We assume a recent lull in the trade war will set the stage for a partial rollback of some tariffs, but not before economic casualties mount on both sides of the border.
Canada's economy still faces a shallow downturn as exports to the U.S. contract, but the expansion should resume later this year as clarity emerges on tariffs. The U.S. economy will nearly stall for a while.
The Bank of Canada and the Fed will look past higher inflation and focus on a rising jobless rate, reducing policy rates three more times this year by a total of 75 basis points.
North American Outlook: Trading Down
