As Prime Minister Mark Carney heads to his second meeting with U.S. President Donald Trump in the Oval Office today expectations of immediate tariff relief are not running high. But a new report from BMO Economics reminds us that the stakes are. The report offers three scenarios for tariffs going forward, but even in the most optimistic Canada does not emerge completely unscathed.

In this scenario which BMO calls “Muddle Through” and considers the most likely, Canada escapes blanket tariffs from the United States, but sectoral duties remain on steel, aluminum, lumber and some other products. The average U.S. tariff rate on imports from Canada stays at about 7 per cent and Canada slightly boosts its rate to 2 per cent from the current 1 per cent.

While the United States escapes damage in this scenario, Canada’s economy does not. BMO projects even this level of tariffs could shave 1.5 per cent off GDP in the long term.

Business investment would continue to decline with companies reluctant to expand capacity in Canada. Export volumes would fall, but a weak

Canadian dollar and low import growth could prevent trade from weighing too heavily on the economy, said the report authored by BMO senior economist Aaron Goertzen.

The scenario sees Canada’s growth slowing to an average of 1.3 per cent annualized in 2025 and 2026, with the

unemployment rate rising to 7.3 per cent. Inflation, however, should remain close to target allowing the

Bank of Canada to cut another 50 basis points off its interest rate to bring it to 2 per cent by early 2026.

A bleaker picture emerges in the study’s worst-case scenario in which the United States slaps a 35 per cent tariff on all Canadian imports, and Canada responds with a 15 per cent tariff on U.S. goods.

“In Canada, a recession would be virtually assured,” said the report. “Exports would plunge and so too would business investment.”

BMO projects that real GDP in Canada would drop 5 cent in the long-term and the unemployment rate would climb 1 to 1.5 per cent as industries dependant on American trade laid off workers. The Canadian dollar would lose about 10 per cent of its value.

A middle scenario in between the two envisions tariffs on Canada at 15 per cent, the same as many of the United States’ other trading partners. The impact of this would “significantly slow” short-term growth and cut GDP by 2.5 per cent in the long-term.

The report does offer hope, pointing out that Canada and the United States could make it through “this rocky patch” mostly unscathed, as politicians on both sides appear to recognize the damage sweeping tariffs could do.

“If the President thought broad tariffs against Canada were a good idea, they would probably already be in place, said Goertzen.

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There appears to be no stopping gold as the yellow metal moved closer to a record US$4,000 an ounce Monday. BofA Global Research charted the booms and busts of bullion in the chart above to give us some historical perspective.

The current boom is about 10 years old, rising 85 per cent from 2015 lows into 2020, corrected -15 per cent into 2022 and then rallied another 130 per cent, analysts said. It’s the same age as booms in the 1970s and 2000s, but smaller in size.

If it matched the 2000s rally the gold price now would be close to US$7,000.

  • Prime Minister Mark Carney meets with U.S. President Donald Trump today
  • Today’s Data: Canada international merchandise trade
  • Earnings: DPM Metals Inc., McCormick & Co. Inc
  • ‘It was devastating’: How Imperial Oil employees found out about the company’s major layoff plan
  • Danielle Smith: You can’t build Canada without a pipeline
  • ‘Clear the fog’: How India’s pickleball-playing envoy to Canada aims to reset ties

Financial planning is often presented as a decade-by-decade checklist: save in your 20s, buy a house in your 30s, hit peak earnings in your 40s and 50s and retire in your 60s. But life trajectories have become less predictable.

Lynn MacNeil, of Richardson Wealth Ltd., explains how we can prepare for the significant milestones in life, from earning our first paycheque to achieving financial independence.

Are you worried about having enough for retirement? Do you need to adjust your portfolio? Are you starting out or making a change and wondering how to build wealth? Are you trying to make ends meet? Drop us a line at wealth@postmedia.com with your contact info and the gist of your problem and we’ll find some experts to help you out while writing a Family Finance story about it (we’ll keep your name out of it, of course).

McLister on mortgages

Read more  Want to learn more about mortgages? Mortgage strategist Robert McLister’s

Financial Post column can help navigate the complex sector, from the latest trends to financing opportunities you won’t want to miss. Plus check his

Financial Post on YouTube

mortgage rate page for Canada’s lowest national mortgage rates, updated daily. Visit the Financial Post’s YouTube channel for interviews with Canada’s leading experts in business, economics, housing, the energy sector and more.

Today’s Posthaste was written by Pamela Heaven with additional reporting from Financial Post staff, The Canadian Press and Bloomberg.

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