US President-elect Donald Trump’s increasingly aggressive rhetoric against Canada suggests we should take his tariff threats seriously. We already assume that Trump includes Canada in a likely 10% universal import tariff, but we remain relatively sanguine about the consequences of that specific measure given all countries will face the tariff. It would be a different story if Trump imposed a 25% tariff on Canada alone, with a near 3% slump in GDP leaving the economy in recession. In that scenario, the effects of a potential follow-up US withdrawal from the USMCA would be modest by comparison.
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