Article content material
Former Financial institution of Canada governor Stephen Poloz warned a Bay Road crowd Wednesday that the influence of United States President Donald Trump‘s threatened tariffs may very well be worse than anticipated as a result of the Canadian financial system is extra “fragile” than when it met a best-case state of affairs in weathering the pandemic 5 years in the past.
Article content material
“We confront (these new) challenges from a weak place to begin,” Poloz stated in a speech on the Canadian Membership in Toronto, during which he pointed to larger unemployment, “extraordinarily weak” enterprise funding and a slew of mortgage renewals at larger rates of interest.
Article content material
“The return of tariff man and his unpredictability will intensify that weak point, whether or not the tariffs go into impact or not,” stated Poloz, who was governor of the central financial institution from 2013 to 2020. “At this time, we strategy the Trump tariff shock with our financial system in a really fragile place.”
Poloz stated it’s one factor to mannequin the influence, with some suggesting {that a} commerce battle can be equal to a 5 per cent pay minimize for Canadians, however, as with the response to the pandemic, fashions can’t account for every part.
“We will do arithmetic across the tariffs, however we are able to’t predict future behaviour — the human reactions which are beneath the issues that fashions purport to seize,” he stated.
However, Poloz stated there are dangers to Canadians and the greenback if Canada carries out a deliberate response of counter-tariffs, and he urged consideration of different responses, similar to eliminating inter-provincial commerce obstacles.
He additionally urged politicians to consider what is maybe on the coronary heart of Trump’s rhetoric: Canada paying its share of nationwide defence below the North Atlantic Treaty Group settlement.
Article content material
This, he prompt, may very well be achieved by a brand new defence tax on the money register, particularly directed in the direction of women and men “in uniform,” and an settlement that might guarantee Canada’s transport and aerospace industries had a shot at navy procurement contracts.
Decrease-income Canadians may very well be reimbursed for the tax, maybe within the neighbourhood of three per cent, in the identical method they obtain a GST rebate, he added.
“I believe Donald Trump would say, ‘Now, that’s a teammate. Overlook about all this different stuff that I’m speaking about,’” Poloz stated, acknowledging that whereas his plan may blunt the influence of a commerce battle, it might come below criticism for seemingly acquiescing to a “bully.”
He additionally acknowledged that eliminating inter-provincial commerce obstacles may very well be politically difficult, however stated there’s a blueprint for it in Canada’s founding.
Really useful from Editorial
“It’s value remembering that again in 1866, the US walked away from its commerce agreements with the provinces… What was our response then? Confederation. Think about that,” he stated.
“Our founding fathers thought they have been making a unified east-west free commerce zone, in order that we might cut back our dependence on commerce with United States,” stated Poloz. “The irony is sort of an excessive amount of for me to deal with.”
• E-mail: bshecter@nationalpost.com
Bookmark our web site and help our journalism: Don’t miss the enterprise information you could know — add financialpost.com to your bookmarks and join our newsletters right here.
Share this text in your social community
