Latest news with #Macklem
04-08-2025
- Business
Why Canada's economy is showing resilience in the face of U.S. tariffs
Despite tariffs piling up over the past few months, economists say there are few signs of economic collapse — though Canada's economy is starting to show cracks. TD Bank economist Marc Ercolao conceded it's a bit of surprise to see the economy holding up against a massive disruption from Canada's largest trading partner. Many months ago, ourselves — as well as other economic forecasters — had an outlook for a much weaker Canadian economy. Obviously, that isn't manifesting now, he said in an interview. We are avoiding the worst-case scenario. Last week, Bank of Canada governor Tiff Macklem said Canada's economy is holding up under the weight of U.S. tariffs with some resilience. Just a few days later, U.S. President Donald Trump added 35 per cent tariffs on Canadian goods to a running tally that includes hefty duties on steel, aluminum, automobiles and, more recently, semi-finished copper. On Thursday, Statistics Canada gave a glimpse at how the economy wrapped up the second quarter of the year when many of those tariffs came into full effect. The agency sees a couple of small contractions in real gross domestic product (GDP) by industry in April and May, but its flash estimates show the economy rebounding somewhat in June. If those early readings pan out, Statistics Canada said that would be good enough for flat growth overall on the quarter. Some of those results are distorted by volatility — businesses rushing to get ahead of tariffs boosted activity in the first quarter, and that's giving way to weakness in the second quarter, for example. It's still hard to pinpoint exact impacts tied to tariffs, Ercolao said, but a broad trend is emerging. What we can say over the last six months or so is that economic activity is somewhat flatlining. Services sectors are holding up relatively well, but Ercolao said export-heavy industries such as manufacturing and transportation are bearing the brunt of the impact. Bank of Canada says consumer confidence growing In an attempt to shore up some of that weakness, the federal government announced various programs to support tariff-affected workers, and broader plans to accelerate defence and infrastructure spending. Macklem noted during his news conference Wednesday that business and consumer confidence are still low, but have improved according to the central bank's recent surveys. While some trade-exposed sectors have faced job losses and unemployment has generally trended upward to nearly seven per cent, employers elsewhere in the economy continue to expand their payrolls. Consumption is still growing, Macklem said. It's growing modestly. It's certainly being restrained by the uncertainty caused by tariffs. But it is growing and we expect that to continue through the third and fourth quarters. Last week, the Bank of Canada kept its policy interest rate unchanged at 2.75 per ce nt in a third consecutive decision. WATCH | Bank of Canada's governor gives reasons for holding the bank rate steady: If the central bank were panicked about the Canadian economy's ability to withstand U.S. tariffs, Ercolao argued it would likely have lowered that rate. The past week's GDP readings were good enough for BMO to raise its outlook for the third quarter into positive territory. Forecasters at the bank now expect Canada will avoid a technical recession this year. BMO chief economist Doug Porter said in a note to clients Friday that Ottawa's personal tax cut at the start of the month and robust demand for domestic travel amid the trade war will boost the economy this quarter, as will the less-dire sentiment around economic forecasts. Some other forecasters continue to pencil a tariff-induced recession into their outlooks. In the Bank of Canada's monetary policy report released alongside the rate decision, it outlined one scenario for the economy assuming the tariff situation remains largely status quo. Canada avoids a recession in that outcome. Growth in 2025 and 2026 remains overall positive, but half a percentage point lower than it would have been without the weight of tariffs. Time to adapt, mitigate negative impacts Macklem told reporters the Bank of Canada would expect the economy to keep growing even with today's tariffs, but it'll be on a permanently lower path. Unfortunately, the sad reality is that tariffs mean the economy is going to work less efficiently. Porter said in his note that the actual impact of Trump's new 35 per cent tariff on Canada's economy could be less than the headline figure suggests. Because of a carve-out for Canadian exports that are compliant with the Canada-U.S.-Mexico Agreement (CUSMA), BMO sees the effective U.S. tariff rate at roughly seven per cent under the new duties, less than a percentage point higher than it was before Friday. But with CUSMA up for renegotiation in 2026, Porter said that 35 per cent tariff rate could loom as a cudgel over negotiations — taking full effect if the trade agreement expires without a new deal in place. Enlarge image (new window) Tracking the trade war between the U.S and Canada. Photo: CBC / Wendy Martinez, Graeme Bruce The Bank of Canada published a separate escalation scenario this week that would see the United States remove Canada's CUSMA exemption as it ramps up global tariffs. Real GDP would drop an extra 1.25 per cent by 2027 in this more severe case; Porter said that this outcome would be serious for sure, but far from disastrous. Ercolao said much of the tariff doom and gloom earlier in the year was tied to the speed at which those import duties would be imposed. But the on-again, off-again nature of U.S. trade restrictions to date has given businesses time to adapt to the new way of doing business and constant delays in implementation, he said. If we go back to when Trump began his presidency, had he went 100 per cent on his tariff plan right away, we probably would have seen a deep economic contraction just because it would have been so sudden, Ercolao said. Now we've been afforded that time to at least try to mitigate some of the negative impacts from what these tariffs were expected to do to the Canadian economy.
Vancouver Sun
04-08-2025
- Business
- Vancouver Sun
Canada's economy is showing 'resilience' against U.S. tariffs. Why?
'Some resilience' — those were the two words Bank of Canada governor Tiff Macklem used last week to describe how the Canadian economy is holding up under the weight of U.S. tariffs. Just a few days later, U.S. President Donald Trump added 35 per cent tariffs on Canadian goods to a running tally that includes hefty duties on steel, aluminum, automobiles and, more recently, semi-finished copper. With tariffs piling up over the past few months, economists say Canada's economy is starting to show cracks — but few signs of collapse. Start your day with a roundup of B.C.-focused news and opinion. By signing up you consent to receive the above newsletter from Postmedia Network Inc. A welcome email is on its way. If you don't see it, please check your junk folder. The next issue of Sunrise will soon be in your inbox. Please try again Interested in more newsletters? Browse here. TD Bank economist Marc Ercolao conceded it's a 'bit of surprise' to see the economy holding up against a massive disruption from Canada's largest trading partner. 'Many months ago, ourselves — as well as other economic forecasters — had an outlook for a much weaker Canadian economy. Obviously, that isn't manifesting now,' he said in an interview. 'We are avoiding the worst-case scenario.' On Thursday, Statistics Canada gave a glimpse at how the economy wrapped up the second quarter of the year when many of those tariffs came into full effect. While the agency sees a couple of small contractions in real gross domestic product by industry in April and May, its flash estimates show the economy rebounding somewhat in June. If those early readings pan out, StatCan said that would be good enough for flat growth overall on the quarter. Some of those results are distorted by volatility — businesses rushing to get ahead of tariffs boosted activity in the first quarter, and that's giving way to weakness in the second quarter, for example. It's still hard to pinpoint exact impacts tied to tariffs, Ercolao said, but a broad trend is emerging. 'What we can say over the last six months or so is that economic activity is somewhat flatlining,' he said. Services sectors are holding up relatively well, but Ercolao said export-heavy industries such as manufacturing and transportation are bearing the brunt of the impact. In an attempt to shore up some of that weakness, the federal government has announced various programs to support tariff-affected workers and broader plans to accelerate defence and infrastructure spending. Macklem noted during his press conference Wednesday that business and consumer confidence are still low, but have improved according to the central bank's recent surveys. And while some trade-exposed sectors have faced job losses and the unemployment has generally trended upward to nearly seven per cent, employers elsewhere in the economy continue to expand their payrolls. 'Consumption is still growing,' Macklem said. 'It's growing modestly. It's certainly being restrained by the uncertainty caused by tariffs. But it is growing and we expect that to continue through the third and fourth quarters.' Last week the Bank of Canada kept its policy interest rate unchanged at 2.75 per cent in a third consecutive decision. If the central bank were panicked about the Canadian economy's ability to withstand U.S. tariffs, Ercolao argued it would likely have lowered that rate. The past week's GDP readings were good enough for BMO to raise its outlook for the third quarter into positive territory. Forecasters at the bank now expect Canada will avoid a technical recession this year. BMO chief economist Doug Porter said in a note to clients Friday that Ottawa's personal tax cut at the start of the month and robust demand for domestic travel amid the trade war will boost the economy this quarter, as will 'the less-dire sentiment' around economic forecasts. Some other forecasters continue to pencil a tariff-induced recession into their outlooks. In the Bank of Canada's monetary policy report released alongside the rate decision, it outlined one scenario for the economy assuming the tariff situation remains largely status quo. Canada avoids a recession in that outcome. Growth in 2025 and 2026 remains overall positive, but half a percentage point lower than it would've been without the weight of tariffs. Macklem told reporters that the Bank of Canada would expect the economy to keep growing even with today's tariffs in place, 'but it'll be on a permanently lower path.' 'Unfortunately, the sad reality is that tariffs mean the economy is going to work less efficiently,' he said. Porter said in his note that the actual impact of Trump's new 35 per cent tariff on Canada's economy could be less than headline figure suggests. Because of a carve-out for Canadian exports that are compliant with CUSMA, BMO sees the effective U.S. tariff rate at roughly seven per cent under the new duties, less than a percentage point higher than where it stood before Friday. But with CUSMA up for renegotiation in 2026, Porter said that 35 per cent tariff rate could loom as a 'cudgel' over negotiations — taking full effect if the trade agreement expires without a new deal in place. The Bank of Canada published a separate 'escalation' scenario this week that would see the United States remove Canada's CUSMA exemption as it ramps up global tariffs. Real GDP would drop an extra 1.25 per cent by 2027 in this more severe case; Porter said that this outcome would be 'serious for sure, but far from disastrous.' Ercolao said much of the tariff doom-and-gloom earlier in the year was tied to the speed at which those import duties would be imposed. But the on-again, off-again nature of U.S. trade restrictions to date has given businesses time to adapt to the new way of doing business and constant delays in implementation, he said. 'If we go back to when Trump began his presidency, had he went 100 per cent on his tariff plan right away, we probably would have seen a deep economic contraction just because it would have been so sudden,' Ercolao explained. 'Now we've been afforded that time to at least try to mitigate some of the negative impacts from what these tariffs were expected to do to the Canadian economy.' Our website is the place for the latest breaking news, exclusive scoops, longreads and provocative commentary. 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Winnipeg Free Press
04-08-2025
- Business
- Winnipeg Free Press
Canada's economy is showing ‘resilience' against U.S. tariffs. Why?
OTTAWA – 'Some resilience' — those were the two words Bank of Canada governor Tiff Macklem used last week to describe how the Canadian economy is holding up under the weight of U.S. tariffs. Just a few days later, U.S. President Donald Trump added 35 per cent tariffs on Canadian goods to a running tally that includes hefty duties on steel, aluminum, automobiles and, more recently, semi-finished copper. With tariffs piling up over the past few months, economists say Canada's economy is starting to show cracks — but few signs of collapse. TD Bank economist Marc Ercolao conceded it's a 'bit of surprise' to see the economy holding up against a massive disruption from Canada's largest trading partner. 'Many months ago, ourselves — as well as other economic forecasters — had an outlook for a much weaker Canadian economy. Obviously, that isn't manifesting now,' he said in an interview. 'We are avoiding the worst-case scenario.' What are tariffs doing to the economy? On Thursday, Statistics Canada gave a glimpse at how the economy wrapped up the second quarter of the year when many of those tariffs came into full effect. While the agency sees a couple of small contractions in real gross domestic product by industry in April and May, its flash estimates show the economy rebounding somewhat in June. If those early readings pan out, StatCan said that would be good enough for flat growth overall on the quarter. Some of those results are distorted by volatility — businesses rushing to get ahead of tariffs boosted activity in the first quarter, and that's giving way to weakness in the second quarter, for example. It's still hard to pinpoint exact impacts tied to tariffs, Ercolao said, but a broad trend is emerging. 'What we can say over the last six months or so is that economic activity is somewhat flatlining,' he said. Services sectors are holding up relatively well, but Ercolao said export-heavy industries such as manufacturing and transportation are bearing the brunt of the impact. In an attempt to shore up some of that weakness, the federal government has announced various programs to support tariff-affected workers and broader plans to accelerate defence and infrastructure spending. Macklem noted during his press conference Wednesday that business and consumer confidence are still low, but have improved according to the central bank's recent surveys. And while some trade-exposed sectors have faced job losses and the unemployment has generally trended upward to nearly seven per cent, employers elsewhere in the economy continue to expand their payrolls. 'Consumption is still growing,' Macklem said. 'It's growing modestly. It's certainly being restrained by the uncertainty caused by tariffs. But it is growing and we expect that to continue through the third and fourth quarters.' Will Canada hit a recession? Last week the Bank of Canada kept its policy interest rate unchanged at 2.75 per cent in a third consecutive decision. If the central bank were panicked about the Canadian economy's ability to withstand U.S. tariffs, Ercolao argued it would likely have lowered that rate. The past week's GDP readings were good enough for BMO to raise its outlook for the third quarter into positive territory. Forecasters at the bank now expect Canada will avoid a technical recession this year. BMO chief economist Doug Porter said in a note to clients Friday that Ottawa's personal tax cut at the start of the month and robust demand for domestic travel amid the trade war will boost the economy this quarter, as will 'the less-dire sentiment' around economic forecasts. Some other forecasters continue to pencil a tariff-induced recession into their outlooks. In the Bank of Canada's monetary policy report released alongside the rate decision, it outlined one scenario for the economy assuming the tariff situation remains largely status quo. Canada avoids a recession in that outcome. Growth in 2025 and 2026 remains overall positive, but half a percentage point lower than it would've been without the weight of tariffs. Macklem told reporters that the Bank of Canada would expect the economy to keep growing even with today's tariffs in place, 'but it'll be on a permanently lower path.' 'Unfortunately, the sad reality is that tariffs mean the economy is going to work less efficiently,' he said. What about the new tariffs? Porter said in his note that the actual impact of Trump's new 35 per cent tariff on Canada's economy could be less than headline figure suggests. Because of a carve-out for Canadian exports that are compliant with CUSMA, BMO sees the effective U.S. tariff rate at roughly seven per cent under the new duties, less than a percentage point higher than where it stood before Friday. But with CUSMA up for renegotiation in 2026, Porter said that 35 per cent tariff rate could loom as a 'cudgel' over negotiations — taking full effect if the trade agreement expires without a new deal in place. The Bank of Canada published a separate 'escalation' scenario this week that would see the United States remove Canada's CUSMA exemption as it ramps up global tariffs. Real GDP would drop an extra 1.25 per cent by 2027 in this more severe case; Porter said that this outcome would be 'serious for sure, but far from disastrous.' Monday Mornings The latest local business news and a lookahead to the coming week. Ercolao said much of the tariff doom-and-gloom earlier in the year was tied to the speed at which those import duties would be imposed. But the on-again, off-again nature of U.S. trade restrictions to date has given businesses time to adapt to the new way of doing business and constant delays in implementation, he said. 'If we go back to when Trump began his presidency, had he went 100 per cent on his tariff plan right away, we probably would have seen a deep economic contraction just because it would have been so sudden,' Ercolao explained. 'Now we've been afforded that time to at least try to mitigate some of the negative impacts from what these tariffs were expected to do to the Canadian economy.' This report by The Canadian Press was first published Aug. 4, 2025.
Vancouver Sun
30-07-2025
- Business
- Vancouver Sun
Bank of Canada holds key rate at 2.75% but opens door to future cuts
OTTAWA — Signs of resilience in the Canadian economy were enough for the Bank of Canada to leave its benchmark interest rate unchanged Wednesday, but the spectre of U.S. trade uncertainty continues to cast a shadow over the central bank's decisions. The central bank's policy rate remains at 2.75 per cent after a third consecutive hold. With a backdrop of considerable trade uncertainty, Canada's economy has yet to deteriorate sharply in the face of U.S. tariffs and underlying inflation is showing some stubbornness. Bank of Canada governor Tiff Macklem said the economy is showing 'some resilience' so far. Stay on top of the latest real estate news and home design trends. By signing up you consent to receive the above newsletter from Postmedia Network Inc. A welcome email is on its way. If you don't see it, please check your junk folder. The next issue of Westcoast Homes will soon be in your inbox. Please try again Interested in more newsletters? Browse here. But he said that if the economy weakens more and price pressures from tariffs are contained, 'there may be a need for a reduction in the policy interest rate.' The Bank of Canada lowers its policy rate when it wants to stimulate the economy but keeps borrowing costs elevated when it's worried inflation will rise. CIBC senior economist Andrew Grantham said in a note to clients Wednesday morning that the Bank of Canada 'appears to be getting a little more comfortable' with the idea that future rate cuts could be needed to support the economy. He said Macklem's language gave a hint that rate cuts could be on the table for September, but cautioned that upcoming economic data will have more sway. TD Bank senior economist Andrew Hencic said in a note that scenarios released alongside the central bank's rate decision Wednesday show Canada's economic growth could rebound from the tariff hit but remain below trend for the foreseeable future. That 'leaves the door open' to additional interest rate cuts, Hencic said, as long as inflation is stable. Macklem said U.S. tariffs have put domestic growth on a 'permanently lower path.' 'The sad reality is that tariffs mean the economy's going to work less efficiently. It means there's going to be less income. So there's going to be less consumption,' he said. Macklem said the rate decision, which was widely expected by economists, came from a 'clear consensus' among monetary policymakers. Ontario Premier Doug Ford said in a post on X that he was 'shocked' by the Bank of Canada's decision to keep interest rates unchanged as the trade war threatens Canadian jobs. 'Rather than wait around and let President Trump's tariffs do even more damage to our economy, the Bank of Canada needs to cut interest rates now,' he said. Asked to respond to Ford's comment during the press conference, Macklem emphasized that the central bank's decisions are independent of the political process. He added that the Bank of Canada's mandate remains keeping inflation low and predictable for Canadians. 'We will support the economy through this period of upheaval, but at the same time, we are going to make sure that a tariff problem does not become an inflation problem,' he said. Macklem noted later that sector-specific weakness is best addressed by fiscal policy — targeted government support, in other words. Going forward, the Bank of Canada will be watching how much tariffs affect business activity and demand for Canadian exports, and whether higher costs from those import duties are passed on to customers. U.S. effective tariff rates are 'less than were threatened,' Macklem noted, but are still higher than recent historical experience. The odds of a 'severe and escalating' global trade war have diminished in recent months, he said. The Bank of Canada published a monetary policy report alongside its rate decision Wednesday, but that report once again did not include a single, central forecast for the economy. Instead, the bank offered a scenario based on the current tariff level persisting, and two others that outline both a de-escalation and a further ramp up of tariffs. Each of those case studies sees at least some level of tariffs persisting. Macklem said that, between various exemptions, the central bank sees the effective U.S. tariff rate on Canada at roughly five per cent today, up from virtually zero at the start of the year. The bank's monetary policymakers also assume a vast majority of Canadian goods will be exempt from tariffs over the coming years thanks to their compliance with the Canada-U.S.-Mexico Agreement as companies rush to get certified. In the status quo scenario, the Bank of Canada sees the economy rebounding through the rest of this year after an estimated decline of 1.5 per cent in annualized real gross domestic product last quarter. Inflation would also hold around two per cent through the end of 2027 in this outcome as the forces pushing prices higher are roughly offset by the forces dampening them. A de-escalation scenario would cut U.S. tariffs on Canada in half, while the escalation alternative would see the United States put a 10 per cent blanket tariff on all Canadian goods without any CUSMA exemptions. The more optimistic scenario sees growth rebound faster, but the escalated scenario would see inflation rise and the economy fall into a recession for the rest of 2025. Trump has threatened to impose a 35 per cent duty on Canadian imports starting Friday if a trade deal isn't struck between the countries before then. The Bank of Canada's forecasts don't specifically address the impact of that possible outcome. This report by The Canadian Press was first published July 30, 2025.
Hamilton Spectator
30-07-2025
- Business
- Hamilton Spectator
Bank of Canada holds key rate at 2.75% but opens door to future cuts
OTTAWA - Signs of resilience in the Canadian economy were enough for the Bank of Canada to leave its benchmark interest rate unchanged Wednesday, but the spectre of U.S. trade uncertainty continues to cast a shadow over the central bank's decisions. The central bank's policy rate remains at 2.75 per cent after a third consecutive hold. With a backdrop of considerable trade uncertainty, Canada's economy has yet to deteriorate sharply in the face of U.S. tariffs and underlying inflation is showing some stubbornness. Bank of Canada governor Tiff Macklem said the economy is showing 'some resilience' so far. But he said that if the economy weakens more and price pressures from tariffs are contained, 'there may be a need for a reduction in the policy interest rate.' The Bank of Canada lowers its policy rate when it wants to stimulate the economy but keeps borrowing costs elevated when it's worried inflation will rise. CIBC senior economist Andrew Grantham said in a note to clients Wednesday morning that the Bank of Canada 'appears to be getting a little more comfortable' with the idea that future rate cuts could be needed to support the economy. He said Macklem's language gave a hint that rate cuts could be on the table for September, but cautioned that upcoming economic data will have more sway. TD Bank senior economist Andrew Hencic said in a note that scenarios released alongside the central bank's rate decision Wednesday show Canada's economic growth could rebound from the tariff hit but remain below trend for the foreseeable future. That 'leaves the door open' to additional interest rate cuts, Hencic said, as long as inflation is stable. Macklem said U.S. tariffs have put domestic growth on a 'permanently lower path.' 'The sad reality is that tariffs mean the economy's going to work less efficiently. It means there's going to be less income. So there's going to be less consumption,' he said. Macklem said the rate decision, which was widely expected by economists, came from a 'clear consensus' among monetary policymakers. Ontario Premier Doug Ford said in a post on X that he was 'shocked' by the Bank of Canada's decision to keep interest rates unchanged as the trade war threatens Canadian jobs. 'Rather than wait around and let President Trump's tariffs do even more damage to our economy, the Bank of Canada needs to cut interest rates now,' he said. Asked to respond to Ford's comment during the press conference, Macklem emphasized that the central bank's decisions are independent of the political process. He added that the Bank of Canada's mandate remains keeping inflation low and predictable for Canadians. 'We will support the economy through this period of upheaval, but at the same time, we are going to make sure that a tariff problem does not become an inflation problem,' he said. Macklem noted later that sector-specific weakness is best addressed by fiscal policy — targeted government support, in other words. Going forward, the Bank of Canada will be watching how much tariffs affect business activity and demand for Canadian exports, and whether higher costs from those import duties are passed on to customers. U.S. effective tariff rates are 'less than were threatened,' Macklem noted, but are still higher than recent historical experience. The odds of a 'severe and escalating' global trade war have diminished in recent months, he said. The Bank of Canada published a monetary policy report alongside its rate decision Wednesday, but that report once again did not include a single, central forecast for the economy. Instead, the bank offered a scenario based on the current tariff level persisting, and two others that outline both a de-escalation and a further ramp up of tariffs. Each of those case studies sees at least some level of tariffs persisting. Macklem said that, between various exemptions, the central bank sees the effective U.S. tariff rate on Canada at roughly five per cent today, up from virtually zero at the start of the year. The bank's monetary policymakers also assume a vast majority of Canadian goods will be exempt from tariffs over the coming years thanks to their compliance with the Canada-U.S.-Mexico Agreement as companies rush to get certified. In the status quo scenario, the Bank of Canada sees the economy rebounding through the rest of this year after an estimated decline of 1.5 per cent in annualized real gross domestic product last quarter. Inflation would also hold around two per cent through the end of 2027 in this outcome as the forces pushing prices higher are roughly offset by the forces dampening them. A de-escalation scenario would cut U.S. tariffs on Canada in half, while the escalation alternative would see the United States put a 10 per cent blanket tariff on all Canadian goods without any CUSMA exemptions. The more optimistic scenario sees growth rebound faster, but the escalated scenario would see inflation rise and the economy fall into a recession for the rest of 2025. Trump has threatened to impose a 35 per cent duty on Canadian imports starting Friday if a trade deal isn't struck between the countries before then. The Bank of Canada's forecasts don't specifically address the impact of that possible outcome. This report by The Canadian Press was first published July 30, 2025. Note to readers:This is a corrected story. A previous version had an incorrect estimate of the effective U.S. tariff rate due to inaccurate information provided during the Bank of Canada lockup.
