Carney confronts early test as U.S. trade war hits Canadian economy
Canada’s economy is under increasing pressure as U.S. tariffs, weakening American growth, and domestic uncertainty converge — posing an immediate test for newly appointed Prime Minister Mark Carney.
“A weaker U.S. economy will continue to spill over and negatively impact Canada,” said RBC economist Claire Fan, pointing to early signs of contraction, including a 0.2 per cent drop in GDP in February.
Carney, who took office on April 28 pledging a pragmatic approach to economic management, now faces the dual challenge of heading off a possible recession and managing strained relations with the U.S. His first major test will come in a high-stakes meeting on Tuesday with U.S. President Donald Trump, whose protectionist trade policies have rattled Canadian industries.
Despite the tension, there are hints of possible cooperation. Trump recently told reporters, “I think we’re going to have a great relationship... He called me up yesterday and said, ‘Let’s make a deal.’” U.S. Trade Representative Jamieson Greer also suggested the two leaders could collaborate to strengthen North American manufacturing, calling Carney “a serious person.”
Still, the economic damage may be hard to reverse quickly. Ontario’s Financial Accountability Office warns U.S. tariffs could cost the province over 68,000 jobs this year, rising to nearly 138,000 by 2029. Meanwhile, markets are betting the Bank of Canada will cut interest rates in June to help offset slowing growth. “Policymakers at the Bank of Canada have their work cut out for them,” said TD economist Marc Ercolao.
Carney is expected to announce his cabinet within two weeks and convene a meeting of premiers to coordinate a national response. Among his early priorities: unifying provinces on trade policy, advancing infrastructure projects, and delivering on a promise to implement internal free trade by July 1.
While his background as a central banker and crisis manager helped him get the job, Carney’s ability to stabilize a faltering economy amid a U.S.-led trade war will quickly define his leadership.
