Desjardins' Randall Bartlett says tariffs and countertariffs may fuel inflation and economic downturn
Randall Bartlett, deputy chief economist at Desjardins, said Canada could fall into a recession by mid-year if US President Donald Trump imposes 25 percent tariffs on most Canadian goods.
Speaking with BNN Bloomberg, Bartlett said Desjardins’ analysis indicates that avoiding a recession under these conditions would be “very difficult.”
He explained that retaliatory tariffs would worsen the economic impact and drive inflation higher, making it harder for the Bank of Canada to manage both a decline in gross domestic product (GDP) and rising prices.
“Ultimately, retaliatory tariffs are just going to exacerbate that and also lead to higher inflation,” he said.
Bartlett described the inflationary effects of a tariff war as “multifold.”
He noted that US tariffs would weaken the Canadian dollar, increasing the cost of goods imported and re-imported from the US, which would put “upward pressure on domestic inflation.”
He added that Canadian retaliatory tariffs would further raise costs for consumers and businesses, stating, “Those are tariffs, just like any tariff, that are going to be paid by the citizens, the businesses and the households of the country importing those goods… that (also) feeds into higher inflation in Canada.”
According to Bartlett, both the US and Canadian economies would suffer from a tariff war, though tariffs and countertariffs remain politically popular.
“Clearly it’s been politically successful in the US, even if it’s not going to be an economically successful policy south of the border,” he said.
In Canada, he noted, retaliatory tariffs would “exacerbate the economic downturn” and contribute to higher inflation, but polling suggests they have public support.
Bartlett also discussed potential responses if tariffs are imposed. He suggested that if they remain in place throughout a Trump administration, the Bank of Canada could lower its policy rate to around 150 basis points by early 2026.
However, he cautioned that the central bank would have to balance inflation concerns with economic weakness.
On fiscal policy, he said the federal government has options to increase stimulus once Parliament resumes but should focus on targeted measures rather than broad spending, as was done during the COVID-19 pandemic.
“This is going to need longer-term support, which is more targeted to industries that are hardest hit and households that are more deeply affected,” he explained.
