‘We’re Seriously Outgunned’ in Trade War, Warns Former Bank of Canada Governor

Stephen Poloz, former governor of the Bank of Canada, expressed concerns regarding the country's position in the ongoing trade war with the United States, stating that Canada is currently at a significant disadvantage.

During a recent webinar, Poloz emphasized, "We’re seriously outgunned" and pointed out the importance of maintaining a strong relationship with the U.S. He stated, "When the dust settles, we will need our U.S. partnership just as much as we need it today." This remark highlights the critical nature of the economic ties between the two countries.

Long-Term Perspective

Poloz urged that Canadians must think long-term when considering the implications of the trade war. He compared the situation to historical rivalries, mentioning that this is not akin to the Hatfields and McCoys, indicating that while disputes may arise, a cooperative long-term future is essential.

He believes that despite the current challenges, there will be opportunities to improve relations and that people are crucial to this process. Poloz noted, "People forget that trade doesn’t happen between countries; it happens between people." He remains optimistic that practical solutions can be found as mutual respect and business interests remain strong.

Economic Forecasts

The current forecasts for Canada’s economy amidst the trade challenges are concerning. The Bank of Canada projects that a prolonged trade conflict could lead to a three percent decline in GDP over the next two years. Meanwhile, economists from Desjardins Group expect a potential economic contraction by the second quarter of the current year.

While acknowledging the grim outlook, Poloz believes these forecasts are not critical for the economy's survival. He maintains that solutions can be identified and implemented effectively.

Impact on Federal Elections

The trade conflict is anticipated to play a significant role in the federal elections, with leaders from various parties discussing economic measures, including tax cuts for lower-income Canadians. Poloz suggests that a fiscal response to the trade war is necessary, though he does not advocate for measures as extensive as those seen during the pandemic.

He expressed hope that the response would focus on fostering investment rather than solely promoting household spending.

Future Economic Strategies

Poloz also outlined several strategies to enhance Canada’s competitiveness in the global market, such as prioritizing energy and resource projects deemed essential, embracing technological advancements, and improving the tax framework for the manufacturing industry. He also suggested utilizing revenue from tariff retaliations to fund tax reductions.

Looking ahead, he noted the upcoming major technological advancements that would alter trade dynamics, shifting more towards services rather than goods. He urged that Canada must position itself to seize these evolving opportunities.

trade, economy, Canada