logo
Trump trade war could push late mortgage payments to levels not seen since 2008 financial crisis, Bank of Canada warns

Trump trade war could push late mortgage payments to levels not seen since 2008 financial crisis, Bank of Canada warns

Toronto Star08-05-2025

The Bank of Canada says the Canadian economy would have been in a solid spot right now if it wasn't for U.S. President Donald Trump's trade war, and it is worried that high levels of uncertainty could create financial market 'dysfunction.'
The bank's 2025 Financial Stability Report, released Thursday, said Canadians with a mortgage have managed their debt better than expected throughout 2024 while interest rates significantly dropped since June.
Meanwhile, insolvency filings by businesses have also fallen substantially, according to the report.
ARTICLE CONTINUES BELOW
Those without a mortgage, however, are showing bigger signs of financial stress — though rates of arrears on consumer credit products remain below historical averages, the report stated.
Federal Politics
Analysis
Mark Carney tells Donald Trump Canada is 'not for sale' in historic meeting at the White House
The prime minister said Canada would 'never' join the United States but is willing to work with
The bank said that, overall, Canada's financial institutions have not come under stress and are well positioned to handle higher credit losses in the future.
'The country's financial system has faced unprecedented shocks in recent years, and it has proven resilient,' Bank of Canada governor Tiff Macklem said in a press conference Thursday, citing the pandemic and the subsequent rise in inflation and interest rates.
'Now the Canadian economy and financial system face a new threat,' he said. 'U.S. trade policy has taken a dramatic protectionist shift. Tariffs and uncertainty have sharply reduced prospects for global economic growth. And financial markets have been rocked by chaotic policy announcements and reversals.'
The governor said central bankers have two key worries when it comes to Canadians' future financial stability.
He warned that a prolonged trade war would reduce economic growth and increase unemployment, putting pressure on Canada's financial system and causing banks to cut back lending. This, in turn, would create greater financial stress for Canadians.
ARTICLE CONTINUES BELOW
ARTICLE CONTINUES BELOW
The bank highlighted that a severe and long-lasting trade war could push the rate of mortgage arrears — or late mortgage payments — beyond levels reached in the 2008 global financial crisis, but Macklem called this a 'pretty extreme scenario.'
'While that's not the central bank's base case forecast, it's a reminder of the urgency with which Canadian officials must address the trade spat with the U.S.,' Royce Mendes, economist at Desjardins, wrote in a note to clients.
At the same time, the bank is increasingly concerned that Trump's trade war will trigger a 'disorderly' market sell-off in the near-term, harming Canadian households and amplifying the risk of an economic slowdown.
Business
Report calls for 'auto pact' tying duty-free vehicle imports to Canadian production
In response to any U.S. tariffs, Canada should impose its own surtax on imports of U.S.
The report cited recent bouts of 'extreme market volatility,' particularly when investors dumped stocks and traditionally stable U.S. government bonds following Trump's announcement of global 'reciprocal' tariffs on April 2.
'Government bond markets are the foundation of the financial system. They need to function smoothly for other markets to work,' said senior deputy governor Carolyn Rogers in prepared remarks.
'If the trade war causes a larger spike in volatility than we have seen so far, leveraged hedge funds might rush to sell their holdings. That could strain liquidity across core markets, increasing stress throughout the financial system,' she added.
ARTICLE CONTINUES BELOW
ARTICLE CONTINUES BELOW
The bank said it is monitoring signs of financial stress and is working closely with federal and provincial financial authorities to address potential emerging issues.
'We must remain vigilant. Vulnerabilities remain and there is a another test on the horizon,' said Rogers.
This is a developing story.

Orange background

Try Our AI Features

Explore what Daily8 AI can do for you:

Comments

No comments yet...

Related Articles

Federal immigration raid at Omaha food production plant sparks protests
Federal immigration raid at Omaha food production plant sparks protests

Winnipeg Free Press

time16 minutes ago

  • Winnipeg Free Press

Federal immigration raid at Omaha food production plant sparks protests

OMAHA, Neb. (AP) — Immigration authorities raided at least one Omaha food production plant Tuesday morning, inspiring some small protests, but details about how many workers were affected weren't immediately clear. Omaha police and the Douglas County sheriff said immigration officials had warned them about their plans, and their departments helped block off traffic around the neighborhood where many food production plants are located while U.S. Immigration and Customs Enforcement officers worked. ICE officials didn't immediately respond to questions. Meatpacking plants rely heavily on immigrant workers who are willing to do the physically demanding work. The industry has not yet been the focus of President Donald Trump's immigration enforcement efforts, but the administration has been intensifying its efforts in recent weeks. Trump called out the National Guard this week to respond to ongoing protests in Los Angeles over his immigration policies. In Omaha, a small group of people came out to protest the raids, and some of them even jumped on the front bumper of a vehicle to try to stop officers. Glenn Valley Foods officials didn't immediately respond to an inquiry from The Associated Press, but WOWT reported that CEO and owner Gary Rohwer said he wasn't made aware of the operation ahead of time and that there was no warrant. 'Of course not. It's a raid,' said Rohwer, whose company makes the Gary's QuickSteak brand of ready-to-grill steak. Federal agents entered the plant around 9 a.m. Tuesday with a list of 97 people they wanted to screen, Rohwer said. He said the company regularly checks the immigration status of employees with the federal E-Verify database. The raids prompted one Douglas County Commissioner to walk out in the middle of a meeting Tuesday to head down to the area he represents in southeast Omaha where the plants are located. Commissioner Roger Garcia and City Councilman Ron Hug both expressed concern about the impact of the raids on families. Monday Mornings The latest local business news and a lookahead to the coming week. 'These actions are deeply harmful to the South Omaha community,' Hug said in a statement. 'Not only are they unjust and disruptive, but they also directly undermine the economic stability and growth of District 4 and the broader community.' Douglas County Sheriff Aaron Hanson said his agency is 'not privy to the exact nature of the ICE operation' but that his agency is there to assist with assuring 'peace and safety' of everyone in the area. Asked when he learned of the operation, he said his department received 'respectful and ample notification.' He says he got the notification about a week ago.

Leadership Experience 2025: Starbucks Rallies 14,000 North America Coffeehouse Leaders to Accelerate its 'Back to Starbucks' Strategy
Leadership Experience 2025: Starbucks Rallies 14,000 North America Coffeehouse Leaders to Accelerate its 'Back to Starbucks' Strategy

Cision Canada

time43 minutes ago

  • Cision Canada

Leadership Experience 2025: Starbucks Rallies 14,000 North America Coffeehouse Leaders to Accelerate its 'Back to Starbucks' Strategy

TORONTO, June 10, 2025 /CNW/ - This week, Starbucks is hosting over 14,000 coffeehouse leaders from across North America at Leadership Experience 2025 (LE25) in Las Vegas—its largest leadership gathering ever and the first under chairman and CEO Brian Niccol and COO Mike Grams. "Getting 'Back to Starbucks' means refocusing on what has always set us apart — a welcoming coffeehouse where people gather, and where we serve the finest coffee, handcrafted by our skilled baristas," said Niccol. "We are bringing together our coffeehouse leaders from across North America to celebrate, empower and equip them to accelerate our transformation. The coffeehouse experience defines the Starbucks brand, and these leaders and their teams bring that experience to life for millions of customers every day." A New Era of Leadership and Customer Experience LE25 is an important milestone for Starbucks. Over three days, coffeehouse leaders will engage in immersive workshops, connect over new ways of working, hear directly from company leaders, and experience the first-ever Starbucks Global Barista Championship, celebrating craft, connection, excellence at its best. The event will accelerate Starbucks turnaround—centered on exceptional service, simplified routines, and deeper customer connections. Leaders will explore new innovations, clearer customer service standards, and a renewed focus on hospitality, including a goal of four-minute wait times – without compromising the warmth and connection that define the Starbucks Experience. "This isn't just a reset—it's a recommitment to who we are when we are at our best," said Grams. "LE25 is our moment to recommit to a culture of hospitality and excellence. We're making progress, have real momentum with our "Back to Starbucks" plan and are on the right track to turn the business around." Since launching its Back to Starbucks strategy nine months ago, customers are already feeling the difference, with welcoming spaces, more confident baristas, faster service, and the return of small but meaningful touches like ceramic mugs, handwritten notes on cups, a more consistent dress code, and a much-loved customer favourite: the condiment bar. "Our turnaround is rooted in listening—to partners and customers—and taking action on what we hear," added Grams. "We're listening and testing in the coffeehouse, and then applying our learnings to scale quickly and enhance the customer and partner experience." Leading with Partners, Winning with Customers Starbucks continues to be a leader in partner (employee) care, offering competitive pay and industry-leading benefits such as a recently launched paid parental leave top-up benefit for all eligible Canadian store partners, equity in the form of stock, $5,000 in mental health benefits for eligible partners and more. Additionally, as part of its focus on making Starbucks the best job in retail, the company has established a goal to hire 90% of retail leaders from within, fostering a culture of growth and opportunity. "We believe a great partner experience fuels the customer experience," said Grams. "We always have more work to do, but our partners are rallying behind Back to Starbucks and telling us they like what they see. When our partners feel supported, our customers notice the difference too." Coffee and Craft Take Center Stage LE25 kicks off today with Starbucks largest-ever coffee tasting, featuring a first taste of the new Starbucks 1971 Roast™, available in the U.S. and Canada this Winter. The company is also celebrating the impact of its investment in the Global Farmer Fund, supporting long-term sustainability across Origin communities. LE25 will also spotlight the first-ever Starbucks Global Barista Championship— a celebration of Starbucks baristas who embody the company's commitment to community, connection and craft. Over the three-day competition, 12 baristas from around the world will showcase their coffee passion and expertise through a variety of skills and knowledge-based competitions. "We're returning to what made us iconic: handcrafted coffee, human connection, and a relentless focus on excellence," said Niccol. "We're reigniting the soul of Starbucks, together." Giving Back in Las Vegas This week, Starbucks is demonstrating how major events can be designed with sustainability and community in mind. LE25 is powered by 100% renewable electricity sourced within 500 miles of Las Vegas. Starbucks will donate any surplus food to its FoodShare partner Three Square Food Bank, divert food waste and coffee grounds from the event to local farms, and plant 10 trees per attendee to support reforestation efforts in South American coffee-growing communities. The Starbucks Foundation will invite attendees to vote for five local Las Vegas organizations to receive grants, with an estimated $100,000 to be donated to causes like hunger relief, homelessness, youth empowerment and more. The Starbucks Foundation is also donating a $10,000 Neighborhood Grant to each Barista Championship contestant's chosen nonprofit.

Credit rating agency says Manitoba's recent tax changes outweigh affordability offers
Credit rating agency says Manitoba's recent tax changes outweigh affordability offers

Winnipeg Free Press

timean hour ago

  • Winnipeg Free Press

Credit rating agency says Manitoba's recent tax changes outweigh affordability offers

WINNIPEG – The Manitoba government is expected to use more 'revenue levers,' similar to its recent income and property tax changes, as part of its plan to reduce the deficit, a credit-rating agency report says. S&P Global Ratings has affirmed the Manitoba government's existing short-term and long-term credit ratings and says the outlook for the province is stable, based in part on expected revenue changes and spending control. 'The stable outlook reflects our expectation that, despite economic growth and trade uncertainty, Manitoba will deploy revenue levers and expenditure management to generate stronger fiscal outcomes in the next two years,' the report, issued May 26, said. The NDP government, elected in 2023, has promised to reduce costs for Manitobans. It has taken out advertising to promote its cut to the provincial fuel tax, an increase to a tax credit for renters and other measures. But the money forgone by the province for those measures is outweighed by recent tax changes that are boosting provincial revenues, a director with S&P said. That includes a change in this year's budget that will no longer see income tax brackets automatically rise in line with inflation. 'That alone is enough to offset all the affordability measures that they're putting in,' Bhavini Patel, director in S&P's Canadian international public finance group, said in an interview. The NDP government has promised to balance the budget before the next election, slated for 2027. That would end a string of annual deficits that stretches back almost continuously to 2009, with the exception of two surpluses. Part of the province's revenue growth has come from recent changes that will see many property owners and income-earners pay more. In last year's budget, the government changed the way education tax credits on property are calculated. The government estimated the change would net the province an extra $148 million a year, although that number is likely to grow due to recent increases in property assessments and taxes levied by school divisions. Monday Mornings The latest local business news and a lookahead to the coming week. In this year's budget, the government stopped indexing income tax brackets and the basic personal exemption to inflation. By keeping the brackets and exemption constant as wages increase, unlike most provinces, the government is forecasting an extra $82 million in revenue. Finance Minister Adrien Sala said he's not looking at future tax changes aimed at garnering more money, and is expecting an economic boost to increase revenue. 'I think the biggest driver of new revenues will be economic growth,' he said in an interview. He pointed to the recent start of construction of the Alamos gold mine near Lynn Lake as an example. The government is also looking at keeping annual spending growth in check in order to balance the budget, he said. This report by The Canadian Press was first published June 10, 2025.

DOWNLOAD THE APP

Get Started Now: Download the App

Ready to dive into the world of global news and events? Download our app today from your preferred app store and start exploring.
app-storeplay-store