The Ben Mulroney Show - Economist says Canada is entering a recession and will lose 100,000 jobs

Episode Date: May 22, 2025

Guests and Topics: -Economist says Canada is entering a recession and will lose 100,000 jobs with Guest: Dr. Eric Kam, Economics Professor at Toronto Metropolitan University -Is it time to finally take the dream of a Canadian automaker seriously? with Guest: Flavio Volpe, president of the Automotive Parts Manufacturers Association 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 Mulrooney show and I remember going to a lot of G7 summits with my family. As a matter of fact, some of you don't know, I didn't travel a lot with my dad. People assume I went all over the world, but my parents had a rule that we only traveled with them during the summer. And what was during the summer? The G7 Summit. So we went to almost every G7 Summit. I remember one, I was in London and I wore a black, I wore a tuxedo to go see a laser light show in the courtyard of Buckingham Palace. That was cool.

And on one of the off nights, cause my parents had a bunch of stuff to do, I got a ticket to go see Miss Saigon, a play in the West End. And turns out at that play, I was sitting in the balcony, I like in the fourth row of the balcony, and Barbara Bush and a couple of other first ladies showed up and sat right in front of me.

And I shouted down in front and the secret service turned around and Barbara Bush turned around. She recognized me. We had a good laugh. Anyway, all that to say, I'm never in the room with the people making the big decisions and having the big meetings,

though that happens by the leaders themselves. So all the more reason to speak to somebody who who knows the ins and outs of what happens in moments like this. We're joined now by Eric Kam. He is a good friend of the show, and an economics professor at Toronto Metropolitan University. Eric, welcome. Benedict, I have to tell you that when I was younger, my parents would take me to flea markets in Barrie, Ontario. So 601. There's a comparison. There's a comparison. I'm welcome. Benedict, I have to tell you that when I was younger, my parents would take

me to flea markets in Barrie, Ontario. So six to one. There's a comparison. There's a comparison. I never met Barbara Bush, but I once tried to run through a bush and I got poison ivy. There you go. There you go. And I have a daughter named Ivy. See how we're connecting all the dots. Okay. So let's move on. The finance ministers are at in Banff right now. They're discussing the global economy, Ukraine, and so much more. A lot of it is pageantry. A lot of it is press conferences. A lot of it is standing together for photo ops. But I don't think you would send your finance ministers or your representatives of your finance departments, or halfway around the world, unless you thought something could come out of it. Well, that's right. And what this is to me in all the reading that I've done,

and even spoken to people that have been, as they say, in the room, is that this is the political version of what academics do at conferences. They go, they meet people, they meet new people, reconnect with older people. But what they really do is set the groundwork and try to talk and make sort

of back room, front room deals. They may not come to fruition at the conference, just like an academic won't write a new paper to be published at a conference, but you meet new co-authors. And so people have told me that mostly it's about not just standing for pictures and looking like you should, but making connections in the background that can one day turn into fruitful agreements, Ben. Yeah. And it must be this, a meeting like this should be even more important today. Given the fact that you've got of the seven, you got Donald Trump sort of creating chaos and everybody else reacting.

So to have the other six together, not necessarily all rowing in the same direction, but knowing what the other guy's doing. You show each other six together, not necessarily all rowing in the same direction, but knowing what the other guy's doing. You show each other your cards, right? So you can possibly sing from the same hymn book. Well, I think it's been well established on your show and in our discussions. The world economy right now is really teetering.

So we need leaders to step up and actually be leaders and have conversations, and with Trump as well to try to Minimize some of this risk and uncertainty that they're pouring into the markets It's the one thing that they don't see while Trump does understand it It doesn't seem to care right now is that with every passing day with every increase in risk and uncertainty That they put into the markets is another day that the markets have higher and lower fluctuations, which has more ramifications on things like stock prices and future prices.

And we know that tariffs are just taxes and this isn't good for any country, Ben. So if nothing else, I hope they come out of this with a little bit more stability and a little bit less riskiness. And some countries are doing better than others. Canada has not been faring well for the past 10 years, and it looks like it's going to get worse.

Do you agree with the chief economist of TD Bank who says that Canada is entering a recession, and we're about to shed 100,000 more jobs? I believe that half of that is true. I think that we're going to shed 100,000 jobs. I don't believe we're heading into a recession, Ben. We are in a recession. I don't like when economists wordsmith and they say,

well, a recession is two consecutive quarters where GDP goes down. Yeah. That's just ridiculous. And that's just to impress people in the media. What's going on is that our economy is recessed. We know that all of our macro indicators are pointing down. We know we haven't had macro indicators are pointing down. We know we haven't

had any GDP growth in years. The productivity or the supply side of our economy is stagnant. And if you look at, in my opinion, the three biggest problems in our economy today, housing affordability, debt spending, and I forget the third one because I'm not looking at it. The point is that none of them, none of them, Ben, are going to be solved by lower interest rates. And so far, that's the only bullet in our government's gun. So are we heading into a recession? No, Ben, we are absolutely mired in a recession. And now it is time to get us out of the recession, Prime Minister Carney and friends. Yeah, that's just super, my friend. All right, yesterday, people on social media were

making a big deal about yield bonds in the U. And when I hear that, Eric, my eyes, they gloss over. What does that mean for the average person? They're talking about the yield curve. And what's going on, Ben, simply is that the yield curve says that the return on short term bonds should be less than the return on long term bonds. So you should be able to gamble, and I use that term with a small G,

on putting your money in the bond market for the long run because you're gonna be safe. Well, guess what? Not to sound like a broken record, and none of my students know what that term means, but all of this risk and uncertainty we've planted into the market, you've actually upended the yield curve.

And right now, if you look at the futures market on bonds, long-term rates are scheduled to be shorter than short-term rates. So it's not unlike any other market that you've turned on its ear. And one of the basic tenets in economics and finance is you can always rely on long-term bonds. And now, thanks to what's going on in the world, you cannot. So if you can't bet on the bond market, Ben, the average investor says, well, what the

heck can I bet on? And right now, the only thing investor says, well, what the heck can I bet on? And right now, the only thing you can bet on is recessionary polls. I gotcha. I gotcha. OK. Ontario now, it turns out, could have a half trillion dollar debt by 2027. First of all, I wasn't keeping track of Ontario's debt, but that would be a record, Eric. What implications could that have?

And we always talk about the federal debt, but what happens to a province when it's carrying that much debt? Nothing good, Ben. I'm gonna let you in on a little secret about economics. It reminds me of other parts of life. Size matters. And Ontario is Canada's largest province by population and economic output.

So slowdowns are gonna hit this province harder and show up more clearly in all of our statistics. Moreover, of course, Ontario is reliant heavily on manufacturing, services, and real estate because those things are dependent on high interest rates, global trade showdowns, and immigration-driven population growth. All of that means put it in a bowl, stir it up, and everything that makes our economy susceptible to disaster is staring our economy in the face right now. Not to mention the fact that our debt is out of control and heaven forbid the bottom falls out of the unemployment market, which it looks

like it might then as you said, if our employment market gives out, that's the last domino and we are really, really headed in to major problems. So that means long, long story short, Ford has got some real challenges ahead of him in terms of spending revenue, labor, and economy. And I hope he's up for the job. All right, very quickly, I want to throw to us a piece of audio from Kate Harrison on the CBC. She said she gave the truth as she sees it on housing. This is a generational issue. Emily is right. No one has the political courage to say what the truth as she sees it on housing. This is a generational issue. Emily is right. No one has the political courage to say what the truth is, which is that in order to bring affordability to increase affordability, prices for others will have to come down and your

resale value will come down. But some have more capacity to let those prices come down than others. They do. They do. And I think Gregor Robertson, the new minister, was trying to have his cake and eat it too in terms of threading that needle. I think the prime minister did perhaps a little bit better job massaging a message that is a difficult one.

But to be totally candid to solve the housing issue in Canada, it's not going to be done just through temporary modular housing. It's not going to be done just through half. Every level of government has something that they need to do to bring through temporary modular housing. It's not going to be done just through half. Every level of government has something that they need to do to bring to the table here. But it will involve some political courage on the part of federal leaders, as well as provincial and municipal, to admit that, yes,

for the boomers that were lucky enough to secure low mortgages and pay those off, their values will have to come down in order for young people to knock on the door of homeownership. All right, Erica, you got 35 seconds to comment on what Kate Harrison said about housing. Garbage, unadulterated garbage. There's no policy where you can just unilaterally bring down housing prices. And do you really want to? You and I just talked about if the bond market isn't there, what can people put their money

into that they're assured of increases? For years, it's been housing, Ben. So are you going to punish boomers and punish successful people who bought homes as investments? You are not going to do that. If you believe in markets, markets got us into this mess and markets can get us out of this mess, not stupid government policies like price controls. Thank you, Eric. I appreciate it. Stay healthy, Benedict. Welcome back to the Ben Mulroney show. Thank you so much for joining us. You know, in the lead up to Donald Trump's world

changing tariffs, this next guest that were is joining us in a moment was such a voice of reason of measured well thought out arguments on how to deal with the bouncing ball that was Donald Trump and his thoughts on any given day on tariffs. And now that we are living in a tariff filled world, and our eyes are on the G seven summit, and it's time to ask ourselves what to do now. So let's go to Flavio Volpe, the president of the automotive parts manufacturers Association Flavio, welcome back to the show. That was very generous of you. Thanks for having me back on.

Thank you, my friend. Okay, so the G7 summit is a time where the world leaders get together. In a lot of cases, the cameras are not on. A lot of big things can happen at these summits. Now, for sure, a lot of the heavy lifting is done before the summit even happens. So you kind of know that you're going to come out with some deliverables. But it's you say that it's the time where we can fight the US tariffs. We can plead our case. Tell me what you mean. Yeah, look, I think presenting our case is more what I mean than plead.

But the president, the world is watching, the president's showing up into a country where he's talked about annexation. Now, certainly he's backed off that. He's walking into a room with countries of major consequence with whom he's picked the fight, but with a lot of them he started conversations about, you know, the UK framework deal,

or we saw that meeting with Prime Minister Carney, which I think most people should assume was of about a lot more substance on a material discussion than just a meeting green. Here we have a stage where we, the other six countries, including us as the host country, can help Donald Trump present the win. On the highest stage, in the most collegial manner, it's an opportunity not to be missed. We, Canada, should be working very hard on the Kannonaskis summit being a place where we publicly bury the hatchet. So hold on, Flavio, I don't want you to get too far ahead of me here.

What do you think can be accomplished? What meaningful changes to our relationship with the United States do you think can actually be accomplished at this summit? Well, I think everybody should remember that the only thing that's changed from six months ago is tariffs have been placed on the Canadian economy. Now, the consequences have made this a massive conversation, but these are tariffs that have

been put in place through national security and emergency declarations by the president. We, Canada, should be looking to have those tariffs lifted. Now, in return, what are the Americans looking for? Well, he is, he styles himself the master negotiator. We keep saying we have things that they need. Well we should put some, we should put some some parameters around it. We think they need our critical minerals. I know that if I'm at Ford Motor Company and I want lithium from Canada, I don't know when I can buy it because we haven't approved extraction and we have no processing.

We should consider paying for processing that only exists in China and making these approval processes shorter and saying to the Americans, you can have lithium from this facility in Quebec in 2033 and that gets you off. I got it so but Flavio let me uh let me play devil's advocate for a second because uh look we watched for months the parade of uh provincial leaders and I some some federal leaders uh but also vocal voices in the business community

speaking to Donald Trump either through on television or directly in front of Mar-a-Lago. All of this information is stuff he probably already has. He's doing this because he wants to do it. His worldview is informed by how he feels about something, not about the facts on the ground. When he says, we don't need anything from you, that's not true. But in his mind, that's how he feels. Yeah, look, what we've been seeing, you know, it was one of those voices, what we've been seeing is a different tonal relationship between the new prime minister and Donald Trump. We're watching it in the in the reaction of his executive, we no longer see Howard Lutnick out there every second day, saying something about Canadian jobs

should be American jobs. We don't see Scott Besson, his Treasury Secretary, out there saying, well, you know, Canada's not paying their way. His surrogates are quiet. Yeah. And the Premiers have lined up behind the Prime Minister. I think we've got something really

substantive on the table here. I think, you know, most of us, if you're watching this closer, you're stuck in the middle of it like me. You could tell the difference between a Justin Trudeau, Canada, Donald Trump conversation and a Mark Carney one. I'm hopeful because the Americans are acting differently too. Yeah. Well, I want to move my attention, our attention to something you wrote in the Globe and Mail. And also sidebar, I heard you on a different radio station a few weeks ago, making the point that Donald Trump really hasn't thought long and hard about the idea of closing down factories in Canada

so that they can ultimately one day reopen in the States. If a factory closes here in Canada, that is a factory closing for an American automaker. And so the only people he's helping are Korean car companies in Tennessee. And I really thought that was a really very interesting point that you made. But given the fact that we are feeling these pressures, given the fact that our integrated automotive sector

is being choked with an attempt to bring everything south of the border by Donald Trump, you posit that maybe this is now the moment, the opportunity for a Canadian automaker to rise from the ashes of this relationship. Yeah, look, I think we need to figure out how to buy some insurance and we should build some ourselves.

We've made this argument, Ben, you've had me on the show for the last couple of years talking about, this is the best place to make cars. Please come here, we'll subsidize your production because we have the best raw materials, parts companies, applied technologies and workforce. Well, all those arguments are true for Canadians for a Canadian operation as well.

In the past, not since Bricklin 50 years ago, we tried this, but the world has changed and the auto business has moved to Canadian strengths. Regardless of where we are right now, the industry is electrifying around the world. Well, we have the things that help you electrify, but also the things that make you electrify, but also the things that make these cars connected autonomous work.

But so, so, Flavio level set for me, what you're not talking about the government getting into the business of building cars, right? No, what I'm saying here is, I think the first step is the government says, yeah, we agree, we should have a national ambition, we'll support the idea with helping industry do a feasibility study of what kind of cart we should make and how it should be positioned.

And then industry and government should also be humble enough to say, if we do this effort properly, and it looks like it's not gonna work, then we're not gonna do it. Yeah. When I read the headline, not gonna work, then we're not gonna do it. Yeah. Yeah. When I read the headline, not the story, just the headline, I thought, oh my goodness, it's the Avro Arrow on wheels.

Do we have the know-how to build something, but everything that goes into the development of a car that could compete on the world stage. I think that's where I'm wondering. I don't know if we, I don't know if there are any gaps in, in what we can do here. I got an answer for you. We built project arrow launched two years ago. It's a fully working prototype. I'm not proposing we put that into production, but it's an all Canadian car. We answered that we have all the technology. What's it look like? Oh, we'll go projectdaro.ca, you'll like it.

I'm gonna keep talking, I'm gonna type. Yeah, and I'll tell you, Mexico, who is under the exact same pressure that we are, President Scheinbaum said, okay, look, part of what we're gonna do here is we're gonna launch our own company, it's called Olenia, and Mexico's got 130, 140 million people,

but they only buy 1.7 million cars a year. Why lower disposable income? Well, we're going to target a $10,000 US city car. And we'll miss I'm looking at this thing. It's a good looking car. I did not expect this at all. I mean, it's not bad at all. Is that we roll then? Wow, I'm really impressed by this. Okay. Hey, we're gonna have to leave it there, Flavio. But thank you very much. Like I said, I always appreciate your voice on these important issues and I appreciate that you come here to the Ben Mulroney show. Thanks for having me on anytime. The best high concept sci-fi rig of a role in the universe is back.

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