Bank of Canada Warns Trade War Risks Permanent GDP Loss

The Bank of Canada has warned that a prolonged trade conflict with the United States would significantly harm Canada's economy, more so than the U.S. due to Canada's heavy reliance on American trade. According to recent minutes from the central bank, GDP losses in Canada could be permanent, with growth expected to slow as the economy adjusts to new tariffs. In light of these uncertainties, the Bank of Canada cut its key interest rate to 3% to support economic growth and balance inflation risks, influenced by U.S. President Trump's threats of tariffs. Following Trump's executive order imposing a 25% tariff on Canadian goods, Prime Minister Trudeau announced a retaliatory 25% tariff on U.S. goods, indicating ongoing tensions. Former Canadian Minister Chrystia Freeland emphasized Canada's significant market leverage over the U.S., vowing targeted retaliation against Trump's tariffs. The situation highlights the intricate interdependencies between the economies of Canada and the United States and the potential fallout from escalating trade tensions.