ECONOMIC SPOTLIGHT // Q4 2024
The recent U.S. presidential election, which saw Donald Trump secure a return to the White House, has generated significant global attention. While markets reacted positively to the news, with U.S. equities surging and treasury yields fluctuating, Trump’s potential policy shifts raise questions for Canada’s economy. The impact of his administration’s protectionist trade agenda could shape the Canadian economic landscape in the coming months, particularly as policymakers and investors navigate this new reality.
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In the United States, Trump’s election and the Republican Party’s control of the Senate signal a period of potential policy upheaval. Markets initially welcomed the clarity, but concerns linger over the possible implementation of tariffs and a slower pace of Federal Reserve rate cuts. These developments will likely increase inflationary pressures and impact trade dynamics globally, with Canada as a key trading partner facing unique challenges.
Closer to home, Canada’s economy continues to show resilience, supported by a steady labor market and a revival in housing activity. October’s job growth of 15,000 positions reflects solid year-to-date gains of 270,000 jobs, keeping unemployment at 6.5%. Wage growth remains stable, and an uptick in hours worked hints at a robust GDP print for the month. Meanwhile, housing sales surged 8% in October, a sign that recent interest rate cuts and new federal borrowing measures are stimulating demand in key urban markets like Toronto and Vancouver.
For Canadian investors, these developments offer a mixed picture. On one hand, rate cuts by the Bank of Canada (BoC) and stable employment provide a favorable environment for growth. On the other, Trump’s trade policies could disrupt cross-border trade, with potential tariffs posing a risk to GDP and inflation. The Canadian dollar, already under pressure, is projected to weaken further into early 2025, potentially dipping below 70 cents USD before recovering modestly.
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Canada’s economy is navigating a delicate balance. Domestic strengths in labor and housing markets are tempered by external uncertainties stemming from U.S. policy shifts under Trump. For Canadians, the evolving trade landscape and currency fluctuations underline the importance of monitoring both domestic and international developments closely.
Future Outlook
Looking ahead, the Bank of Canada faces the challenge of balancing domestic growth with external risks. Additional rate cuts may support the housing market and broader economy, but trade disruptions or tariff implementations could necessitate more cautious policymaking. Investors should anticipate short-term volatility, particularly in sectors tied to U.S. trade, while focusing on long-term opportunities in Canada’s resilient housing and labor markets. As policymakers prepare for the next USMCA review in 2026, concessions may be required to safeguard trade stability, ensuring a steady path forward for Canada’s economy.
Stay tuned for updates as we monitor these developments closely.
Source – TD Economics*