Trucks loaded with shipping containers leave the Port of Montreal in May, 2021.Christinne Muschi/Reuters
To help make sense of 2025, The Globe and Mail asked dozens of experts, including economists, investors, academics and business leaders, to each choose a chart they think will be important to watch this year.
Rough trade
Stephen Tapp, chief economist, Canadian Chamber of Commerce
Donald Trump’s 25-per-cent across-the-board tariff threat on imports from Canada and Mexico is a big deal that, if realized, would have a major impact on North America’s economy in 2025. In effect, even before returning to the presidency, Mr. Trump has started to renegotiate the Canada-U.S.-Mexico trade agreement, which wasn’t scheduled for review until July, 2026.
Not surprisingly, the premiers of several Canadian provinces have been vocal about protecting their economic interests from this serious threat. The accompanying chart shows provincial vulnerability to U.S. tariffs. Three provinces – Ontario, Alberta and New Brunswick – are identified as most vulnerable in the upper right of the scatterplot because they’re more trade-intensive than the national average, and they export a larger share of their goods to the United States than other provinces. As such, they’ll be working especially hard for exemptions on the energy and auto exports that the Canadian Chamber’s Business Data Lab’s modelling suggests would be hit hardest by U.S. tariffs.
It’s all uphill from here
Trevor Tombe, professor of economics, University of Calgary
Few economic developments will matter more for Canada’s economy in 2025 than uncertainty over trade with the United States. Approximately 2.4 million jobs are embodied with Canada’s exports to the U.S. Ontario leads the pack with more than one million jobs at risk, Quebec with over 500,000 and Alberta with over 315,000. However, the impacts extend beyond exporters themselves. About half of these jobs are in supply chains or service providers indirectly dependent on U.S. trade. And more than 300,000 Canadian jobs support exporters in other provinces, reflecting the interprovincial connections that amplify the ripple effects of U.S. tariffs.
Worse, whether a new tariff materializes or not, the mere threat creates significant uncertainty that weighs heavily on business investment decisions. This uncertainty is likely to dampen growth, and almost inevitably lead to job and income losses in the coming year, even in the absence of actual trade barriers. The stakes are clear: With so many jobs and incomes tied to U.S. trade, avoiding a recession or significant slowdown in 2025 will be an uphill challenge.
Trading up
Eric Lascelles, chief economist, RBC Global Asset Management
The ebb and flow of global trade is a useful proxy for the performance of the global economy. Periods of decline have historically been associated with recessions or near misses, and periods of rapid trade growth are aligned with economic health. In this context, it’s heartening that the weakness of recent years has lately been unwound, consistent with recession fears fading and the global economy firming. Gazing ahead, global trade may take on an even greater importance, providing insight not just into Canada’s economy but also specific damage inflicted by U.S. tariffs.
Canada’s loss is America’s loss
Royce Mendes, head of macro strategy at Desjardins Capital Markets
Canadians have justifiably been shocked that Donald Trump has painted us with the same brush as China and Mexico. Aside from the fact that our border and drug trafficking problems pale in comparison to those of those other two countries, Canada hasn’t become a back door for Chinese goods to enter the U.S. market. The sheer size of the U.S.-Canada bilateral trading relationship makes Mr. Trump’s sabre-rattling very questionable. Rightly or wrongly, Mr. Trump views trade deficits as a sign that other countries are unfairly benefiting from the United States.
Despite the fact that the U.S. runs an almost US$40-billion trade deficit with Canada, when taken as a share of total two-way trade, the deficit looks miniscule. So any modest gains from reshoring activity to the U.S. by closing that small trade deficit would almost certainly be more than offset by the catastrophic unwinding of supply chains that would occur. While Mr. Trump’s proposed 25-per-cent tariff would no doubt hurt Canada more than the U.S., America has much to lose from disregarding the strategic importance of its relationship with Canada.
The Trump tax
Alan Arcand, chief economist, Canadian Manufacturers and Exporters
The threat of U.S. tariffs is Canada’s most urgent economic challenge – and with good reason. The United States is Canada’s largest trading partner, accounting for three-quarters of our merchandise exports. Manufacturing, a cornerstone of Canada’s economy and responsible for 10 per cent of real gross domestic product, is particularly at risk, as 44 per cent of its sales are driven by U.S. exports.
Certain manufacturing segments are especially vulnerable. Among Canada’s top 15 manufacturing industries, the auto sector stands out as the most reliant, with three-quarters of its sales tied to U.S. exports. Other highly exposed subsectors, in which over half of sales depend on the U.S., include machinery, computer and electronic products, chemicals and primary metals. If a new U.S. tariff is imposed, bold and co-ordinated action from all levels of government will be essential to safeguard manufacturing jobs and bolster Canada’s economic competitiveness.
Balancing act
Meredith Lilly, professor of economics, Carleton University
The size of Canada’s merchandise (goods) trade balance with the United States will be a critical trend to monitor because trade deficits are a major influence on Donald Trump’s views about tariffs. Mr. Trump is a mercantilist and believes the U.S. should export more goods than it imports. Instead, the U.S. has a trade deficit with all of its largest trading partners, including Canada, meaning it imports more than it exports in dollar terms. The potential tariff blow to Canada should be softened by the fact that the U.S. has even larger trade deficits with several other countries, especially China, Mexico and Vietnam. Also, Canada is the largest purchaser of U.S. goods, and the U.S. has a trade surplus with Canada in services.
Nevertheless, the U.S. trade deficit with Canada is largely driven by its imports of Canadian energy. Given the relative weakness of the Canadian economy, this imbalance is not easily addressed. Canada’s weak dollar only further incentivizes U.S. imports from Canada, while the strong American dollar discourages Canadian imports from the U.S. This all means that the Canada-U.S. trade imbalance – and what it will represent to President Trump – will be an important chart to watch in 2025.
Tariff-rate roulette
Sebastien Lavoie, chief economist, Laurentian Bank Securities
Positive economic forces for 2025 include the continuing global monetary easing cycle and its impact on aggregate consumer demand, broader adoption of artificial intelligence boosting trend growth, and a mix of looser deregulation and additional fiscal stimulus from big countries such as the United States and China. However, U.S. tariffs on imports from China, Mexico and Canada must be incorporated into a realistic base-case scenario.
Such a scenario should include a minimum 5-per-cent tariff on all U.S. imports from Canada, excluding energy and manufacturing. Alternative adverse scenarios could insert sweeping tariffs varying between 10 per cent and 25 per cent for a longer period, in addition to retaliation, bringing North America near or into recession territory in either 2025 or 2026. Accordingly, one hot chart for everyone to monitor is the U.S. effective tariff rate. This ratio divides U.S. custom duties relative to imports. Donald Trump’s trade policy 2.0 could lift the U.S. effective tariff rate above 5 per cent, a level unseen since the challenging 1970s.