Canada PM Carney Says Likelihood of US Recession Has Climbed 'Significantly'Update

By Paul Vieira

OTTAWA--Canadian Prime Minister and former central banker Mark Carney says the probability of a recession in the U.S. has increased "significantly" and that Canada would be hard pressed to escape a sizable hit to its economy.

At an election-campaign stop in British Columbia, Carney said the selloff in global equity markets should come as no surprise. "They are reacting to what we have warned of--which is that these tariffs are fundamentally damaging to the American economy and, by extension, to the global economy," he said.

Carney said that in the past 24 hours, he spoke with Bank of Canada Gov. Tiff Macklem on Monday, his finance minister and with senior policymakers across the world. He said he's confident that Canada's financial system remains in a rock-solid state.

Investors sold holdings for a third straight day, with the Dow Jones Industrial Average down Monday--although the losses are not nearly as steep as in the two days following the reveal of President Trump's tariff order.

The Bank of Canada on Monday issued its quarterly business and consumer outlook surveys, based on responses collected in February and March, and before last week's tariff-fueled mayhem. The surveys indicated that both businesses and households were moving into a defensive mode, with data indicating a freeze on hiring and investment plans, and increasing worries about higher inflation.

Meanwhile, one-third of businesses and two-thirds of households said they anticipate a recession in Canada over the next 12 months.

Write to Paul Vieira at paul.vieira@wsj.com