With the US and Canada locked in a trade war, fears of a recession lurk

The trade war that United States President Donald Trump has triggered with Canada is expected to hurt businesses in both countries.

But experts say the damage to the Canadian economy will be worse, as the tit-for-tat tariffs have raised the chances of a recession.

On Saturday, the US imposed 50 percent tariffs on $20bn worth of Canadian goods after trade negotiations between the two countries collapsed. On Monday, Trump also threatened Canada with new 50 percent levies on all car products, starting January 1.

On Tuesday, Prime Minister Mark Carney unveiled retaliatory measures against more than 700 US products, also valued at $20bn. The tariffs are tiered at 15, 25 and 50 percent, and they are slated to come into effect on September 8.

But while Canada’s efforts have sparked a surge of nationalism, experts warn the feeling might sour in the face of economic losses.

“People feel very energised by the idea of Canada standing up to Trump, and there’s a palpable sense of patriotism in Ottawa, but I don’t know how long it will last,” said Vina Nadjibulla, cofounder and CEO of the Centre for Strategic Statecraft, a nonpartisan policy think tank in Canada.

Canada’s economy is a 10th the size of its US counterpart, and the country sends about 70 percent of its exports south of the border, which makes it especially vulnerable to US trade penalties.

While the US tariffs will have a limited impact on the overall Canadian economy — the advisory firm Oxford Economics estimates they will shave 0.3 percentage points off its gross domestic product (GDP) next year — they will hurt specific provinces and sectors more significantly.