A prolonged trade war with the United States can “severely impact” jobs and businesses on both sides of the border and will have “no winners,” says the head of Canada’s largest bank, calling on Canadians to unite behind a long-term economic plan to help boost the country’s struggling productivity levels.

David McKay, chief executive of the Royal Bank of Canada, said many are feeling “upset and disappointed” that the “long-standing and successful economic partnership” between the two countries has been put into question because of the tariffs being imposed, and he shares those feelings.

“On a personal note, I believe this is the moment to unite the country behind a long-term economic agenda — one that boosts competitiveness and drives prosperity for all,” he said in a LinkedIn post on Sunday amid uncertainty about a potential trade war. “The world wants what Canada can provide in great abundance. We can feed and fuel the growing world, and be a leader in energy, agriculture, critical minerals, advanced manufacturing and technology.”

To do this, he said Canada needs to remove internal trade barriers, approve important projects linked to energy faster, support home-grown innovation and provide more capital to the “best engines” of economic growth.

“Over $1 trillion in goods and services are reliably exchanged between the two countries,” McKay said. “This is good for businesses, workers and families on both sides of the border. It’s been good for RBC, too, as a Canadian bank that proudly calls the U.S. our second home market.”

U.S. President Donald Trump on Saturday announced the imposition of a 25 per cent tariff on all Canadian goods and a 10 per cent levy on Canadian energy on Saturday. In response, Canada said it will impose 25 per cent tariffs on U.S. goods ranging from orange juice to household appliances to plastics. The tariffs will take effect on Tuesday.

Prime Minister Justin Trudeau said Canada’s retaliatory tariffs will be introduced in two phases. On Tuesday, $30-billion worth of U.S. goods will be hit, with another $125 billion in tariffs coming in 21 days to give Canadian businesses an opportunity to find alternatives.

But analysts expect the trade war to hurt Canada more than the U.S., which has an economy that is about 10 times larger. The U.S. is also Canada’s largest trading partner, accounting for about 77 per cent of the country’s exports.

The tariffs have come at a time when the Canadian economic outlook was beginning to improve after households “effectively stopped any non-necessary consumption” as interest rates remained high for a long period to tackle inflation, Jefferies Inc. analyst John Aiken said in a note on Sunday.

“However, even the most conservative estimates on the impact of the tariffs point to Canada heading into a recession,” he said. “The longer the tariffs are in place, the more damaging it will be to the Canadian economy. Nobody wins, but (it’s) decidedly worse for Canada than the U.S.”

Should the economy slow down and enter a recession, that could lead to higher-than-expected credit losses, Aiken said, as customers fail to repay their loans and impact Canada’s banks. Analysts expected banks’ concerns linked to credit losses to ease this year, but the situation could change with Trump’s tariffs.

Even so, McKay said RBC has the “financial resilience and expertise” to help its clients navigate such difficult times.

“We’re already working closely with the Canadian government to develop tools to support clients, just as we did during the pandemic,” he said.

The Canadian Bankers Association, which represents more than 60 banks, on Sunday said it’s critical that banks support Canadian businesses by advocating for free trade and creating long-term strategic solutions to strengthen the country’s industries and economy.

• Email: nkarim@postmedia.com

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