Canada’s economy will be permanently scarred if U.S. President Donald Trump imposes auto tariffs, with 1 in 5 Ontario manufacturing jobs at risk and the potential for a lasting reduction in output, according to new analysis by Toronto-Dominion Bank.

TD Economics forecasts U.S. tariffs on automobile imports would lead to a short recession for Canada as a whole, with 2019 growth reduced by a half percentage point as the economy stagnates for two quarters. But the impact on the province of Ontario, where the auto sector is concentrated, would be much worse, with growth reduced by as much as 2 percentage points and 1 in 5 manufacturing jobs at risk, senior economist Brian DePratto said in a note published Monday.

In total, DePratto expects 160,000 net jobs would be lost, with almost all of those cuts in Ontario. That’s enough to erase all of the gains in employment that the province experienced over the past two years, he said.

To make matters worse, the economy would never completely recover from the shock to confidence, reducing the level of output permanently 0.2 percentage points below the baseline scenario.

“This is a big enough of a shock and a big enough of a disruption relative to history that basically you’ll get people choosing not to locate here that would have previously,” DePratto said in a phone interview. “Typically when you run these things through your models, you tend to get a little bit of a catch-up, but in this case it’s so negative that you never quite get there.”

DePratto described the impact as being similar to the 2014-15 oil-price shock, which sent Alberta into a recession but had a milder impact on the national economy. The effect would be likely moderated by the Bank of Canada cutting interest rates and an 8 percent to 15 percent depreciation in the Canadian currency. But the fact that the economy would take a hit despite those offsets “speaks to the size of the risks around current trade negotiations,” he said.

“This scenario may paint a fairly negative picture, but if anything, the risks are tilted further to the downside,” he said, pointing to potential spinoff effects on home prices and retail sales.

In a separate report released Monday, Oxford Economics said an auto tariff, in addition to existing steel and aluminum tariffs, would cut about 0.7 percent off Canada’s gross domestic product by the end of 2020 assuming Canada reciprocates.

Brett House, deputy chief economist at Bank of Nova Scotia, said last week that a tariff on autos and parts would shave about 0.6 percent off Canadian GDP.

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