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Ep 33: Debunking Interprovincial Trade with Jim Stanford

• Julia Pennella • Season 1 • Episode 33

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Canada at a Crossroads: Jim Stanford on Tariffs, Recession Risk, and Rethinking Economics

What happens when a leading economist breaks down the storm clouds gathering over Canada’s economy? Jim Stanford, Director of the Centre for Future Work, delivers a compelling analysis of how looming U.S. tariffs could trigger a recession on par with the downturns of the 1980s and ’90s.

Stanford argues we’re living through “a hinge point in history”—a moment demanding a shift in economic thinking. He outlines how Trump’s threatened tariffs could damage Canada through multiple channels: collapsing exports, frozen investments, jittery consumers, and a slowing global economy. Even if the threats vanish tomorrow, Stanford warns the uncertainty has already done real harm.

But this isn’t just doom and gloom.

Stanford pushes back against overblown claims that interprovincial trade barriers are costing the economy hundreds of billions, calling them political theater. The real story? Most barriers are minor—things like alcohol regulations and licensing rules—not massive economic roadblocks.

And here’s the twist: 80% of Canada’s GDP is created and consumed within our borders. That domestic strength, Stanford says, offers critical resilience. He makes the case for strategic industrial policy, crediting government involvement for successes in auto, aerospace, telecom—and even the oil sands.

If you're looking for a fresh, unfiltered take on Canada’s economic future—one that’s honest about the risks but clear-eyed about the opportunities—this episode is for you.

Tune in now to understand what’s really at stake, and how Canada can chart a smarter, more resilient path forward.

Quick heads up this episode was recorded on June 9, 2025 so while the news may have changed since this conversation was recorded. The thoughts and ideas still remain relevant. 

Check out some of Jim Stanford's work here:

Here’s why we will survive Donald Trump’s tariffs — the answer is right in front of us`


Julia Pennella:

Welcome back to let's Talk Politics, the podcast where we break down the political and economic headlines shaping our world and what it all means for you All. Right, folks, I am totally nerding out, and I'm sure you will too, because today's guest is a huge deal in the world of economics, and not just because he has more degrees than most people have coffee cups. Joining us is the brilliant Jim Stanford economist, author, professor and the kind of guy who can actually make things like GDP and labor productivity, dare I say it, interesting and really, really fun to learn about. Jim is the director of the Center for Future Work, a labor economics think tank based in Vancouver. Before that, he spent over 20 years as the chief economist for Unifor, canada's largest private sector union, back when it was still the Canadian autoworkers. You've probably read his takes in the Toronto Star, seen him on CTV or heard him dropping economic truth bombs on course radio. He's the author of Economics for Everyone, a guide to capitalism that's been translated into six languages, and he's written more books and reports than I've had. Late night existential spirals about interest rates. But beyond all the credentials and columns, jim's superpower is making economic issues relatable, funny and honestly kind of empowering. This episode is jam-packed with Jim Stanford's signature wit and sharp insights on the political and economic landscape happening right now. Jim breaks down the real impact of US tariffs on Canada's economy, jobs and industry and explains why a recession may be looming closer than we think. Plus, he's got a hot take on all the buzz around removing internal trade barriers throughout Canada and why the government's big economic projections might be more smoke and mirrors than actual money in the bank.

Julia Pennella:

But before we get into this episode, here's a quick roundup of the latest Canadian news. Prime Minister Mark Carney made a big announcement this week around new federal measures to defend Canada's steel and aluminum sectors from the economic gut punch of US President Donald Trump's 50% tariffs. Exports are down, jobs are bleeding and Ottawa is ready to hit back. Carney's play A new tariff rate quota, which in plain English means some foreign steel gets through but cross that line and your imports get slapped with a juicy new tax. And if the US doesn't come to the table with a deal, carney's promising to crank Canada's counter-tariffs up another notch by July 21st. All of this in part of a larger strategy to make Canadian steel more competitive and to keep the country from getting steamrolled by US protectionism.

Julia Pennella:

And while all that drama unfolds, there's also Bill C-5 making its way through Parliament, a fast-track bill that would let the federal cabinet greenlight nation-building projects like mines, ports and pipelines using you guessed it a whole lot of steel and aluminum, but not everyone's on board. Indigenous leaders, environmental groups and many MPs are sounding the alarm over the bill's sweeping powers, especially the part that lets Cabinet override environmental reviews and other safeguards in the name of the national interest. Prime Minister Carney insists Bill C-5 is about consultation, cooperation and building Canada's future, but critics say it's more about cutting corners than building consensus. So buckle up. We've got a lot to dig into. Quick heads up this episode was recorded on June 9th 2025. So, while the news may have changed since this conversation was recorded, the thoughts and ideas still remain relevant. So let's talk politics with Jim Stanford. Jim, thanks so much for joining us.

Jim Stanford:

My pleasure, Julia. Thank you for the invitation.

Julia Pennella:

I'm really looking forward to the conversation. I think jobs and the labor market are such a hot topic right now, so I do want to throw it to you Given the turbulent times we're living in, what's your political or economic hot take right now?

Jim Stanford:

Well, maybe it's a political economy hot take. That's what we used to call economics, political economy, back in the days of Adam Smith and so on, when they interspersed economic analysis with the big changes in history and the big evolution of the economy and society. And we're definitely at one of those moments right now. I think Mr Carney's term that we're ata hinge point in history is quite valid for all kinds of reasons. So, looking at what's happening in America, we've got Trump threatening to send in the Marines against protesters, arresting union leaders and others, sending people off to jail in El Salvador all the threats to democracy coming from there, but, of course, all the threats to the world order and to economic prosperity coming from there, and Canada is on the front lines of it. So, in a way, this is a very exciting time to be an economist, no doubt about it, but a very worrisome time, and I share with both trepidation and intellectual excitement. What comes next? Because it's going to be very different.

Julia Pennella:

Yeah, I think the next few months are going to be crazy. The next few years we'll have to see this all unfold and I want to lean into, obviously, the Trump administration and forefront of everything in Canadians' minds I think the world's minds is the looming threat of tariffs and a recession. See on the labor market specifically, and what kind of policies would you like to see from both the federal and provincial government to help protect jobs most at risk, particularly in sectors like manufacturing steel and aluminum?

Jim Stanford:

Well, there's the problem in trying to forecast the effects of Trump's actions are he changes his actions from one day to the next, so we can have a worst case scenario, which is what happens if he actually went full bore on the tariffs and kept them. So the tariffs that he's threatened against Canada and the tariffs he's threatened against the rest of the world, the so-called Liberation Day tariffs that he was going to impose on 200 different jurisdictions, including uninhabited islands in the Antarctic, so go figure. But if he went ahead with all of those, then obviously the world trade system is going to have a cataclysmic shock and we're going to have a world recession, and the impacts on Canada will be severe. We would feel them through several channels. Obviously, just a tariff on our exports to the US causes problems. It means that our products are more expensive in the US and, though presumably in most cases we'll buy less of them, not in all cases In many cases they have to buy from us, no matter how much it costs, because we're their dominant source of supply. That's true in several industries, like critical minerals, aluminum, oil. Of course they need all those things, so where they have to buy it, we may not feel that painful of an immediate hit, but in most industries we will. So you will see a reduction in exports to the US and therefore a reduction in employment and production in export industries.

Jim Stanford:

Another channel of impact is going to be just a huge uncertainty that's been caused by Mr Trump's erratic behavior. So that's uncertainty for investors. Obviously, businesses are not going to sink capital into a long-lived project. They don't know what the world is going to look like next month, let alone in five years or 10 years, which is how long their capital investments need to be stable and productive. And consumer uncertainty as well, because people don't know if they're going to have a job in many industries, so they're going to put off major purchases, and that in and of itself can cause a recession. Finally, there's also the impact of the slowdown in the rest of the world on Canada. So almost certainly the US is going to have a recession, simultaneous or even sooner than Canada, because of the self-destructive impacts of Mr Trump's actions. And other parts of the world, including Europe and Asia and the other countries that we want to expand our trade with, are also going to have recessions, so it's going to be harder for us to export there.

Jim Stanford:

So for all of those reasons. There's no doubt, if Mr Trump sticks to his guns, we are going to have a serious recession in Canada, I would say on the par of the recessions we had in the early 80s and the early 90s. So you're looking at two to three years of shrinking or slow GDP growth. You're looking at double digit unemployment we're already at 7% in Canada, but that would go well above 10% and you're looking at very significant economic hardship, human hardship, fiscal problems for governments, of course, because deficits will get worse. Now, that's if Mr Trump sticks to his guns.

Jim Stanford:

But he has shown repeatedly now that he doesn't always do that and he can be pushed in the other direction depending on the day-to-day swings of markets, what sort of pressure he's getting from business leaders or how he judges the politics.

Jim Stanford:

This whole thing is obviously driven by domestic politics for him, not economic logic, and if he decides that it's hurting him more than helping him, then he'll find some way to, you know, with great bluster, say well, I never intended to do that anyway, I'm now doing something different. So we're still in trouble just because of the uncertainty of his actions, and we are paying tariffs in several significant industries, including steel, aluminum, automotive and some other products. Even if he came out tomorrow morning and said I was kidding, everything is going back to normal, I've won you know, claim victory. Somehow we're still in trouble because of the negative impacts of the uncertainty and so on. So best case scenario is we've got a difficult slowdown and maybe not a full fledged recession. If he pulls back from most or all of his tariffs, worst case scenario he sticks to his guns and we've got a significant recession.

Julia Pennella:

I appreciate that analysis and, to your point too, wall Street's calling him, you know, taco Trump always out. And I'm also thinking about how much lost investment and revenue has been held back because people are keeping their portfolios tight or playing it safe, just even in these few months. But I want to lean into. Obviously there's forecasting. We can only predict so much. But you've been a long advocate for industrial policy and strategic investment in Canada and we have seen a renewed political push for made in Canada economy. We're seeing move towards economic nationalism and signals from the federal government about prioritizing nation building projects, despite not delivering a spring budget and reducing interprovincial trade barriers. So we've seen those efforts by premiers on signing agreements. So I'm curious what do you think are the biggest policy hurdles still holding Canadian manufacturers back from building strong domestic industries and competing globally?

Jim Stanford:

Well, canada has traditionally relied on industrial policy actively throughout our history. In fact, it kind of fell out of favor with mainstream economists in the latter part of the 20th century when it was considered picking winners, and instead we should just adopt a kind of a deregulation, free trade type of approach and let the markets decide what products and industries Canada should specialize in. And I think that was a mistake. And in retrospect, you know, putting all of our eggs in the basket of free trade relationships, particularly with the United States, wasn't smart. We're at risk to unpredictable changes from America, as we're seeing right now. But even if it was a normal president, a normal democracy in the United States, we'd still be at risk because we'd be focusing on generally primary industries, export extraction and export of resources, including energy, minerals, forestry products, some agricultural products and not developing a more sort of diversified and value-added economy. So I think for lots of reasons, industrial policy has become more important in Canada and around the world. Even again, lots of mainstream economists are recognizing that this so-called comparative advantage model of free trade, where free competition will assure that everybody's doing what they're relatively best at. That's the textbook economics 101 definition of comparative advantage. It doesn't describe how the world works and it certainly isn't a recipe for prosperity. If you look at the countries that have really succeeded in developing technology and productivity and living standards, they didn't follow comparative advantage principles. They actually got in, got their hands dirty and built those industries. So I think Canada has to relearn those lessons and many of our successful industries everything from the auto sector, obviously, aerospace Canada punches way above its weight in aerospace precisely because of a legacy of industrial policy. Telecommunications, pharmaceuticals tech, even the oil sands were an outcome of industrial policy. Telecommunications, pharmaceuticals tech, even the oil sands were an outcome of industrial policy, where governments directed lots of investment, including public equity at one point, into developing the technology and the initial operations and so on. I do think we're going to have to relearn those lessons and that's going to require a more interventionist approach. It's going to require government playing an active role in shaping markets and shaping incentives, rather than just assuming that a so-called free market will send the correct signals. There's obviously going to be a role for fiscal incentives of different kinds whether that's an investment subsidy or tariffs in some cases can actually be sensible, not the way Mr Trump is doing it or even public equity investments. We've done that many times in the past to help nurture value-added industries in Canada, creating strong markets for the products that we want to make from those industries. That includes in Canada, sort of through domestic procurement strategies or by Canadian campaigns, and also developing export markets, of course, now putting special focus on Europe and Asia rather than relying so much on the States. So I think that there's going to be a growing role for this Now.

Jim Stanford:

That overlaps with some of the other things that we've been talking about. This interprovincial integration idea. We could talk about how much of that is verbiage and how much of it would make a real difference. I think it's been quite overplayed. And then the big investments in different types of infrastructure. You know everything from transportation to electricity to obviously the oil industry wants oil pipelines. So those things will play a role, but I don't think of those as industry policy per se. Industry policy more narrowly means trying to foster a larger presence, a larger footprint for a desired industry, something that's considered desirable to have because of its technology intensity, its export orientation, its potential for productivity growth, its ability to anchor supply chains. Those are the reasons you want certain industries in manufacturing, like auto and aerospace, but in other industries as well, like high value business services or high value education services, etc. Those can all be targets for industry policy and I think we're going to see a lot more of that in Canada.

Julia Pennella:

Very well said and I want to lean into the point there. You said interprovincial trade is a little bit overplayed. What do you mean by that? If you could elaborate a little bit further on that.

Jim Stanford:

Well, there's been some extraordinary and absolutely unbelievable claims made. Canada doesn't have free trade within its borders, that we trade less with each other than we do with other countries, or that the gains from removing so-called barriers to interprovincial trade would generate enormous economic gains $200 billion $300 billion a year of GDP and those are just outlandish claims. We have far more integration within Canada than anywhere else. We have the same government, we have the same laws, we have the same currency. You can move anywhere in the country and work anywhere in the country, and the idea that we're somehow balkanized is just nonsense. That isn't true.

Jim Stanford:

The barriers to trade in interprovincial trade are very limited and quite specific. In merchandise about, the only one that ever comes up is trade in wine and beer. In merchandise about the only one that ever comes up is trade in wine and beer. Okay, that is one industry where, for various reasons, because of provincial regulatory authority in the liquor business, you've had limitations on making alcohol in one province and selling it in another. So we could have a debate about whether that makes sense or not.

Jim Stanford:

There's a particular history behind that and a particular reason for it. Newfoundland wants to keep its brewery Okay, and it will disappear in an instant if those rules are gone. So sure, let's have a discussion about that, but does anyone think that's going to make even a measurable difference 1% of 1% difference to Canada's GDP? You know, don't think that for a minute. The other major source of so-called barriers are regulations around occupational registration and access to practice a certain profession in one province or another, because if you're a lawyer or a doctor, you have to get licensed and everything, and that's done provincially right now.

Jim Stanford:

And again we could have a discussion about whether that makes sense. Do we want to move to a unified occupational registration thing? That's a shift away from the traditional federalism that we've had. Do we agree that there should just be one standard for all of Canada so that lawyers and doctors and nurses can move more easily from one province to another? Perhaps we could have a discussion. But do we think that's going to solve any big problems? Everywhere in Canada has got a shortage of healthcare staff, so this isn't going to solve the problem. It might make it easier for one province to try and poach from another, but the shortages are everywhere.

Jim Stanford:

In the skilled construction trades area we actually have a unified national system it's called the Red Seal system that the federal government worked on with most of the provinces. Some provinces don't participate and it's a good one because it says we're going to have a high standard for certifying trades workers, whether it's electricians or plumbers, machinists, etc. Different provinces, given that you're going to have different projects and different demands for labor at different times in different parts of the country. So it is possible to do those things. You have to pay attention to make sure that you're not doing it in a way. That just weakens all of the standards.

Jim Stanford:

And there are some provinces that aren't committed to the Red Seal program because they prefer a more deregulatory, hands-off approach whereby anyone who picks up a hammer can be called a carpenter. Believe me, I can pick up a hammer and I am no carpenter. So if we can have good standards that do apply across the country, excellent, and the Red Seal program is a good way to do that. But there's some governments that aren't interested in that. They just want to deregulate everything and that's not going to be a solution. So I think to some extent all the hype over interprovincial trade is driven politically, because people are worried about what's happening and they want to see their leaders do something. And standing up and saying we're finally going to fix this problem of barriers to trade within Canada and we're going to do it by July 1st Sounds great. Okay and fine, go for it, but don't expect it to really make a difference to our economic situation. It certainly will not offset or counter the economic harm that's going to happen from Trump.

Julia Pennella:

I appreciate that analysis and I do take your points.

Julia Pennella:

Even just with skills accreditation, we still have a massive shortage in the skills trade in Canada to build the homes we need.

Julia Pennella:

My sister just recently was certified as a radiation technician Certified in Canada, but again has to get her licenses in every province. So I take your points there and I want to lean into the domestic demand. We obviously have a smaller demand than the US or other counterparts around the world, but growing our industries, what do you think has to do with obviously untying a bit of our reliance with the US, but expanding to other global markets? And I want to point to an article that you wrote for the Toronto Star recently about how we'll survive Donald Trump's tariffs. Because the answer is right in front of us and you made a striking point in this piece that thinking global is important but it isn't everything and if you get too obsessed with the global you can miss what's right in front of you. Should we be doubling down on growing our domestic industries for local consumption or focus on these other emerging markets? I'm wondering if you can expand on that quote a little bit.

Jim Stanford:

Yeah? Well, the answer, julia, is both. You know, absolutely. We should do some hard work to try and develop other export markets for our products and we've been saying that for years, by the way and there's a reason that it hasn't happened, because it's much easier to just sell this stuff across the border to the US. You know our economies are historically linked, they're highly integrated. It's easier to get our stuff to America than it is to get it to Europe or Asia and for various reasons we've had more success in the American market than those other markets. So now that's no guarantee in the long run and we have to be more diversified. So by all means, let's go and try to expand those markets. And it's a hard thing to do. It means you have to be selling competitive, appealing, innovative products and have a whole sort of marketing infrastructure to help penetrate those markets. And it is a hard, expensive thing to do.

Jim Stanford:

But the government should cooperate with business and try to do it. Just signing free trade agreements doesn't do it. Okay, we've done that, been there, got the t-shirt and it made no difference. Our free trade agreements with Europe, with South Korea, et cetera. We still don't sell very much there, especially value-added products. So it's a harder task.

Jim Stanford:

But we should also not get so obsessed with the global that we forget that most of our economic output never crosses a national border. Almost 80% of our GDP is produced and used right here in Canada by Canadians for Canadians, and it doesn't go anywhere else. And people are surprised by that number just because we've been so indoctrinated with this idea that we live in a global economy now and there is no room for national identity or national choice on things, and that's quite false. The vast majority of what we produce is produced here and that gives us one line of insulation or buffering to the trials and tribulations of global trade, including Mr Trump's erratic actions. Trials and tribulations of global trade, including Mr Trump's erratic actions. So you know.

Jim Stanford:

You can go down the list of all the major industries in Canada Construction, for example. That's been one of our biggest job creators. Almost nothing in construction is traded. Almost all of it is done here For the obvious reason you have to build something here and it's where you built it Services, private services. Over 90% of private services are produced and consumed in Canada and not across the border. There are some important traded services, like some business services, tech services, data services and we should be involved in that. But most services are done here for the obvious reason you have to be near the customer that you're serving, in most cases Public services again, almost all non-traded and public services make up something like 20% of our GDP. Even in goods industries like resources and manufacturing, a significant share of the value added is produced for Canadians. Most of the food that we manufacture, for example, is used here. Some of it is exported, but most is not. So those are all industries where we can zero in on the domestic economy as the key driver of sales.

Jim Stanford:

If we want to support Canadian industries, I think it's going to be important through all kinds of measures. You know we've seen the buy Canadian ads and those are great. They'll make a little bit of difference. A strategic procurement strategy where governments at all levels are pushed to buy Canadian in everything they buy, that would make a difference. And then finding ways to retool or reorient some of the supply chains.

Jim Stanford:

A problem we have in the auto sector is, after 60 years of free trade not even 35, 60 years of free trade in auto, going back to the auto pact in 1965, everything is completely intertwined like a spider's web. So you've got suppliers that sell something that gets done and tweaked and then sold back. It crosses the border sometimes six or seven times before the final car is assembled. I think we're going to need to try to disentangle that a bit We'll never get it fully disentangled but to have more of the footprint and the supply chain for Canadian auto plants in Canada. That's another way to enhance the domestic demand for what we make in those supply chains and the same would apply to other industries. So again, mr Carney mentioned during the election a new strategy around auto in particular to try and have a more in Canada footprint for that supply chain and I think that goal is important and I think it can be applied in other industries as well.

Julia Pennella:

Very well said and great points there, especially in the auto industry. Like we have seen, canada's auto industry be resilient. But this is a bit of a different beast we're dealing with. To your point about how some parts are here and then push back there to assemble and come back and tweak. And that's a wrap on this episode of let's Talk Politics. But don't go too far, because economist Jim Stanford is back for part two. In the next episode we're digging even deeper into Canada's economic landscape. Jim even weighs in on the Alberta separatist movement, breaks down why corporate profits, not wages, might be the real driver behind inflation, and he even challenges some of the outdated ways we think about economics. Oh, and if you're stressed about AI taking over the job market or your job, jim's got a surprisingly reassuring take that might just calm your nerves. There's a lot more ground to cover and, trust me, you won't want to miss it. Make sure to tune in for part two of my conversation with Jim Stanford right here on let's Talk Politics.