Canada set for sustained period of weak growth

We have updated our forecasts for Canada to account for the latest changes in US trade policy. A recession should be avoided, but the harsh tariffs on the vehicle sector and uncertainty about the future of the USMCA mean GDP growth is likely to slow to a crawl. The scrapping of the carbon tax will keep a lid on headline inflation, but retaliatory tariffs mean core inflation will rise above 3%. Nonetheless, with the economy weak, we see scope for three rate cuts to take the policy rate to 2.0%.