Scotiabank published an economic outlook for Canada and Mexico on July 14 after it had analyzed the potential impact of varying degrees of Washington's protectionist trade policy and response measures on North America.
Canada's third-largest lender predicts that the country's economy will contract by 1.8% in 2020 in the worst-case scenario, which means the US breaks trade ties with all its partners and launches an all-out trade war.
The report said that the US would be affected the least of the three countries if NAFTA falls apart. However, the authors claim, "it would pay a hefty price if it takes on extreme protectionist measures with the rest of the world."
According to the bank, an all-out trade war initiated by the White House would lead to a recession in the US in 2020, reducing GDP growth by 0.1% in 2020.
Donald Trump's trade agenda has faced a backlash from Mexico and Canada, Washington's long-standing trade partners, who have come up with counter-measures.
Ottawa said its retaliatory tariffs on US goods, due to take effect on July 1, would cover C$16.6 billion ($12.8 billion). Mexico, in turn, levied a series of tariffs on US' exports valued at $3 billion, including bourbon, apples, potatoes, and pork.