Governments are going to have to address sluggish productivity growth. Either that or get turfed at the polls
Last week, I summed up 2023 as a year of poor economic performance, with high interest rates, declining real per capita GDP and shortages of housing and health care. Should we expect more of the same from 2024 or something better and brighter?
On the economic side, the most important wind of change will be a shift from rising to falling interest rates. BMO forecasts CPI growth at close to 2.8 per cent in Canada, 1.1 percentage points lower than in 2023 though still higher than the Bank of Canada’s two per cent target. BMO thinks interest rates, including mortgage rates, will edge down by roughly a point, buoying stock and bond markets that were flat through most of 2023 after a disastrous 2022.
Although high interest rates have made headway in controlling inflation, they come at a cost. BMO predicts Canada’s GDP growth will fall to 0.5 per cent (from just one per cent this year) even with continuing high immigration levels. Per capita GDP will thus likely take a hit again, falling by at least two per cent, and the unemployment rate could edge up by a point to 6.4 per cent. That means the “misery index” — the sum of the inflation and unemployment rates — will remain virtually unchanged (9.2 per cent in 2024 vs. 9.3 per cent in 2023).
With the Bank of Canada, like other central banks, focused on its inflation target, the crucial question becomes whether federal and provincial policies switch over to combating weak economic growth and productivity.
In the short term, the Trudeau government seems fixated on new redistributive programs such as denticare and pharmacare, rather than addressing the alarming decline in per capita GDP. Quite the contrary, its primary “growth” policy is to pursue a fast-paced energy transition regardless of the immediate GDP loss. Few plans are in place to improve private investment in innovation and investment, not unless you count extraordinarily reckless auto subsidies. And in Ottawa regulations grow like weeds, slowing the pace of development.
The provinces are not much better in addressing growth. B.C. and several others show little interest in reversing the relentless increase in payroll, corporate, property and personal taxes. Alberta’s promises to lower personal income taxes seem lost to the wind. The provinces, especially Ontario, are at least focussing on housing and transportation infrastructure, but they show little concern over falling education standards in mathematics and literacy or their growth-killing tax rates.
The federal government and most provinces, especially B.C. and Ontario, are facing a surge in deficits without any real plan to improve their own productivity. Working with various governments, I am struck by how far behind the times public-sector technology often is. At a recent meeting in Ottawa, I saw some highly skilled civil servants wrestle with old printers trying to print out materials for review. A friend relates how because of lack of digitization it took a surprisingly long time just to get a list of past property tax payments from the city of Toronto. Few hospitals seem to be spending on new technologies that can process patients more quickly in emergency wards. With such poor technology, governments instead simply add more workers to their bloated bureaucracies.
Maybe 2024 will be the year in which governments finally focus on growth. If they don’t, they may find themselves turfed out at election time. Around the world, 2024 is the year of the election, with the most national elections ever: in 40 countries covering 42 per cent of global GDP. The major ones are in Bangladesh, Belgium, India, Indonesia, Mexico, South Africa, Taiwan, the European Parliament and, of course, the United States. Even some authoritarian governments face their electorates this year, for instance, Iran, Russia and Venezuela.
Many of the genuine elections could have a big impact on geopolitics and the world economy. Paul Singer, founder of Elliott Investment Management, argues that “The world is now completely dependent on the good sense of leaders to avoid an Armageddon.” Stock markets should be priced to reflect this political risk. Political developments could erode global trade and co-operation and aggravate hostilities in Eastern Europe, East Asia and the Middle East.
For Canada, the critical election takes place in the United States. But whoever wins the presidency in November (or later!), we’re likely to be hit by increasing U.S. protectionism. And if U.S. per capita GDP continues to rise faster than ours, as it did over the last decade, we will either find a new economic path or watch skilled workers and business investment literally go south on us.
We aren’t due for an election until 2025 but rumours abound that the Jekyll-and-Hyde NDP will finally act out its criticisms of Liberal policy and pull the plug this year. The Liberals won’t trigger an election if they continue to trail the Conservatives by 10 points or more. But the NDP may figure it can pick up seats, especially in Ontario.
With the winds of change blowing, Canada may see federal and provincial governments try a different approach to economic policy, one focused on economic growth rather than just redistribution. Both levels of government need to address our falling per capita GDP. If they do, Canadians will have something to cheer about by the end of 2024.
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Stellantis is pausing vehicle production at two North American facilities—one in Canada and another in Mexico—following President Donald Trump’s announcement of 25% tariffs on foreign-made cars. The move marks one of the first corporate responses to the administration’s push to bring back American manufacturing.
Key Details:
In an email to workers Thursday, Stellantis North America chief Antonio Filosa directly tied the production pause to the new tariffs, writing that the company is “continuing to assess the medium- and long-term effects” but is “temporarily pausing production” at select assembly plants outside the U.S.
Production at the Windsor Assembly Plant in Ontario will be paused for two weeks, while the Toluca Assembly Plant in Mexico will be offline for the entire month of April.
These plants produce the Chrysler Pacifica minivan, the new Dodge Charger Daytona EV, the Jeep Compass SUV, and the Jeep Wagoneer S EV.
Diving Deeper:
On Wednesday afternoon in the White House Rose Garden, President Trump announced sweeping new tariffs aimed at revitalizing America’s auto manufacturing industry. The 25% tariffs on all imported cars are part of a broader “reciprocal tariffs” strategy, which Trump described as ending decades of globalist trade policies that hollowed out U.S. industry.
Just a day later, Stellantis became the first major automaker to act on the new policy, halting production at two of its international plants. According to an internal email obtained by CNBC, Stellantis North American COO Antonio Filosa said the company is “taking immediate actions” to respond to the tariff policy while continuing to evaluate the broader impact.
“These actions will impact some employees at several of our U.S. powertrain and stamping facilities that support those operations,” Filosa wrote.
The Windsor, Ontario plant, which builds the Chrysler Pacifica and the newly introduced Dodge Charger Daytona EV, will shut down for two weeks. The Toluca facility in Mexico, responsible for the Jeep Compass and Jeep Wagoneer S EV, will suspend operations for the entire month of April.
The move comes as Stellantis continues to face scrutiny for its reliance on low-wage labor in foreign markets. As reported by Breitbart News, the company has spent years shifting production and engineering jobs to countries like Brazil, India, Morocco, and Mexico—often at the expense of American workers. Last year alone, Stellantis cut around 400 U.S.-based engineering positions while ramping up operations overseas.
Meanwhile, General Motors appears to be responding differently. According to Reuters, GM told employees in a webcast Thursday that it will increase production of light-duty trucks at its Fort Wayne, Indiana plant—where it builds the Chevrolet Silverado and GMC Sierra. These models are also assembled in Mexico and Canada, but GM’s decision suggests a shift in production to the U.S. could be underway in light of the tariffs.
As Trump’s trade reset takes effect, more automakers are expected to recalibrate their production strategies—potentially signaling a long-awaited shift away from offshoring and toward rebuilding American industry.
Vice President JD Vance said Thursday on Newsmax that he believes Americans will “reap the benefits” of the economy as the Trump administration makes a “big transition” on tariffs.
The Dow Jones Industrial Average dropped 1,679.39 points on Thursday, just a day after President Donald Trump announced reciprocal tariffs against nations charging imports from the U.S. On “Rob Schmitt Tonight,” Schmitt asked Vance about the stock market hit, asking how the White House felt about the “Liberation Day” move.
“We’re feeling good. Look, I frankly thought in some ways it could be worse in the markets, because this is a big transition. You saw what the President said earlier today. It’s like a patient who was very sick,” Vance said. “We did the operation, and now it’s time to make the patient better. That’s exactly what we’re doing. We have to remember that for 40 years, we’ve been doing this for 40 years.”
“American economic policy has rewarded people who ship jobs overseas. It’s taxed our workers. It’s made our supply chains more brittle, and it’s made our country less prosperous, less free and less secure,” Vance added.
Vance recalled that one of his children had been sick and needed antibiotics that were not made in the United States. The Vice President called it a “ridiculous thing” that some medicines invented in the country are no longer manufactured domestically.
“That’s fundamentally what this is about. The national security of manufacturing and making the things that we need, from steel to pharmaceuticals, antibiotics, and so forth, but also the good jobs that come along when you have economic policies that reward investing in America, rather than investing in foreign countries,” Vance said.
WATCH:
With a baseline 10% tariff placed on an estimated 60 countries, higher tariffs were applied to nations like China and Israel. For example, China, which has a 67% tariff on U.S. goods, will now face a 34% tariff from the U.S., while Israel, which has a 33% tariff, will face a 17% U.S. tariff.
“One bad day in the stock market, compared to what President Trump said earlier today, and I think he’s right about this. We’re going to have a booming stock market for a long time because we’re reinvesting in the United States of America. More importantly than that, of course, the people in Wall Street have done well,” Vance said.
“We want them to do well. But we care the most about American workers and about American small businesses, and they’re the ones who are really going to benefit from these policies,” Vance said.
The number of factories in the U.S., Vance said, has declined, adding that “millions of workers” have lost their jobs.
“My town [Middletown, Ohio], where you had 10,000 great American steel workers, and my town was one of the lucky ones, now probably has 1,500 steel workers in that factory because you had economic policies that rewarded shipping our jobs to China instead of investing in American workers,” Vance said. “President Trump ran on changing it. He promised he would change it, and now he has. I think Americans are going to reap the benefits.”