Tag: canada

Muddling Through or Zombie CUSMA: Five economic scenarios for uncertain times

John Deutsch Institute for the Study of Economic Policy (JDI)

By Christopher Cotton
Jarislowsky-Deutsch Chair in Economic & Financial Policy, Queen’s University
Director of the John Deutsch Institute for the Study of Economic Policy

Last week, I had the pleasure of presenting on the future of the Canadian economy during the 38th Annual Forecast Lunch hosted by the Smith School of Business and the Kingston Economic Development Corporation. This article is Part 2 in a 2-part series summarizing my presentation. Part 1 of this series shows that Canada is facing declining incomes stemming from structural issues beyond current trade woes.

Providing an economic forecast for the next year is an impossible task. At least, it is impossible to do with any degree of legitimate confidence. While some forecasters may get lucky with their guesstimates and claim their accuracy is an indication of brilliance, the reality is that no one knows for sure what the next year holds. The margin of error for 2026 is wider than it has been in decades.

The outlook for 2026 is clouded by three distinct sources of deep structural uncertainty:

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Canadians are getting poorer: The economic crisis runs deeper than trade woes

John Deutsch Institute for the Study of Economic Policy (JDI)

By Christopher Cotton
Jarislowsky-Deutsch Chair in Economic & Financial Policy, Queen’s University
Director of the John Deutsch Institute for the Study of Economic Policy

Last week, I had the pleasure of presenting on the future of the Canadian economy during the 38th Annual Forecast Lunch put on by the Smith School of Business and the Kingston Economic Development Corporation. This article is Part 1 in a 2-part series summarizing my presentation. Part 2 presents five economic scenarios for uncertain times.

On the surface, the Canadian economy appears to be finding its footing. Headline inflation has largely returned to target, interest rates have moderated from their 2024 peaks, and Canada continues to report relatively high GDP growth compared to many of our G7 and OECD peers.

But these positive trends mask deep structural concerns about a country that is struggling to attract investment, retain talent, and improve its standard of living. Layered on top of these domestic challenges is an unprecedented level of economic, political, and international uncertainty, making sustainable growth elusive.

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Interprovincial Trade Barriers: What are they? How costly are they for Canada? And How Can We Address Them?

John Deutsch Institute for the Study of Economic Policy (JDI)

By Daniel Teeter and Christopher Cotton, Queen’s Economics Department

While Canada champions free trade on the international stage, its internal market remains fragmented by a web of provincial regulations, a lack of infrastructure, and other barriers to businesses operating across provincial borders. Our recent JDI Policy Insight article, “Breaking Down Canada’s Internal Trade Barriers,” considers the impediments to within-Canada trade, the costs of these barriers, and summarizes 22 potential reforms and investments that may help alleviate the barriers.

The Cost of Division

The paper underscores a startling reality: interprovincial trade barriers are potentially as costly as a 7% tariff on goods crossing provincial lines, inflating consumer prices by an estimated 7.8% to 14.5%. This artificial inflation stifles competition, hampers innovation, and curtails economic growth. The authors estimate that dismantling these barriers could boost Canada’s GDP by up to $161 billion annually, or an additional $2,300 to $4,000 per Canadian per year. Yet, despite these potential gains, such barriers persist.

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