Canadian PM Carney Warns Trump’s Tariffs May Trigger U.S. Recession

• PM Mark Carney warned Trump’s tariffs could tip the U.S. into recession and drag Canada down with it.
• Despite earlier threats, Canada mostly avoided new U.S. tariffs, helping the Canadian dollar hit a four-month high.
• Economists still expect rate cuts and fiscal support in Canada, calling the outlook “gloomy” despite escaping worst-case trade damage.

Canadian Prime Minister Mark Carney didn’t mince words this week, warning that President Trump’s sweeping new tariffs could “rupture” the global economy—and might be enough to push the U.S. into a recession.

“The U.S. economy is already slowing, inflation’s picking up… this could be the tipping point,” Carney said at a press conference.

Canada Won’t Be Immune

Carney noted it’s rare for Canada to avoid economic pain when the U.S. falters. “When the U.S. dips, we usually go right with them,” he said. While he believes Washington might eventually rethink the tariffs, it probably won’t happen soon. “Not until the pain hits home.”

What Tariffs Hit Canada?

Interestingly, Canada avoided the worst of the tariff storm. Donald Trump didn’t add new levies beyond earlier ones—like the 25% tax on non-USMCA goods, foreign aluminum, steel, and cars. Economists now believe up to 80% of Canadian exports could still cross the border mostly tariff-free, assuming companies stay USMCA-compliant.

“Reimagine Our Economy”

With a strong lead ahead of the April 28 election, Carney urged Canada to prepare for long-term changes. “Short-term support is important, yes—but we need to reimagine our economy now that frictionless access to the U.S. can’t be taken for granted.”

Economists Still Gloomy

Stephen Brown at Capital Economics thinks Canada might avoid recession—but said the forecast remains murky. He expects the Bank of Canada to slash interest rates three more times this year and sees new federal and provincial stimulus efforts as likely.

A Small Silver Lining

In the markets, the Canadian dollar got a small boost—hitting a four-month high—as traders welcomed the fact that Trump didn’t go full scorched-earth on Canadian trade.