Before we get into the main topic of today’s Twenty-Four, we want to address President Trump’s social media post from Saturday in which he threatened to impose a 100% tariff on all Canadian goods entering the U.S. if “Canada makes a deal with China.”

It’s not clear what kind of deal the President is referring to, but presumably it is a free trade agreement between Canada and China. Prime Minister Carney responded by saying Canada has no intention of entering into a free trade agreement “with China or any other non-market economy.”

Where this will go from here is uncertain. While the actual implementation of a 100% tariff is highly unlikely, it is another signal that negotiating a “deal” (whether a renewed Canada-U.S.-Mexico Agreement or some other arrangement) with the U.S. that keeps tariffs off most Canadian goods is fraught with challenges. Among these is Canada’s relationship with China, which Trump’s post has put in the spotlight.

We will continue to monitor this and other trade-related developments and adjust our outlook when necessary. In the meantime, our December forecast still covers what we think are the three most likely scenarios with the low case capturing a deteriorating trade relationship with the U.S..

Divergent forces - The IMF’s global outlook

If I came home with a report card that said I had a B average, I might be thinking to myself “that’s pretty good.” My mom, however, would be quick to point out that I could have earned an A.

This applies to the latest global economic outlook published by the International Monetary Fund (IMF) last week. The IMF projects that the global economy will grow by 3.3% this year (up from 3.1% in its October forecast) followed by 3.2% in 2027. Given the drag being generated by U.S. trade policy, that is a “pretty good” number. Back in April 2025, when U.S. tariffs looked more menacing, the IMF pegged global growth in 2026 at just 3.0%.

But, as I can hear my mom saying, it could have been better.

If U.S. trade policy was not pushing against growth, we could easily be celebrating a global economic boom due the “tailwinds from surging investment related to technology, including artificial intelligence.” Returning to the report card analogy, we are nailing science class but failing social studies.  As the chart below shows, the effective tariff rate in the U.S. is lower than in the spring, but much higher than before Trump 2.0.   

Unfortunately, the “risks to the outlook remain tilted to the downside” with the IMF citing four potential sources of trouble:

• The AI bubble could, if not burst, contract quickly
• Trade tensions could get even worse
• Geopolitical tensions could erupt, introducing
• Larger fiscal deficits and high public debt could sour financial conditions
  

“On the upside, rapid adoption of AI, possibly facilitated by the ongoing surge in AI-related investment in both hard and soft infrastructure, could significantly improve productivity and boost medium-term growth prospects sooner rather than later.”

And while it seems hard to imagine given things like President Trump’s post over the weekend, “tangible progress in trade talks would stand to lower tariffs, enhance policy predictability, and support global efficiency gains.”

For now, though, we might need to be content with “pretty good.”