Bank of Canada Governor Tiff Macklem issued a stark warning on the economic consequences of prolonged US tariffs, emphasizing that broad-based and long-lasting trade barriers will depress Canadian exports, reduce overall output, and push consumer prices higher.
In a speech overnight, Macklem noted that the unpredictability of US tariffs, marked by “constant policy reversals”, has injected significant uncertainty into the outlook for Canadian businesses and households.
Macklem highlighted two major areas of concern: uncertainty about which tariffs will be imposed and for how long, and uncertainty about their economic impact.
Already, the BoC has observed that businesses are cutting back investment and hiring, and many households are growing more cautious with spending. He warned that if broad-based tariffs remain in place, the result will be “less demand, less economic growth and higher inflation”.
While monetary policy cannot prevent the initial rise in prices caused by tariffs, Macklem stressed that it must act to “prevent those initial, direct price increases from spreading”.
“We must ensure that higher prices from tariffs do not become ongoing generalized inflation,” he emphasized.
