It’s tariff day, or according to Trump, “Liberation Day”. We will find out this afternoon what the tariff plan is.

In the meantime, let’s take a look at how people are feeling about tariffs on both sides of the borders.  

In Canada, two leading indicators of sentiment point to troubling signs. The Conference Board of Canada’s Index of Consumer Confidence fell to its lowest level on record last month. Small business confidence, as measured by the Canadian Confederation of Independent Business (CFIB), is at its lowest level since COVID using the 3-month measure, and lowest on record using the 1-year gauge.

Clearly the ‘on and off’ again approach to Trump tariff threats is hurting confidence. Policy uncertainty is at its highest on record (yes, economists have found a way to measure that too). And with a Canadian federal election underway, we have our own policy uncertainty at home. 

Canada is not alone in this crisis of confidence. A similar story is also playing out stateside. The University of Michigan’s consumer sentiment index plunged in March to its lowest level since the pandemic in 2022. According to the index developers, the March decline was experienced across political party affiliations and noted that “Consumers continue to worry about the potential for pain amid ongoing economic policy developments”.

Also in the survey, one year-ahead inflation expectations have jumped to 5% - a problem for the Federal Reserve (the Fed) looking to cut rates and bring back inflation to 2%.

How about other economic indicators? To be honest, many are not that useful at the moment. Most economic data are lagged and don’t really tell you about what’s happening now, or necessarily what to expect in the future. Indeed, if you didn’t know that a trade war was underway, the Canadian economy would seem just fine. Growth in the second half of 2024 picked up, and first quarter GDP growth is tracking better than many expected earlier in the year. The unemployment rate was unchanged in February at 6.6%, and we’ll get a March update this Friday. These indicators point to calm before the storm.  

Back to the University of Michigan results. A couple interesting questions come to mind.  

First, will the confidence data translate into a major U.S. economic slowdown, or even a recession? So far, economic forecasts have been downgraded for the U.S., but growth expectations for the year are still positive. The Fed’s median forecast from March pegs GDP growth at 1.7% (down from 2.1% in December). One theory is that uncertainty itself is the main culprit and perhaps more clarity on the tariff front will improve sentiment. 

Second, will these indicators and other troubling signs (like a slumping stock market) be enough for Trump to back down on tariffs? We’re not holding our breath, and have accounted for a range of tariff scenarios in our latest forecast as we await Trump’s next move. Trump’s updates will happen later today, and we’ll provide an update in tomorrow’s Twenty-Four.  

Answer to the previous trivia question: Apple was founded on April 1, 1976

Today’s trivia question: Which country exports the most in per capita terms?