The Ben Mulroney Show - Ben asks an economist if it is inevitable that we're heading towards a recession

Episode Date: May 1, 2025

Guests and Topics: -Ben asks an economist if it is inevitable that we're heading towards a recession with Guest: Dr. Eric Kam, Economics Professor at Toronto Metropolitan University If you enjoyed the podcast, tell a friend! For more of the Ben Mulroney Show, subscribe to the podcast! https://globalnews.ca/national/program/the-ben-mulroney-show Follow Ben on Twitter/X at https://x.com/BenMulroney Enjoy Learn more about your ad choices. Visit megaphone.fm/adchoices

Welcome back to the Ben Mulroney Show and nearly 44% of voters cast a vote for the Liberal Party and Mark Carney because they believe that he is the right guy to shepherd us through a tumultuous economic environment. And so let's talk about the environment, let's talk about the economy, and let's talk about with somebody who knows far more about it than I do, Eric Kam. Welcome to the show, my friend, the economics professor from Toronto Metropolitan University and great friend of the show. Benedict, two quick things.

First of all, excellent work on Monday night. Thank you. I couldn't turn you off. Number two, way to keep your lunch down during the course of the evening. Thank you, my friend. Thank you. Well, listen, not good news at all right now. Deloitte has put out a report suggesting the Canadian economy is headed for a recession this year. What do you make of the

report and do you agree with it? Well, I mean, it's like saying the leaps might blow another playoff series. It's very predictable. And of course, I agree with it. All you have to do is open up any publication that shows you macroeconomic variables. And we know that our economy is quite stagnant. We effectively have no real GDP growth, no employment growth, no growth in anything that you can hook yourself onto and say, I see positive signs for the economy. And in fact, I'm actually quite worried because through it all, the resilience of our economy has been our labor market and the bottom hasn't fallen out of it, but I'm just kind of holding on for dear life

that it doesn't because you and I talk a lot about GDP going down and economy is not growing and price stability and all of that is interesting. But it's interesting if you have a job and you can pay for your life's necessities. If we start to see unemployment bloat, that's people losing their jobs. And then everything else we discussed then is irrelevant if they can't put food on the table or pay their rent. So I'm really watching to see unemployment statistics over the next few months. When you say next few months, or two, three, six months what? Yes, exactly, Ben. All right.

Well, listen, it's not all just bad news north of the border, south of the border. The US economy shrank by 0.3% in the first quarter as Trump went in every direction with his trade war and his disruptions. So I'm gonna ask you a chicken or egg question. When the American economy stumbles, it usually correlates with something going on elsewhere in the world. Is that the case?

Or is this the US setting off a chain reaction? Yeah, this is, I don't know if it's chicken or egg, but this is the US setting off a bit of a chain reaction. First of all, it's the largest economy in the world, right? And so there's a bit of a follower for the rest of the world with the United States. When they tend to do something, it tends to permeate like waves in an ocean through other economies. And then of course, you know, smaller and smaller economies, especially. But what you've seen here is that Trumpy has taken a stand, right? He's come out and said almost, we want our economy to be strong in the long run, but in the short run,

I'm willing to accept some pain. And he knew, he knew there was going to be some economic pain. So what he's done in his country is he's created a tariff war. That's the same thing as a trade war. That's the same thing as a tax on consumers. And Trump knows this is a tax on international consumers, but also a tax on his own consumers because prices have gone up in his own country. So I don't like the strategy, but I see what he's trying to do. He's saying we're big enough, Ben, that we're going to be able to see this through. Even if in the short run we have some price increases and some decreases in our gross domestic product, we're big enough and we've been powerful enough over the last few years to withstand it.

And he's he's right. He's probably right that they're going to get past this. The bigger question, of course, are the economies and those waves and ripples we talked about, because a lot of countries are not as able to handle these exogenous shocks as well as the United States. Is it possible for the Americans to go into recession but the rest of the world to weather that storm? Or if the Americans go into recession, so too does everybody else? If the American economy tanks the, no, you can't make a statement like the rest of the world, every single economy will tank because it's an interesting fact. The world is a closed economy, right?

So for every country that's in a surplus, somebody has to be in a deficit. But you can absolutely say because of the size, just the sheer size of the American economy, if that economy starts to contract, it will absolutely 100% take other economies down with it. Eric, what happens? We know that Mark Carney wants to start renegotiating NAFTA as soon as possible. He's going down to Washington in short order for his first bilateral with Donald Trump. If they can work at lightning fast speed to update NAFTA 2.0 into 3.0 in a way that the tariffs go away, could we stave off the worst of what we're

expecting in this recession? I think we actually can. And I think your point's really well taken. What matters to me right now, and we've talked about it before before is uncertainty and risk and the faster that we can remove those terms from our lexicon of the economy the better. Right now what Trump has done is put uncertainty and risk into an international economy the likes of which we haven't seen in a very long time. So if these two leaders can come out of a room and have

a deal, no matter what that deal is, I mean we have time to worry about the deal later. Right now, I would like there to be a deal to at least remove some of that of uncertainty from the economy and so we can bring back some stability, especially to consumers who are waiting on the sidelines, consumers and investors to say, I need to see what's going to happen with some certainty before I make any decisions. So when you hear Mark Carney say things like the global order is is is reshifting, that our old relationship with the United States is over. First of all, what do you think he means by that? And don't you think that adds uncertainty where we don't need it? Yeah, he's saber rattling. He absolutely is. He's doing his country a disservice

when he says things like that, because far too many people, Ben, are going to read into that and say what he's saying is I'm going to teach the United States a lesson that we don't need the United States. Well, let me tell you something. He's not going to teach the United States anything and we absolutely need the United States. I don't care if tomorrow we tear down every inter-provincial trade barrier we have. I'd love to see it. But you are never, given the geography, given transportation costs, you are never going to live in a Canada that doesn't rely on trade with the United States. So I don't like the saber rattling. It's like the little mouse trying

to scare the big lion. It's impossible. He's got to go in there and make a deal to bring some stability back to the system and stop trying to scare somebody who basically you can't scare. Eric, the Hudson's Bay Company gone, Canadian Tire closing stores, PV Mart going under, now Hakim Optical. Is this all just a coincidence, just a bad moment in retail, or is this a major signal of huge problems? You know, it's kind of two things, Ben. We could sit here and talk about the economy, but we already have. We know that our Canadian economy is somewhat slipping into the toilet, but let's not be repetitive. Let's look at something else with respect to economics. One of the hardest things to gauge is consumption based on consumer preferences. And we are seeing an almost unprecedented shift in the last few years

in the way that we shop. People are shopping online. If you look at my almost 21 year old, why would she ever go to a mall? You only do that if you absolutely positively have to do that. So consumers are moving away. They don't like the idea of the cost of getting to a store and waiting in a store and customer service that in this country isn't so wonderful. They would rather shop online. So while I do see it as a problem with the economy, it's a bit of a two-headed monster. And the second part is even harder to fix, which are shifting preferences.

People are buying online, they're buying in bigger box stores to take advantages of their price power in the market and relatively smaller places like the ones you just mentioned are being left aside. But it probably was inevitable the minute that the internet took on shopping. The knock on effects for real estate in big cities and small are going to be significant because of this shift. Everything is going to be significant because of this shift.

This is a real sea change in the way people spend their disposable income. People have really gotten used and you can blame the pandemic if you want. And there's definitely an argument to be made. People were told to, you know, what did Doug Ford say? Stay a la maison. Well, people did. And they decided, you know what? Part of me kind of likes this. I can shop online. Everything can be delivered to me. I don't have to leave my house. And so

we were kidding ourselves if we didn't think that was going to have some reverberation effects in the market. So as we see Ebay and the Amazon soar, other places are damaged then. Eric, thank you so much for being our economic Sherpa. We appreciate it. Stay healthy, Ben. Want to transform your space and your Sundays? Well, Home Network is giving you the chance to love your home with $15,000. Whoo! There can only be one winner.

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