Bank of Canada Warns U.S. Tariffs Could Push Growth Below 1%
Latest news on WhatsApp أجدد الأخبار على واتساب
Bank of Canada Governor Tiff Macklem has warned that new U.S. tariffs could push Canadian economic growth in the final quarter of 2026 to below 1 per cent, as renewed trade uncertainty threatens to delay business investment and hiring.
Speaking to the Halifax Partnership, Macklem said the Canadian economy entered the summer in a stronger position, supported by improved exports, investment and labour market conditions. But escalating trade tensions with the United States and continuing conflict in the Middle East have shifted the balance of risks facing the economy.
Products affected by the latest U.S. tariffs account for about 5 per cent of Canadian goods exports to the United States, meaning the direct impact on the overall economy could remain relatively limited. The larger concern, according to the central bank, is the uncertainty created by the tariffs, which could cause companies to postpone investment, expansion and hiring decisions.
Macklem said that if the current tariffs remain in place, fourth-quarter growth could be cut roughly in half, falling to below 1 per cent. Canada’s economy had expanded at an annualized rate of 3.3 per cent in the second quarter, after a period of weakness, as households and businesses began adapting to trade disruptions.
The Bank of Canada is also facing a more complicated challenge than slowing growth alone. While weaker economic activity can reduce price pressures, higher energy prices are pushing inflation in the opposite direction.
Canada’s inflation rate has been running at around 3 per cent in recent months, driven in large part by higher fuel prices. The Bank said inflation could rise further if oil prices remain close to US$100 a barrel.
Macklem said damage to global refining capacity and disruptions to major shipping routes have pushed gasoline and diesel prices higher than would normally be expected based on crude oil prices alone. Those increases are also raising transportation and distribution costs for Canadian businesses.
So far, the Bank says there is no broad evidence that higher energy costs are spreading significantly into the prices of other goods and services. However, it warned that prolonged conflict and supply disruptions could increase the risk that inflationary pressures become broader and more persistent.
That leaves the central bank facing a difficult interest-rate decision. Macklem said the Bank does not want to raise rates and further weaken economic growth if inflation pressures remain temporary, but it also does not want to wait too long if those pressures become more persistent.
The Bank of Canada kept its policy interest rate unchanged at its most recent meeting. Macklem said policymakers will continue to assess the effects of tariffs and energy prices on growth and inflation before making future rate decisions, while maintaining the Bank’s 2 per cent inflation target.
