In this week’s The Seven…

• Growth spurt - GDP on the rise to start the year
• “We don’t need your cars” - New U.S. auto tariffs
• Getting ready - LNG export news 
• Filling up - Job vacancy rate falls
• Looking ahead - Southern Alberta Economic Summit
• Interesting Fact: Less is more
• Chart of the Week: Consumer anxiety

We were hoping this would be a relatively quiet week that would give us some time to brace for the U.S. tariff announcements expected on April 2 (referred to as "liberation day” and “the big one” by President Trump). The serenity was disturbed by the announcement on Wednesday of an impending 25% U.S. tariff on imported vehicles and parts. More on this latest development in the trade war below as well an overview of the latest GDP data, some good news on the LNG front, and a few other economic tidbits to chew on before the next tariff salvo.

Before the flood - Canada posts GDP growth ahead of tariffs

With more U.S. tariff announcements threatening to upset an already wobbly economic apple cart, it’s at least somewhat encouraging that the Canadian economy posted strong growth in January. After a 0.3% month-over-month increase in December, Canada’s real gross domestic product rose by 0.4% in January.

There is, unfortunately, a “but” to this: Statistics Canada’s advance estimate shows essentially zero growth in February and we expect more weak readings are to come as the trade war escalates. In our base case forecast released last week, we see national GDP growth slowing from an annual rate of 1.5% in 2024 to only 0.6% in 2025. If this week’s auto tariff announcement is any indication, growth could be curtailed even more with a national recession a distinct possibility.

Made in the U.S.A. - Are auto tariffs here to stay?

As we try to figure out the rhyme and reason for U.S. tariffs, the hope is that they are a negotiating tactic rather than a permanent new fixture of U.S. trade policy. If we think of this as the “art of the deal” scenario, there will be an opportunity to meet U.S. demands (assuming we feel it best to do so), get the tariffs lifted, end the countermeasures, and return to some semblance of mutually-beneficial open trade.

The “art of the deal” scenario is fraught with challenges, but it is arguably much less problematic for the Canadian economy than the alternative in which free(ish) trade with the U.S. is truly over. In this “fortress America” scenario, the U.S. forfeits the benefits of open trade and endures the economic pain to achieve much higher levels of domestic production. This would spell the end of things like the integrated North American auto industry that began with the auto pact in the mid-1960s (a system Trump calls “ridiculous”) as manufacturers move operations to the U.S. to avoid the tariffs.

These are just scenarios and how reality will play out might be very different. Nonetheless, the 25% U.S. tariffs on imported vehicles and parts announced on March 26 certainly sound like they are part of a “fortress America” scenario with the President referring to them as “permanent.”

Liquidity - LNG exports getting closer

As we inch closer to Canada finally being able to export liquefied natural gas (LNG) to energy-hungry Asian markets, there were two positive developments this week.

Counter-intuitively, LNG Canada's export facility in Kitimat, British Columbia will be receiving a shipment of LNG from a tanker on April 1. The LNG is needed for the cooldown process that is part of the commissioning of the plant. Once this is complete, the plant can start exporting LNG with the first shipments to begin by the middle of the year.

Another LNG export project off the B.C. coast got a shot in the arm this week with the federal government pledging up to $200 million to develop the Cedar LNG project. The project is a partnership between the Haisla Nation (50.1% ownership) and Pembina Pipeline Corp. (49.9%). Natural gas will be delivered to the facility through an approximately eight-kilometre-long pipeline that connects to the Coastal GasLink pipeline. Early construction work is underway and the company projects it will be in service in late 2028.

Cooling down - Job vacancy rate

Job vacancies in Alberta have fallen to their lowest level in almost four years. The job vacancy rate* was 2.9% in January, down from an average of 3.3% in 2024 and 4.2% in 2023. (All data in this section have been adjusted for regular seasonal variation.)

The lower vacancy rate has resulted from the combined effect of strong population growth in the province (increasing the supply of workers available to fill empty positions) and a cooler labour market (reducing the creation of new positions to be filled).

Although it has come down, the job vacancy rate in the accommodation and food services sector remains the highest at 6.0% in the fourth quarter of 2024. The “other services” sector (which includes, for example, auto repair shops and hair salons) had a vacancy rate of 4.7% in the fourth quarter followed by construction at 4.5% and transportation and warehousing at 4.3%.

*The job vacancy rate is the number of vacant positions on the last business day of the month expressed as a percentage of labour demand (occupied positions plus vacant positions).