Canada could fix its struggling economy by becoming the 51st state of the United States—at least that’s what Donald Trump believes.

The US president, who has repeated this idea multiple times, says merging the two nations would save Canada from what he describes as its dire financial situation. His latest pitch came after Justin Trudeau’s resignation, which Trump claims was tied to Canada’s financial woes. Trump said on Truth Social:

“The United States can no longer suffer the massive Trade Deficits and Subsidies that Canada needs to stay afloat. Justin Trudeau knew this, and resigned. If Canada merged with the U.S., there would be no Tariffs, taxes would go way down, and they would be TOTALLY SECURE from the threat of the Russian and Chinese Ships that are constantly surrounding them. Together, what a great Nation it would be!!!”

Growth projections versus reality

But how does this claim stack up against the numbers, and what’s really happening in Canada’s economy? The International Monetary Fund (IMF) predicts that the country will lead the G7 in 2025, with a 2.4% GDP growth rate, ahead of the U.S. (1.9%) and U.K. (1.5%). Yet not all experts agree.

Capital Economics and S&P Global Ratings predict more conservative growth of 1.7% to 1.8%, citing lingering structural problems. Canada’s mining and processing sectors are seeing gains, thanks to global supply chain shifts away from China.

Residential investment also made a modest comeback in late 2024 after four consecutive quarters of decline. But unemployment remains high, expected to hit 7% before improving. The labor market is sluggish, and household debt is surging as fixed-rate mortgages reset to higher interest rates.

Even with IMF optimism, Canada’s economy is walking a fine line. Its reliance on U.S. trade means Trump’s tariffs could quickly destabilize the country’s fragile growth.

Trump: A haunting threat

Trump has threatened to impose a 25% tariff on Canadian imports unless Canada aligns with U.S. demands. Analysts say this could shrink Canada’s GDP by 2.5%, while inflation could spike to 7.2%.

Key sectors like energy, automotive, and manufacturing would suffer the most. Mining exports could drop by 60%, and motor vehicle exports might see a 39% decline.

Canada’s trade with the U.S. is massive, amounting to $3.6 billion daily. Over three-quarters of this involves business inputs, highlighting how intertwined the two economies are.

If a trade war breaks out, supply chains across North America could be thrown into chaos. Trump’s tariffs will end up creating the very economic instability he claims his merger proposal would fix.

Immigration slowdown hits labor supply

Canada’s growth also faces internal pressures. Stricter immigration policies are slowing population growth, cutting into labor supply and consumer demand.

While this might ease the housing market crisis, it risk_s creating long-term economic stagnation. Lower interest rates, expected to drop to 2.25% by mid-2025, could stimulate spending, but they may not be enough to counteract the demographic slowdown.

Inflation, which had fallen to 3.4% in 2023 from 8.1% the previous year, is expected to rise again above 2%. This limits how much the Bank of Canada can reduce rates without triggering another round of financial strain.

Trump’s framing his proposal as a matter of security. He has criticized Canada for failing to meet NATO defense spending targets. Geopolitically, his return to power is a big change in US foreign policy.

His administration is expected to take a tougher stance on trade, immigration, and foreign policy, potentially forcing Canada to align more closely with American interests.

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Source: https://www.cryptopolitan.com/trump-canada-america-economy-better/