Impact of the Trade War with the U.S.: Canada’s Economic Growth Could Slow

Bank of Canada Governor Tiff Macklem has warned that the recent boost in Canada’s economy could lose momentum as the country continues to face uncertainty from the trade war with the United States.

Speaking in Halifax on Monday, Macklem said conflicts in the Middle East and disruptions to supply chains are becoming increasingly common and could create further economic challenges.

Macklem said there are clear signs that Canadian businesses have adapted to the tariff environment, helping the economy perform better than expected. Canada’s GDP grew at an annualized rate of 3.3 per cent during the quarter.

However, he warned that uncertainty surrounding U.S. trade policies could cause Canadian companies to hold back on hiring and investment. As a result, economic growth could slow to below one per cent in the fourth quarter, roughly half the previous pace.

Macklem also cautioned that Canada’s retaliatory tariffs could increase costs for some businesses, with higher costs potentially being passed on to consumers in the form of inflation.