In this week’s The Seven…

• On and off(ish) - Trade war is officially underway
• Glass half full - Don’t forget about the positive stuff
• Calm before the storm - Employment steady before tariffs
• If this continues - ATB scenarios
• Tariff(ied) - Market dips   
• A blip? - US GDP tracking negative in Q1
• Stepping up - Women business leaders in Alberta
• Next week: BofC should cut 
• Interesting Fact: Amii’s Richard Sutton wins prestigious award 
• Charts of the Week: US-Canada trade: Looks balanced to us

Don't you know I'm still standing better than I ever did

Looking like a true survivor, feeling like a little kid

I'm still standing after all this time

“I’m Still Standing,” Elton John

It was a tough week. The 30-day pause came and went, and Trump’s tariffs took effect on Tuesday.

The world has changed, but we’re still standing.

In this week’s The Seven, we focus on positives. We’re all too familiar with Canada’s longer-term economic challenges, like languishing productivity.

But today we take a glimpse at some bright spots, as Canadians rally together. For International Women’s Day, we also celebrate women business leaders in Alberta. And we give a shout out to Amii’s Richard Sutton for his prestigious award this week.

On, off, on - Tariff whiplash

You need a real-time tracker, but here’s our attempt at updating you on the latest trade actions.

(Side note: I’m literally updating my presentations on the fly, and sometimes during my talks as was the case yesterday).

ON - Saturday, February 1 - An Executive Order was signed imposing a 10% tariff on Canadian energy products and critical minerals and a 25% tariff on everything else to start February 4.

ON - Saturday, February 1 - A tariff of 25% on $30 billion worth of U.S. goods to start February 4 with an additional $125 billion worth of goods added after a consultation period.

OFF - Monday, February 3 - The U.S. blanket tariff and Canada’s countertariff were paused for 30 days.

COMING SOON - Monday, February 10 - A 25% tariff on steel and aluminum imports into the U.S. to take effect March 12, 2025.

PLANNED - Thursday, February 13 - The U.S. announced its intention to impose reciprocal tariffs potentially including a response to Canada’s digital service tax (mentioned again in a memorandum on February 21) and GST/HST. Studies are to be submitted to the President on April 1 with the tariffs potentially starting April 2.

PLANNED - Monday, March 3 - President Trump posted on social media that tariffs will go on “external” agricultural products on April 2. This is thought to be part of the reciprocal tariffs noted above.

ON - Tuesday, March 4 - The 30-day pause on the February 1 Executive Order ended with the U.S. imposing a 10% tariff on energy products and critical minerals and a 25% tariff on everything else. Phase 1 of Canada’s countermeasures (a 25% tariff on $30 billion worth of U.S. goods) also began.

PARTIALLY OFF - Wednesday, March 5 - President Trump exempted some automakers from the 25% tariff on Canadian and Mexican goods for one month as long as they comply with existing free trade rules.

PARTIALLY OFF - Thursday, March 6, President Trump removed the 25% tariff on products from Mexico and Canada that are covered by the Canada-U.S.-Mexico free trade agreement until April 2. It’s unclear which Canadian products will still be affected by tariffs, but a White House official said about 62% of goods from Canada may still face tariffs. The measures also reduced the tariff on potash from 25% to 10%.

THREATENED - Friday, March 7 - In an address from the White House, President Trump said: “Canada has been ripping us off for years on lumber and on dairy products.” The President said America would match dairy tariffs dollar-for-dollar as soon as today or possibly after the weekend.

Counter-tariffs: In Canada, the federal government has left its $30 billion in countertariffs in place, but extended the timeline for the phase 2 tariffs worth an additional $125 billion until April 2. In Alberta, the provincial government has announced that it is suspending purchases of liquor and video lottery terminals from American companies until further notice, and altering procurement practices to purchase goods from Alberta, Canadian companies and countries honouring free trade agreements.

For up-to-the-minute updates, a handy tool is the Peterson Institute’s “Trump’s Trade War Timeline”.

If this continues… ATB’s economic scenario

On Tuesday, with tariffs in force, we updated our analysis of the potential implications for Alberta. The short story is that it would slow Alberta’s economy to a crawl to only 0.5% real GDP growth this year. The longer story is here.

To be clear, this is just a scenario. It includes the tariffs in the February 1 Executive Order, but doesn’t include any additional tariff proposals (like reciprocal tariffs, steel and aluminum). But it also assumes that tariffs remain in force until mid next year. That’s a pretty dim view.

In the meantime, we have the unenviable task of forecasting in this environment and landing on a new ‘base case’ later this month. A sneak peak is that it will land somewhere between our long duration tariff scenario and our old base case.

Glass half full: Don’t forget about the good news

Some things in life are bad, they can really make you mad

Other things can make you swear and curse

When you're chewing on life's gristle, don't grumble -- give a whistle

And this'll help things turn out for the best, and...

Always look on the bright side of life

“Always Look on the Bright Side of Life,” featured in the film Monty Python’s Life of Brian

While the trade war is stealing the spotlight, we can’t lose sight of some other positive developments heading into this current strife.

Here’s a few things focused on Alberta, but also good for Canada.

Expanding into Asian markets -  Energy shipments to Asia are still a small share of the total, but they are surging with the Trans Mountain Expansion enabling more oil exports to Asia. Even more Canadian energy will make its way to Asia with natural gas shipments via the Coastal GasLink natural gas pipeline and LNG Canada Phase 1 export facility starting later this year. Let’s also not forget the Ridley Island Propane Export Terminal, which has led to a rise in propane shipments to Japan and South Korea.

Petrochemicals - Investment intentions for the industry have reached a record high in Alberta, with the massive Path2Zero project underway near Ft. Saskatchewan.

Tourism - It’s come roaring back from COVID and we see this sector performing well in the current environment. More in-province travel will occur as a weak Canadian dollar and trade tensions deters some Canadians from traveling south.

Home construction - There are some headwinds -- tariffs will raise homebuilding costs and would-be buyers will confront a tougher job market -- but we also see home starts staying solid this year as the industry plays catch-up with Alberta’s booming population.

Food manufacturing - Investment intentions for food manufacturing are near record highs, with projects like McCain’s potato processing expansion in Coaldale and P&H Milling’s facility south of Red Deer.

Tech and data centres - Alberta had another solid year of venture capital investment and more data centres are being proposed. One proposal, Wonder Valley, in Greenview M.D. could be the largest AI data centre industrial park in the world. See the Calgary Herald’s Chris Varcoe’s latest article on this.

What’s on your positive list?

Uncertainty bites

So if tariffs come off, we’re good? Not really. The problem is not just the tariffs, it’s the uncertainty caused by the ‘on and off’ again style of Trump’s negotiating approach.

Businesses can be forgiven for not returning to ‘business as usual’ if Trump temporarily cuts a deal, pausing tariffs for an unknown period.

The general point is that uncertainty itself is a headwind, not just the tariffs. It’s one of the reasons business and consumer confidence has taken a hit. The latest numbers from the Canadian Federation of Independent Business show that forward expectations for small business performance continued to decline in February and were about 10 points below the historical average. According to the Conference Board of Canada, consumer confidence in Canada fell by 12.1 percentage points in February to levels last seen during the pandemic.

Do you know who else doesn’t like uncertainty and tariffs in general? Financial markets. The S&P 500 tumbled 1.8% on Monday after Trump said tariffs were coming, then another 1.2% on Tuesday. A partial recovery of 1.1% was followed by another dip of 1.8% yesterday. As this Seven goes to virtual print, the S&P 500 was on track for the worst week since September.

U.S. Economy: Warning signs flashing

An often overlooked indicator is getting some attention in the U.S.

It’s called GDPNow, a tracking tool for the quarterly GDP estimates. We’ll need to wait until April 30 for an advance estimate of the first quarter results from the U.S. Bureau of Economic Analysis, but this nowcasting model using monthly data is showing that GDP growth could be negative.

That’s right, negative. The first decline since early 2022.

There are good reasons why this may be temporary and not a new trend. U.S. companies have been stockpiling to get in front of the tariffs. That means importing more from Canada, Mexico and other countries. Those who took Econ 102 will remember that imports subtract from GDP. That’s a big reason. The other could be government spending cuts, as Elon Musk runs the Department of Government Efficiency operation. So it could have some temporary effects. Commerce Secretary Howard Lutnick has suggested he will strip out government spending when reporting GDP.

But underneath the surface, there may be some trouble brewing. U.S. consumer spending fell 0.2% in January -- the first decline in two years. And the Conference Board’s U.S. Consumer Confidence Index suffered its largest decline in February since August 2021.

Calm before the storm: Jobs flat in February

On any other Labour Force Survey Friday, we’d be glued to our screens at 6:30AM EST to analyze the job numbers. It was more an afterthought today. As the kids say, the February jobs report is ‘so yesterday’.

This is a ‘calm before the storm’ report, as we await to see how the trade war plays out in the job market.

Nationally, employment in February was essentially unchanged (+1.1K), and so was the unemployment rate (6.6%).

As for Alberta, employment growth has sputtered to start the year after a spike in the final quarter of 2024. February (-2.2K) was the second straight month of essentially no change. Over the last 12 months, employment is up 2.4% vs. 1.9% nationally.

Interestingly, Alberta has moved more in line with the national unemployment rate after spending many years above it post the 2015-16 energy recession. As of late, employment has been able to keep pace with the number of folks entering the labour market looking for work. But unless employment picks up again, we see that unemployment rate drifting higher.

Our view, if these tariffs persist, is that the unemployment rate will rise to 7.5% this year on average (which would likely mean some months north of 8%), compared to our base case forecast with relatively modest tariffs of 7%.

Stepping up: Alberta’s women business leaders

More than ever, this topsy-turvy world needs strong and courageous leaders. And there is no better time to celebrate Alberta’s women leaders than on International Women’s Day, which is this Saturday.

Yesterday we profiled three women business leaders: Eleanor Chiu, Linda Dalgetty, and Camille Weleschuk.

Progress has been made, but there is still work to do in reducing barriers to women in leadership and in the labour market.

On a related note, Claudia Goldin, Professor of Economics at Harvard University, has done leading-edge research on understanding women’s labour market outcomes. Claudia won the Nobel Prize in Economics in 2023 “for uncovering key drivers of gender differences in the labour market.” An accessible version of her research can be found here.