Forecasting in volatile times: Are tariffs a game changer for growth and inflation?
Full-blown reciprocal U.S. tariffs are on pause for 90 days, but sizeable 10% tariffs imposed on most countries on April 5 remains in place, and it, along with steep tariffs on imports from China, could have significant implications for the country’s inflation and growth.
The U.S. trade-weighted average tariff rate is currently at its highest since the 1930s, but, in a twist of fate, Canada has emerged as one of the least impacted countries, thanks to USMCA exemptions.
RBC Economics has updated forecasts for the U.S. and Canada to reflect these developments. In this episode of the 10-Minute Take, Claire Fan and Carrie Freestone attempt to answer these questions:
· How will tariffs influence inflation and GDP growth in the U.S. and Canada?
· Will either country see a recession in the coming year?
· What could future policy from the Bank of Canada and Federal Reserve look like?
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11:19
Are services immune to tariffs in the trade war?
More attention is being focused on how Canada can better diversify trade to alternative sources as U.S. tariffs and threats continue to escalate.
In the goods trade, Canada's geographical proximity to the U.S. makes it difficult to diversify away from the U.S. But, that is much less of a constraint for services.
In this episode of the 10-Minute Take, economists Claire Fan and Carrie Freestone dig into:
• How much services Canada trades and with who?
• Is Canada is well positioned to leverage services for broader trade diversification?
• What are the headwinds facing services amid the ongoing trade war?
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9:43
Have the impact of tariffs shown up in the jobs market yet?
Consumers and businesses on both sides of the border have been paralyzed with uncertainty related to trade. Confidence has tanked and we've also witnessed a notable deterioration in other “soft” sentiment data in recent months.
The extent that recent trade policies have impacted hard data is unclear but matters more for central bank decisions. In this week’s episode, RBC Economics’ Claire Fan and Carrie Freestone break down how trade turbulence is impacting labour markets in Canada and the U.S., and what to expect next in the ongoing trade war.
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10:42
Is inflation making a comeback in Canada?
Economic data has shown that Canadian inflation was a little firmer than expected in early 2025, especially after considering the impact of the federal tax holiday that pushed prices lower for a few categories including restaurant dining.
In the U.S., the picture is a bit “stickier.” Broadly resilient consumer demand has been keeping price pressures at uncomfortably high levels, and not all U.S. households are impacted equally. Those that earn less tend to have less options in avoiding higher priced essentials.
Join RBC Economics’ Claire Fan and Carrie Freestone as they give their latest take on inflation, and how the looming trade rift plays into that.
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9:40
What we’ve learned about U.S.-Canada trade so far
As the threat of tariffs has been evolving, economists have been busy assessing the potential economic fallout. In this episode, RBC Economics’ Carrie Freestone and Claire Fan discuss:
-What we know about the tariffs announced, what retaliation could look like and how these forces will impact both the Canadian and U.S. economies.
-What Bank of Canada Governor Tiff Macklem said in the January meeting about how the Bank could respond.
-How markets reacted to tariff news and how we are assessing the balance of risk between a hit to demand and price pressures arising from potential policies.
Join us as we unpack how we’re thinking about the potential damage from a trade war.
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