The chain reaction of the U.S. trade war is fermenting? Canada is on the brink of an economic crisis, with inflation burning both ends of the housing market.

As the United States imposes tariffs causing trade impacts, Canada may be facing an unprecedented economic storm, with the collapse of business and consumer confidence, a housing shortage, and inflationary pressures exacerbating the situation. Financial media outlet Kobeissi Letter warns that the Canadian economy is sliding toward the brink of recession, and without structural reforms, it may be unable to return to the stable trajectory seen before the pandemic.

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The confidence of small and medium-sized enterprises has collapsed, and the recession alarm has sounded.

The report reveals that the confidence index of small businesses in Canada plummeted nearly 60% within a few months after the trade war initiated by the United States, now standing at only 25 points, not only setting a historic low but also falling below the record of 35 points during the 2008 financial crisis.

Royal Bank of Canada ( RBC ) pointed out that the investment trend of enterprises is gradually slowing down, and the growth momentum has明显减弱:

Since 78% of Canada's exports depend on the United States, tariff pressures could have a catastrophic impact on our economy.

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Consumer confidence hits rock bottom, inflationary pressures intensify.

The consumer confidence index has also hit a new low, 15 points lower than during the 2008 crisis. Even though similar sentiments are brewing in the United States, its numbers are still slightly more than three times higher than Canada.

Kobeissi Letter Warning, Canada's Consumer Price Index (CPI) year-on-year growth rate surged to 2.6% last month, far exceeding the expected 2.2%. The month-on-month growth rate reached as high as 1.1%, nearly double the estimate:

This wave of inflation has not yet fully reflected the effects of U.S. tariffs, and it may exceed 3% in the coming weeks. Due to Canada's heavy reliance on U.S. imports, it will also bear the pressure of rising costs. If this situation continues for more than six months, Canada may fall into a technical recession.

At the same time, the country's population is growing rapidly, but the per capita GDP has decreased by about 2%, reflecting lagging productivity.

The imbalance between housing supply and demand continues to expand the crisis.

Additionally, Canada is facing a severe housing shortage, with a structural gap of up to 250,000 units each quarter. Even as demand doubles, the number of housing starts continues to decline. Since 2000, home prices have skyrocketed by 300%, leaving potential buyers with almost no hope for a decrease in prices.

As previously mentioned by the Governor of the Bank of Canada, Tiff Macklem, "The structural challenges in the housing market are a long-term obstacle to economic growth."

Economic instability has further triggered political upheaval. In February, the Liberal Party (LPC) was expected to win only 35 seats, while the Conservative Party (CPC) was projected to secure 236 seats. However, the situation has reversed, with the Liberal Party's odds of winning soaring to 89%, and it is estimated that they will win 178 seats. The report believes this reflects a reaction to the uncertainty of the economic outlook.

The trade conflict between the U.S. and Canada has become the final blow to the Canadian economy.

Due to the hard injury of transportation costs, Canada's export scale to the United States far exceeds interprovincial trade, reaching 700 billion Canadian dollars in 2023, which has raised concerns that the United States' comprehensive tariff policy may be the "last straw" that crushes the Canadian economy. The Oxford Economics Institute estimates that if tariffs remain unchanged, Canada's GDP will shrink by 2.5% by early 2026, the unemployment rate will rise to 7.9%, and inflation will climb to 7.2%. If the trade war expands globally, the Canadian economy may face even greater impacts.

In the face of multiple pressures, Canada urgently needs to promote housing policies, trade diversification, and productivity enhancement. The Kobeissi Letter expresses concern that even if tariffs gradually ease in the future, the Canadian economy will struggle to return to pre-pandemic levels, and without structural reforms, recession will be hard to avoid. The year 2025 will be a crucial turning point for Canada's economy.

Is the chain reaction of the U.S. trade war fermenting? Canada is on the brink of an economic crisis, with inflation burning both ends of the housing market. This first appeared in Chain News ABMedia.