Canada’s economy is strong enough to stand up to Donald Trump.
Given the years of self-flagellation that preceded this trade war, you might not have known that. All the talk of lacklustre productivity, of regulatory roadblocks and uncompetitive tax policies, could easily have given you the impression that we’re here for Trump’s taking.
But you don’t have to look far for signs of resilience, even as escalation gets more surreal.
The most obvious one came on Friday, when Statistics Canada released data showing that annualized GDP growth was 3.3 per cent in this year’s second quarter — the highest increase since 2023, despite the tariffs Trump has had in place since last year and worry about what he’d do next. Remarkably, that included export growth. And the agency upwardly revised its first-quarter data, disproving the fleeting narrative that we’d (briefly) been in a technical recession.
The momentum may be impossible to sustain, as Trump’s newest round of tariffs and Canada’s countermeasures take hold — let alone if the conflict worsens further still. But a stream of projections for how much pain we’ll have to endure has been oddly heartening as well, because of how manageable it appears.
From bank economists, as well as global firms like Oxford Economics, the assessments tended to put the potential hit to GDP growth next year from the new levies at half a percentage point or below. That’s not optimal, but it’s not devastating either.
And even the potential impact of Trump withdrawing from the Canada-United States-Mexico Agreement (CUSMA) altogether — a worst-case scenario that people involved in trade negotiations are now taking somewhat more seriously than they were a couple of months ago — could be survived.
In that case, most analysis suggests that our economy would wind up about two per cent smaller than would otherwise be the case, and job losses would be in the ballpark of 100,000 — about 0.5 per cent of our national workforce.
“It’s not existential,” is how Dan Ciuriak — a former senior government economist who has been a prominent voice of calm about this state of affairs — put it in an interview this week.
All of this adds up to further evidence, if anyone still needs it, for why Mark Carney was right to walk away from an unfavourable deal that he seemed perilously close to accepting. Compromises to our sovereignty, largely to avoid the new tariffs with the relatively marginal impact nationally, would have been much more existential indeed.
But it should also cause us to ask ourselves: Are we willing to leverage our strengths to emerge from this mess stronger than we entered it, rather than allowing Trump to weaken us in ways that national GDP or jobs figures don’t fully capture?
Lurking beneath those relatively encouraging topline numbers is a more disconcerting dynamic, particularly if you live in Ontario or a handful of other provinces.
A country that’s already heavily reliant on its natural resources is at risk of becoming much more so.
That’s the stuff Trump won’t tariff, because the U.S. needs our oil and our potash and our minerals. It’s also where a lot of our trade diversification is taking shape, through new pipelines and export terminals and offtake agreements, despite American demand remaining fairly reliable.
Our ability to actually make things is a much different matter. About the closest Trump comes to a coherent ideology is his desire to relocate manufacturing from other countries to his own. And the level of tariffs that he keeps ramping up (and threatening to ramp up) are indeed threatening the future of factories here, whether or not it would lead to any U.S. gains.
Unfortunately, these are also the industries where it’s much harder to decrease reliance on the U.S. market — partly because we’ve spent many decades integrating, and also because of simple geography. The logistical realities of sending Ontario-made cars to Europe or Asia, to use the most glaring example, are much more unwelcoming than shipping oil and gas from the west coast.
It’s going to lead to a lot of punditry about whether we have to just give up on those sectors, bolstered by data showing the ostensibly marginal hit to the economy nationally. But giving up on manufacturing is not a road we can afford to go down.
Not if we want to avoid extreme pain for communities built around producing those goods. Not if we want to avoid resource-rich provinces complaining about propping up the others. And not if we want to be reasonably self-sufficient, as globalization is under threat.
Carney’s government seems fairly convinced of that, as evidenced by its tariff relief programs and by counter-tariffs aimed partly at reducing U.S. competition for sales within Canada, and keeping businesses alive in the near term.
But the fact that our economy isn’t in danger of immediate collapse also gives us a bit of room to figure out what we can manufacture in the long run that won’t rely so much on American demand, and invest capital accordingly.
Ottawa has already established that military equipment is one of those things, but it alone probably won’t match (let alone exceed) what we’re at risk of losing.
So we need to figure out, for instance, what automotive products we can make that will give us a bigger piece of the EV transition in the coming years and decades. And how to make the most possible products to supply our build out of the electrical grid, rather than importing. And we have to finally get serious about government purchasing power to give a leg up at home to makers of new products that might then be sold overseas.
It’s not easy to focus on this kind of stuff, under the fog of Trump’s trade war, and amid the endless updates of his mood and the exchanges of insults with Doug Ford and the renaming of lakes.
But the future of Canadian manufacturing, and whether we can seize it enough to thrive rather than just survive, is what’s really at stake here. We can endure the rest.
