The
has significantly cut the growth outlook for Canada and several other major economies, blaming the shock effect of United States President
‘s
.
“The forecasts for 2025 include significant downward revisions for Canada, Japan, the United Kingdom and the United States,” the report released on Tuesday said.
For 2025 and 2026, the IMF downgraded its growth outlook for Canada by 0.6 percentage points and 0.4 percentage points, respectively, and said it expects
to come in at 1.4 per cent and 1.6 per cent, noting the forecast was among “several downward revisions (that) stand out.”
Canada’s slumping fortunes “largely reflect the new tariffs on exports to the United States that came into effect in March as well as heightened uncertainty and geopolitical tensions,” the report said.
In the IMF’s World Economic Outlook in January, it projected that Canada’s economy would expand by two per cent in both 2025 and 2026, but that was a drop of one percentage point for this year and 0.4 percentage points for next year from the final outlook for 2024.
The global organization, with 191 member countries, forecasted that growth in the U.S. would come in at 1.8 and 1.7 per cent this year and next, respectively, down 0.9 percentage points and 0.4 percentage points.
It also said global growth would shrink 0.8 percentage points this year to 2.8 per cent and 0.3 percentage points to three per cent next year. Earlier in the year, it had expected global growth of 3.3 per cent for both 2025 and 2026.
However, the IMF warned it was only providing “reference forecasts” based on U.S. levies and retaliation by other countries as of April 4.
“The unpredictability with which these measures have been unfolding has a negative impact on economic activity and the outlook and, at the same time, makes it more difficult than usual to make assumptions that would constitute a basis for an internally consistent and timely set of projections,” the IMF said.
On Feb. 1, Trump signed an executive order imposing tariffs on Canada, Mexico and China. Following a brief reprieve for the two North American trading partners, tariffs of 25 per cent on non-energy goods and 10 per cent on energy took effect on March 4, but exempted goods that complied with the
Canada-United States-Mexico-Agreement
.
The U.S. also imposed tariffs on steel, aluminum and the non-U.S. portion of completed vehicles.
Canada retaliated with tariffs on $60-billion worth of U.S. goods.
More broadly, the U.S. ended up imposing a 10 per cent reciprocal tariff on all countries except Canada, Mexico and China. But it escalated its tariffs on the world’s second-largest economy, which retaliated with counter duties levelling off at 125 per cent.
The IMF estimates that U.S. tariffs to date on Canadian goods represent an average increase of about 15 percentage points from previous rates.
The short-term effects of tariffs on activity are “largest for Canada and Mexico, China and the United States,” the report said.
The IMF also said Canada, Mexico, China and “especially” the U.S. would suffer “the largest declines in exports due to the medium- and long-term effects of tariffs — assuming they are permanent, with the hit “in the latter country due in large part to the long-term real appreciation of the U.S. dollar.”
The IMF said real exports in Canada and Mexico could fall anywhere from 1.8 per cent to six per cent in three scenarios that had no tariffs as a baseline.
• Email: gmvsuhanic@postmedia.com
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