Ontario could be sent into ‘modest’ recession by U.S. tariffs

Ontario could enter a “modest” recession, according to the province’s financial watchdog, as tariffs from the United States hit the economy and hurt business with the province’s largest trading partner.

A new report released Wednesday by the financial accountability officer of Ontario examined the impacts of steel, aluminum and auto tariffs levied by U.S. President Donald Trump on Canadian exports.

The report found the impact of those tariffs would slow Ontario’s growth in 2025 and could lead to a modest recession this year. The next year, growth would remain slow but return to just over one per cent.

The reason Ontario’s economy would be hit so hard is its reliance on exports to the United States.

The financial accountability officer found 77 per cent of Ontario’s total goods exports were to the U.S., along with 60 per cent of the province’s service exports. Every year for the past decade, with the exception of 2016, Ontario recorded a trade deficit with the U.S. — averaging $8 billion.

Finance Minister Peter Bethlenfalvy told reporters on Wednesday he would not “speculate” about a potential recession but that the government was taking action to try and stimulate the economy.

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“I don’t know, I’m not going to speculate on that,” he said. “But I will tell you we are going to protect jobs, we are going to protect this economy.”

The report from the FAO suggests the province could be in line to lose a significant number of jobs directly impacted by U.S. tariffs.

The report suggested there could be 68,100 fewer jobs in Ontario this year as a result of tariffs and 119,200 fewer next year compared to a scenario where no tariffs were levied. That could raise the unemployment rate by 1.1 percentage points, with manufacturing the hardest hit.

Asked about the report on Wednesday, Ontario Premier Doug Ford said he remained optimistic.

“I’m going to disagree with that — let’s see what happens,” he said.

“I’m confident, I really am. I always look at the glass as half-full and no one can predict the future, but I’m predicting that we’re going to do better than other jurisdictions around the world and in North America.”

NDP MPP Catherine Fife said the report contained “good data” and a “road map” to looking after the economy, adding she was concerned by Ford’s response.

“The fact that the premier is not acknowledging that these numbers are real and this tariff crisis is real and hoping that this storm will pass doesn’t instill a lot of confidence,” she said.

“It’s actually very disrespectful to that office.”

The report made its calculations based on a scenario where 20 per  cent of Ontario’s international exports were impacted by tariffs.