{"id":16367,"date":"2025-02-12T20:14:56","date_gmt":"2025-02-12T20:14:56","guid":{"rendered":"https:\/\/torontotribune.ca\/index.php\/2025\/02\/12\/tariff-threats-are-enough-to-chill-canadas-economy-central-bank-says-national\/"},"modified":"2025-02-12T20:14:56","modified_gmt":"2025-02-12T20:14:56","slug":"tariff-threats-are-enough-to-chill-canadas-economy-central-bank-says-national","status":"publish","type":"post","link":"https:\/\/torontotribune.ca\/index.php\/2025\/02\/12\/tariff-threats-are-enough-to-chill-canadas-economy-central-bank-says-national\/","title":{"rendered":"Tariff threats are enough to chill Canada\u2019s economy, central bank says – National"},"content":{"rendered":"


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Canada doesn\u2019t need to be hit by tariffs for the economy to be impacted \u2014 the mere threat of a trade war is enough, the Bank of Canada<\/a> has warned.<\/p>\n

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The Bank of Canada on Wednesday released the summary of its governing council deliberations, outlining the discussions its members had in the run-up to the last rate cut announced on Jan. 29.<\/p>\n

\u201cEven if no tariffs were imposed, a long period of uncertainty under the cloud of tariff threats would almost certainly damage business investment in Canada,\u201d the report said.<\/p>\n

It added that a hit to investments would damage growth prospects for Canada\u2019s economy.<\/p>\n

\u201cCompanies were already re-evaluating their investment plans in the face of trade policy uncertainty. With significant tariffs, the risk of capital flight would increase, exacerbating Canada\u2019s competitiveness challenges and low productivity growth.\u201d<\/p>\n

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Governing council members also reviewed reports that indicated that the Canadian dollar had already taken a hit from the uncertainty. Tariffs, they said, would cause the loonie to slide further.<\/p>\n

Bank of Canada economists were concerned that long-term, tariffs would be devastating for Canada\u2019s export sector.<\/p>\n

\u201cOver time, this could lead to business closures and companies exiting the export sector.\u201d<\/p>\n

The report said a trade war between the U.S. and Canada would damage the economies of both countries, but Canada would take the bigger hit.<\/p>\n

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\u201cIt was clear that a protracted trade conflict would lead to a decline in economic activity. GDP would be lower in both Canada and the United States, but the GDP loss would be significantly larger for Canada because Canada has a more open economy, and its exports are so concentrated with the United States,\u201d it said.<\/p>\n

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The report added that Canada\u2019s exports were so concentrated on the U.S. that the damage to the Canadian GDP from tariffs would be \u201cpermanent\u201d until the Canadian economy readjusted to tariffs.<\/p>\n

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The bank also warned that retaliatory tariffs by Canada and other nations against the U.S. could also cause a period of inflation.<\/p>\n

\u201cWhile retaliatory tariffs would likely represent a one-time increase in the level of prices, members noted that, given the size of the shock, there was a risk that higher import prices could feed into other prices,\u201d the report said.<\/p>\n

\u201cIf this leads to an increase in inflation expectations, it could generate higher ongoing inflation.\u201d<\/p>\n