Ottawa and the provinces have done a better job narrowing deficits since the COVID-19 crisis than many of their peers, providing leeway to help offset tariffs, the Organisation for Economic Co-operation and Development said in its annual report on Canada. (The Logic)

Talking point: The OECD said Canada’s economic outlook has “worsened considerably” because the economy is “highly exposed” to U.S. trade tensions and productivity is so weak. However, relatively strong public finances and a well-capitalized banking system should prevent higher unemployment from triggering a serious economic crisis. The endorsement of Canada’s fiscal position provides Prime Minister Mark Carney and the premiers some cover as they prepare to ramp up spending to help workers hurt by the trade war and make the economy less reliant on U.S. exports. Still, the OECD warned governments against overdoing it. If the tariff shock becomes pronounced, it “will be important to allow the economy to adjust to the new environment without safeguarding specific businesses or sectors,” the report said.