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Canada may not be alone in facing a Trump-induced recession this year.

Economists at Desjardins Group say the U.S. economy is likely to face a contraction this year — prompting further rate cuts from the U.S. Federal Reserve (Fed) and weakness in U.S. stocks.

In a research note published Thursday, Desjardins economists joined the chorus of analysts forecasting a recession for the Canadian economy this year, as ruinous U.S. trade policy — combined with domestic headwinds of slowing population growth and looming mortgage renewals — weighs on trade, investment, consumption and employment, touching off a recession in the second quarter.

“Retaliatory tariffs will further deepen the economic drag while forcing inflation higher,” the research note said.

The U.S. will be feeling pain too, Desjardins said, as it’s now anticipating a recession south of the border as well.

“Estimated U.S. real GDP growth was revised lower for the first quarter, but it’s also been downgraded for future quarters, with the possibility of a recession now looming,” the report said.

This shift in sentiment is also weighing on the U.S. dollar and it is expected to result in more easing by the Fed, it adds.

“As we now anticipate the U.S. economy to enter a recession, the Federal Reserve may need to cut rates more than the market currently expects,” Desjardins said. As a result, it’s calling for the Fed to cut rates by 75 basis points this year.

It also sees the Bank of Canada delivering further rate relief, ultimately cutting rates to 1.75% by the fourth quarter.

In turn, heftier rate cuts from the Fed are seen leading the U.S. dollar to depreciate against a wide range of currencies, Desjardins said.

“Looking ahead, we see a balanced risk outlook for [the U.S.-Canadian dollar exchange rate], with the worst likely over for the loonie,” the report said.

In this environment, with the downside risks to the U.S. economy rising, “the outlook for U.S. equities is much weaker,” Desjardins said, adding that global equities should “continue to outperform as a result.”

Yet, persistent inflation worries may deter more aggressive rate action.

“During a typical recession central bankers would have eased policy further, but rising inflation expectations will keep central bankers wary of delivering too much stimulus,” the report noted.