Canada’s real gross domestic product (GDP) dropped 0.2 per cent in February amid tariff threats from U.S. President Donald Trump, however one expert says that figure was not significantly impacted by Canada-U.S. trade tensions.
“We’re all so attuned to tariffs and the threats therein and the risk of recession and so on that of course the initial instinct is to conclude that, well, here it is,” said Eric Lascelles, chief economist at RBC Global Asset Management, in a Wednesday interview with BNN Bloomberg.
“I think we’re right to be nervous about these things, I fully budget for tariff-related weakness and uncertainty-related weakness in the offing. I will say though, it’s not obvious to me that this particular data in this particular month shows anything quite so clearly of that sort.”
Statistics Canada released its latest GDP print Wednesday morning, attributing February’s economic contraction mainly to a 0.6 per cent decline for goods-producing industries like mining, quarrying, the oil and gas extraction sector, as well as construction.
Lascelles said “you would struggle” to connect the weakness in those industries directly to the threat of tariffs, adding that other factors such as winter weather may have had more of an impact on GDP.
“Actually, if there was a tariff impact in here, it might be on the positive side of the ledger. We saw manufacturing activity up quite a bit, I’m dubious that will persist, but it looks like there was some front loading going on,” he argued.
“So, this is the very strange undulations associated with tariff threats as you see front loading and some extra strength offset by somewhat haphazard weakness. I think we are going to see some weakness going forward but maybe not so clearly related to February.”
Companies “front loading” in recent months were attempting to produce and ship as many goods to U.S. buyers as possible before Trump’s threatened tariffs kicked in, Lascelles explained.
Looking ahead, Statistics Canada said Wednesday that based on its flash estimate, it’s tracking a real GDP increase of 0.1 per cent in March, though Lascelles said he’s skeptical that will hold.
“We’ll see whether that sticks, they had been tracking a zero (in February) and it came in several ticks below that so I would probably pick the under again,” he said.
“But they do note for that one just anecdotally that they are then expecting to see some drop in manufacturing and a drop in wholesale. That would feel to me perhaps more like the true starting gun in terms of damage from tariffs.”
With files from The Canadian Press
