Bank of Canada Chief Warns Tariff Uncertainty Could Stunt Economic Growth
By Promit Mukherjee
BANFF, Alberta — Bank of Canada Governor Tiff Macklem stated on Thursday that he anticipated the economy would slow down significantly in Q2 compared to Q1, with potential further declines in later periods should uncertainties surrounding U.S. tariffs persist.
At a televised press conference alongside Canadian Finance Minister François-Phillipe Champagne in Banff, Macklem stated that although they were referring to an earlier jointly issued communique, he noted that uncertainties have diminished somewhat yet additional efforts are required.
“Macklem stated that he anticipates the second quarter will see considerably slower GDP growth, noting that his predictions for the subsequent quarters would hinge on the scale and impact of the tariffs,” he explained.
“We are eager to engage with the United States in discussions to address our discrepancies, reach an understanding, and gain that clarity so that we can confidently return to fostering growth,” he stated.
“He warned that if the trend reverses, it will have an even more negative impact,” regarding the potential GDP growth in following quarters should the tariffs persist.
Last month, the central bank predicted that the annualized GDP for the first quarter would reach 1.8%, without providing further forecasts due to uncertainties surrounding U.S. tariff policies.
Statistics Canada plans to release the first-quarter GDP figures on May 30. The agency has predicted an annualized growth rate of 1.5% for the initial three months of the year.
Macklem stated that he anticipated exports would support economic growth, considering businesses hastened to ship products to the U.S. prior to tariff implementation in April. However, pervasive uncertainty was impeding investment and spending activities, which could negatively impact the overall economy.
Earlier, he chose not to provide any forecast regarding the economy.
“I think the more we can get uncertainty down, the more we can be forward looking as we move forward in our monetary policy,” Macklem added.
The G7 finance ministers issued a collective statement indicating that economic policy uncertainty has decreased since reaching its highest point. They committed themselves to making additional advancements in this area.
President Donald Trump’s tariffs have caused upheaval in financial markets and disrupted the longstanding global trading system. However, a collective statement from the G7 leaders was celebrated as an advancement by Champagne and Macklem.
Even though the official statement didn’t bring up tariffs, Macklem mentioned that these charges were top-of-mind for both the leaders and governors. The talks emphasized enhancing communication regarding tariffs and addressing issues within international trade frameworks.
“The communiqué conveyed a clear message that we remain dedicated to continually decreasing this uncertainty, which encompasses areas such as trade and tariffs,” he stated.
(Reported by Promit Mukherjee and David Ljunggren; Edited by David Gregorio and Bill Berkrot)