Canada planning covid-style stimulus if US enacts tariffs in bid to avoid early election

The Globe & Mail reports that Canada’s federal government is planning a covid-style relief effort if Trump imposes 25% tariffs. The moves would require a parliamentary vote so they’re far from certain. All opposition parties have pledged to oust the government and the ruling Liberal’s don’t have a majority.

Any stimulus would require the support of the left-wing NDP, which has propped up the government for three years. Parliament is currently prorogued until March 24 as the Liberal’s select a new leader to replace Trudeau (likely Mark Carney) but it could be called back early.

It’s certainly an interesting time in Canadian politics but I think the lesson here is that government everywhere still have the knee-jerk response of higher spending when there is turmoil. That’s a big reason why sovereign yields have been climbing in the past few months.

USD/CAD is up 19 pips to 1.4386 in choppy trade today.

This article was written by Adam Button at www.forexlive.com.