What would a trade war actually look like? [Video]

Donald Trump is threatening steep tariffs on all goods entering the U.S. from Canada, Mexico and China.

They’ll be in place until the countries stop the flow of migrants and drugs illegally entering the U.S., Trump said. Mexico and China have threatened to respond in kind.

Businesses, economists and policymakers are trying to figure out how much of this is threat, how much is bluff and how much is real.

Trade wars are notoriously easy to start. But they can be difficult to unwind. And the consequences of this kind of global trade war could impact everyone.

“The result would be a swift and severe recession on America’s northern doorstep that would crush demand for U.S. imports,” wrote Derek Holt, vice-president of Scotiabank Economics.

Tariffs would raise trade costs to Great Depression levels

Scotiabank ran models exploring how tariffs would weaken demand and slow economic growth. Trump has threatened a 25 per cent tariff on all goods coming into the U.S. from Mexico and Canada. 

The U.S. dollar, …