An economic storm looms: is there a provincial plan?

Opinion

Hey there, time traveller!
This article was published 10/12/2024 (285 days ago), so information in it may no longer be current.

Two weeks ago, Manitoba Premier Wab Kinew told delegates to the recent Association of Manitoba Municipalities convention that U.S. president-elect Donald Trump’s plan to impose a 25 per cent tariff on Canadian exports would plunge the nation into a recession.

The premier was apparently unaware that Canada is already in a recession, according to former Bank of Canada governor Stephen Poloz. Last week, he told a webinar audience that “I would say we’re in a recession. I wouldn’t even call it a technical one.”

In support of his position, Poloz pointed out that Canadian consumers are reducing their spending as they grapple with a 30 per cent increase in the cost of living since the inflation rate began to decline. He also referred to the fact that the inflation rate has fallen faster than expected, arguing that only happens during a recession.

He has a point. Ten days ago, Statistics Canada reported that the nation’s per-capita GDP had declined for the sixth consecutive quarter, and the eighth time in the past nine quarters. While growth for the second quarter was in line with the forecast of 2.1 per cent, it plunged to just one per cent in the third quarter.

All of that information is ominous, but there’s more to worry about: The Canadian Federation of Independent Business estimates that the Canada Post strike has cost Canada’s small- and medium-sized businesses more than $1 billion, with the damage increasing by $76 million per day. It projects that Manitoba small businesses are losing $3.34 million daily.

Those figures are high, but they don’t include the losses that are being suffered by Canada’s large-scale businesses. Add up all those losses and it means the Canadian economy is being hammered at a time when it is struggling to stay afloat.

Viewed in that troubling context, Trump’s tariff has the potential to do significant, long-term harm to our citizens and economy. Indeed, a report by the Canadian Chamber of Commerce estimates the tariff would cause the nation’s GDP to shrink by a massive 2.6 per cent. That would translate into business shutdowns, job losses, higher levels of bankruptcy and a lower Canadian dollar relative to the U.S. dollar.

A lower Canadian dollar would likely result in a spike in prices for food, fuel and other products and services, at a time when many Canadians are already struggling to feed their families and pay their bills.

The consequences here in Manitoba could be even more severe, given that the province’s exports to the U.S. account for approximately 77 per cent of all our exports. In 2023, we exported $15.6 billion worth of goods to our southern neighbour. A 25 per cent tariff could quickly reduce that number by billions of dollars, causing massive economic harm.

We are vulnerable to that level of harm because we have put all our export eggs in one basket and, with Trump’s tariff due to be imposed six weeks from now, many Manitoba exporters don’t have enough time to secure other markets for their products.

Given the reality that the Canadian economy is already in a recession, and the likelihood of significant economic turmoil on the horizon, what is the Kinew government doing to prepare Manitobans for the coming turmoil?

Not much, it appears. The government has been remarkably silent on the impact that the slowing economy and postal strike are having on its taxation revenues and, in particular, its ability to hit its budget targets. It has said nothing about the impact the Trump tariff will have on jobs and the cost of living in the province, nor how it plans to assist Manitobans who will be harmed by the tariff.

Given all that silence, it’s fair to ask if they even have a plan.

The twice-extended 14-cent-per-litre gas tax holiday is due to expire at the end of the month and the government has a tough choice to make. Re-extending the break for another three months will cost the provincial treasury up to $100 million in revenue, but allowing it to expire would cause a massive increase in Manitobans’ fuel costs a mere three weeks before Trump’s tariff is due to hit.

If the Kinew government has a strategy to weather the looming economic crisis, it has a duty to share it with Manitobans.

If it doesn’t have such a plan, it needs to start working on one, and fast.

Deveryn Ross is a political commentator living in Brandon.

deverynrossletters@gmail.com

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