Trump’s decision to impose 25% tariffs on Canada and Mexico came as a shock to many. They will undoubtedly cause economic pain in Canada and Mexico, but there will be economic pain in the United States as well.

The tariffs imposed on Canada and Mexico may cause supply-chain disruptions to the highly integrated North American economy. In fact, at the time of writing, the U.S. has walked back tariffs on automotive products and all USMCA-compliant goods for the next 30 days to avoid such disruptions. Combine this with economic uncertainty from the Department of Government Efficiency (DOGE) and you get paralysis among companies trying to make decisions on investing and hiring in the short term. Any way you look at it, the result is a slowing economy that should show up in the March numbers (reported in April).

Now some good news… in response to the uncertainty that President Trump’s policies are creating, we are seeing other countries step up and take measured responses. Germany just announced a plan to spend 20%+ of their GDP over the next decade on defense and infrastructure investment. Tony Abbott (former PM of Australia) just penned an article arguing for a free trade deal between Canada, Australia, New Zealand, and the UK.

Now, if Canada could put forward a united effort to cut taxes, build infrastructure, and cut red tape to allow large projects, then maybe we will get to look back at this and realize it was the catalyst we needed to take control of our own destiny. This may be a pivotal time for Canada to step up and end what seems to have been an all-talk-no-action approach. If we did, it would be very good for the short-term economy and likely brilliant for the longer term.

I have also included a piece from our CIBC Economics team entitled “Chicken soup for the economy”.

As always, if you have any questions, please feel free to give us a call.

Have a great weekend.

Milan