Bank of Canada Warns US Tariffs Slow Investment, Drag Growth

Bank of Canada Governor Tiff Macklem has identified U.S. President Donald Trump's tariffs as the "biggest headwind" facing Canada, emphasizing the critical need for a new trade agreement between the two closely integrated economies. While the tariffs' effects have not yet appeared significantly in economic data, Macklem warned that second-quarter economic growth is expected to slow considerably and could worsen if tariff uncertainties persist. Policymakers are monitoring the situation carefully, particularly the tariffs' potential impact on consumer prices. In response to the 25% U.S. tariffs on Canadian goods, Canada has imposed retaliatory tariffs on certain U.S. products, further complicating trade relations. Despite efforts by Canadian businesses to diversify trade, Macklem underscored that reaching a new deal with the U.S. remains the most important imperative for economic stability. The Bank of Canada continues to manage monetary policy with these external risks in mind, aiming to maintain price stability amid ongoing trade tensions.