposals
Donald Trump
Tariffs of 10% to 20% on all imports and 60% on imports from China
Reduction of corporate taxes from 21% to 15% and renewal of the 2018 tax cuts which are expiring
Estimated cost: US$4 trillion over the next 10 years
Financing: revenue from tariffs, cessation ofInflation Reduction Act
Kamala Harris
Expiration of tax cuts which are coming to an end for the wealthiest
$25,000 assistance for the purchase of a first property
Renewal of the expiring child tax credit
Monitor and sanction companies that raise food and housing prices too much
Increase in corporate tax rate from 21% to 28%
Taxation of unrealized capital gains for individuals whose net worth is greater than 100 million and who do not pay at least 25% tax
Estimated cost: US$2.7 trillion over the next 10 years
Financing: additional revenue from taxes
Source : Committee for a Responsible Federal Budget
