Canada’s Economy Takes Big Hit From Trump Tariff Fight

President Trump’s tariff war is starting to take a dramatic hit on the Canadian economy.Canada’s economy shrunk at a higher than expected 1.6 percent annual rate in the second quarter due to significant declines in exports to the United States, according to statistics released Friday.There are concerns that Canada’s economy could be slipping into a recession. America is Canada’s largest trading partner.Statistics Canada says the real gross domestic product declined 0.4 percent. Exports declined 7.5 percent after increasing 1.4 percent in the first quarter.Most Canadian goods are avoiding Mr. Trump’s 35 percent tariff due to a previous trade agreement, but about 10 percent of Canadian imports face the new tax, including dairy, lumber, steel, aluminum, and automobiles.Passenger cars and light trucks were hit the hardest by United States-imposed tariffs. Those exports were down nearly 25 percent. Exports of industrial machinery, equipment, and parts also took a big hit. Travel services were down more than 11 percent.Imports were also down from the United States due to the counter-tariff response by the Canadian government. Imports declined 1.3 percent. Passenger vehicle imports dropped 9.2 percent and Canadians traveling abroad dropped 8.5 percent.Canadians are avoiding the United States. Forbes reports that tourism to America from Canada dropped 33 percent in June compared to the same month one year prior. It was the sixth consecutive month of declining visits to the United States from Canada.The decline in GDP would have been even greater if not for increases in consumer and government spending, some of which was initiated by Prime Minister Mark Carney in a bid to soften the impact of the American tariffs.“It should come as no surprise that the Canadian economy struggled in Q2 as tariffs ramped up,” the managing director of Canadian rates at the Bank of Montreal, Benjamin Reitzes, said, according to the CBC.“However, the domestic strength is somewhat comforting, although the sustainability of that momentum is an open question.”Mr. Trump has used the claim of fentanyl being smuggled across the Canadian border as a justification of the higher tariffs — something Canada disputes.“Canada accounts for only 1 percent of U.S. fentanyl imports and has been working intensively to further reduce these volumes,” Canada’s prime minister, Mark Carney, said last month.Canada imposed 25 percent counter-tariffs on $21.7 billion worth of American products in March following Mr. Trump’s announcement of steel and aluminum duties. But Mr. Carney might be folding as the Canadian economy takes a big hit. He announced last week the elimination of most of the retaliatory tariffs against the United States, effective September 1.A 25 percent tariff on American automobiles, steel, and aluminum will continue for now.The Canadian tariffs have had little impact on the American economy. The Department of Commerce announced Thursday that while imports dropped, the United States economy rebounded in the second quarter. The gross domestic product grew at a 3.3 percent annual pace during the period.

Canada’s Economy Takes Big Hit From Trump Tariff Fight

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