Dollars & Cents
By John Dickie, based on an interview with Benjamin Tal, CIBC Deputy Chief Economist
Unlike the last several years, infation is no longer a key concern. Aggregate mortgage costs are almost stable. The U.S. economy is not strong, even before the negative impact of tariffs, both American and Canadian. Which sectors and provinces will the tariffs affect the most? Where is the U.S. economy going?
Canadian infation has been tamed, particularly excluding mortgage interest cost (“MIC”)
Source:
Canada’s population growth
Canada’s working age population should grow
Downward pressure on consumption from increased interest rates is essentially over
40% of mortgage renewals will face lower payments next year
That will lead to only a modest aggregate increase in mortgage costs
$200-$300 billion heading to other assets from Canadian GICs
Source: Statistics Canada , CIBC
Outside of consumer spending, the US economy has been weak
Source: US Bureau of Economic Analysis, CIBC calculations
In the U.S., job-to-job transitions have stalled out
The likely purpose and distribution of the economic effects of U. S. President Trump’s tariffs.
U.S. President Trump threatens high tariffs as a negotiating tool
“My inclination is that when we hear 60% tariffs on China, that’s the beginning of a maximalist negotiating position. That’s the way President Trump negotiates. I would be surprised if we ever hit that…”
Scott Bessent US Treasury Secretary
Dollars & Cents
By John Dickie, based on an interview with Benjamin Tal, CIBC Deputy Chief Economist
Ontario and Quebec could bear 80% of the shock of higher tariffs due to their high direct exposure
Source: CIBC calculations
Trade uncertainty dented Canadian manufacturing capital spending in frst half of Trump’s frst term
Trump’s steel tariffs were painful and probably will be again
Source: Statistics Canada, CIBC calculations
But America’s tariffs will hurt Americans, especially in states that usually vote Republican (“red states”)
China entering the WTO was a game changer for the U.S. economy
U. S. Re-globalization after the pandemic
Source: U.S. Federal Reserve Board, Bureau of Economic Analysis, CIBC
China exporting through South-East Asian countries (which are emerging markets or “EMs”)
US becoming slowly more reliant on emerging markets’ consumers, and less reliant on Canada and Europe
Sources: U.S. Census Bureau, CIBC
Key uncertainties that will drive the economy
The success of the next government
• in resolving the tariff dispute and other disputes with the U.S.
ABOUT THE SOURCE
• in building new infrastructure and diversifying Canada’s exports.
• in addressing housing costs and housing supply.
Benjamin Tal is the Deputy Chief Economist at CIBC World Markets. Well-known for his ground-breaking research on all major sectors of the real estate market, on credit markets, and on business economic conditions, Benjamin frequently sets key elements of the public policy agenda. He is also a big believer in the value of a strong residential rental sector. As well, Benjamin has been the keynote speaker at many CFAA conferences over the years. CFAA thanks Benjamin for his support.