As the threat of crippling tariffs on Canadian exports to the U.S. looms, the Greater Vancouver Board of Trade (GVBOT) Thursday challenged B.C. politicians of all political stripes to adopt a three-per-cent annual GDP growth target.
And while across-the-board tariffs would almost certainly trigger a major recession in Canada, and has resulted in "peak uncertainty," Scotiabank chief economist Jean-Francois Perrault urged Canadians not to panic.
“This is a critical time for our province,” GVBOT president Bridgitte Anderson said at a Thursday morning forum on economic growth that included B.C. government and opposition leaders, business leaders and economists.
“In just two days, we could be facing 25 per cent tariffs from the United States," Anderson said. "But instead of paralyzing us, the spread of tariffs should serve as a catalyst for action in B.C.”
GVBOT is challenging all MLAs in B.C. to pledge support for the three-per-cent GDP growth target for the B.C. economy. Attaining three per cent annual GDP growth over five years would raise the province’s per capita GDP by $9,000 and generate $4 billion in additional revenue, GVBOT said.
In the coming weeks, GVBOT will roll out "policy pillars" for achieving the target. Anderson said cutting permitting times and facilitating investment in large resource projects like LNG projects are some of the tools the province could use to stimulate growth in B.C.
Perrault said there are signs of improvement in the Canadian economy that are cause for "guarded optimism," were it not for the uncertainty over the threat of tariffs. Scotiabank is forecasting two per cent GDP growth this year, based on recent Bank of Canada interest rate cuts.
"The reality, when you step aside from Trump-related concerns about tariffs and various other things, is that the Canadian economy is improving rapidly on the back of very significant rate cuts by the Bank of Canada," Perrault said. "You set aside Trump, we are on a path of recovery."
Canada's general lack of business productivity restrains the economy from growing more than two per cent, he said, and the threat of tariffs and a trade war with the U.S. would squelch economic growth in a profound way.
If the Trump administration makes good on threats to impose across-the-board tariffs on all Canadian imports to the U.S., Perrault said a recession is almost certain.
"Tariffs of that nature are a huge economic shock – huge," Perrault said. "Recession almost guaranteed. The loss of output of four or five per cent."
Canada's response to the tariffs could worsen things, he added. Retaliatory tariffs would increase the cost of imports. So a combination of a low Canadian dollar and import tariffs would be a significant challenge for importers.
There has been talk of responding to tariffs with COVID-19 pandemic-style government supports, which added to inflation and put the Canadian government deep in debt.
"One of the lessons of the pandemic is we completely overdid it on the support side," he said.
He added that he thinks "rationality will prevail," and that across-the-board tariffs will not happen. But their mere threat is weighing down economic growth and optimism.
"I think, at the end of the day, not much is going to happen on the tariff side," Perrault said. "I think we're going to come out of this OK, because I think rationality will prevail. But right now we are at peak uncertainty."