Finance Minister Warns of Recession Risk if Trade Dispute with U.S. Persists
Quebec’s Finance Minister Éric Girard warned that Canada could face an economic slowdown in the second quarter of the year. During his appearance at the BNEF Summit in New York, Girard stated that without a resolution to the trade dispute with the United States, the country risks falling into a recession by late 2025.
Trade Tensions with the U.S.
Girard blamed the tariffs imposed by former President Donald Trump for the deterioration of what was once a strong trade relationship between the two countries. Although Canada, the United States, and Mexico signed a free trade agreement during Trump’s first term, recent tariff policies have rekindled uncertainty in the region.
Optimism in Energy and Aluminum Sectors
Despite the conflict, Girard expressed confidence that Quebec’s electricity exports to the U.S. would not be subject to trade retaliation. He also voiced optimism about a potential reduction in tariffs on Canadian aluminum, a product whose main destination is the U.S. market.
A Call for Pragmatism
“Why don’t we just resolve this once and for all?” Girard asked, emphasizing that swift action could prevent a deeper economic contraction. The minister struck a hopeful tone, stating that the relationship between the two countries “will remain successful and mutually beneficial.”
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Fiscal Impact and Public Spending
The trade tensions come at a time of moderate economic growth in Canada and increased public spending. Prime Minister Mark Carney projects a federal deficit of C$62.3 billion this year, with an additional C$129.2 billion in spending over four years, mainly on infrastructure and defense.
S&P Downgrade
Earlier this month, S&P Global Ratings downgraded Quebec’s foreign issuer rating from AA- to A+, citing the combination of the trade war and rising public infrastructure spending as reasons.
Strong Demand for Provincial Bonds
Despite the downgrade, Girard stated that investors remain confident in Quebec’s bonds. “We haven’t seen any movement in spreads,” he affirmed, highlighting stable demand.
