The Bank of Canada has cut the key interest rate by another 25 basis points to 2.75% but warned of uncertainty ahead as the country tackles US president Donald Trump’s tariffs.
The bank said that while Canada’s economy entered 2025 in a solid position, heightened trade tensions and tariffs “will likely slow the pace of economic activity and increase inflationary pressures in Canada.”
It added that GDP growth in Q4 2024 was stronger than expected at 2.6% but Q1 growth is likely to slow due to the escalating trade war.
Canada, meanwhile, has announced another C$29.8 billion in retaliatory tariffs in response to Trump’s steel and aluminum tariffs, on top of $30 billion in tariffs on US imports introduced earlier this month.
The new tariffs are targeting steel products worth C$12.6 billion, aluminum products worth C$3 billion and other goods worth C$14.2 billion impacting a range of products including computers, sports equipment, and cast iron products.
Canada’s finance minister Dominic LeBlanc said Canada “will not stand idly by while our iconic steel and aluminum industries are being unfairly targeted.”
“The US administration is once again inserting disruption and disorder into an incredibly successful trading partnership and raising the costs of everyday goods for Canadians and American households alike,” LeBlanc said.