One chief economist says current trade tensions with the U.S. mark an opportunity for Canada to implement economic reforms, while noting that rising protectionism will weigh on global growth and spur inflationary pressures.
On Monday, the Organisation for Economic Cooperation and Development (OECD) cut its global economic outlook while warning a broader trade war would hinder growth. The outlook said U.S. President Donald Trump’s tariff hikes would result in lower growth in Canada, Mexico and the U.S., while driving inflation.
“At this stage a lot of the reforms, especially on internal barriers to trade in Canada have been discussed among economists and among people for a long time,” Álvaro Pereira, the chief economist at OECD, said in an interview with BNN Bloomberg Wednesday.
“And this shock we think is a good opportunity to do the reforms that Canada has been due for many, many years and we hope that from now onwards, provinces and the federal government get together and are able to do this type of reforms.”
Global growth, according to the OECD, is on pace to ease from 3.2 per cent last year to 3.1 per cent in 2025 and three per cent in 2026. OECD cut its projections for 2025 and 2026 from 3.3 per cent in both years, as noted in a previous outlook in December.
Pereira said that there is a significant degree of uncertainty surrounding economic and trade policy, which is weighing on consumer sentiment across Canada, the U.S., Mexico and other nations. Assuming tariffs stay in place, he said the impact would be “quite significant.”
“As a consequence, and taking into account the impact that the tariffs will have on the world economy, we’ve downgraded almost every single G20 country,” he said.
According to Pereira, a downgrade in growth and higher inflation is a “consequence of all this rising protectionism.”
He added that the downgrade to Canada’s economy is based on exposure to U.S. trade.
“So basically 74 per cent at least of Canadian exports go to the United States. And so tariffs have a disproportionate impact on Canada, same thing with Mexico, vis-à-vis other countries. It was a difficult forecast because we don’t know exactly the endgame regarding tariffs,” Pereira said.
“But if you take into account the 25 per cent tariffs against Canada and Mexico for the next few couple of years, the impact will be quite significant where growth will be 0.7 per cent this year and the next in Canada.”
Previous forecasts from OECD had forecasted Canadian growth to come in at two per cent for this year and next.
