Governing council members were split in their interpretations of the evolving economic landscape. While some saw Canada’s economic strength in late 2024 as a reason to hold firm, others argued the intensifying trade risks—especially potential damage from U.S. auto, steel, and aluminum tariffs—warranted immediate policy easing. The consensus emerged only after weighing how ongoing tensions might dampen growth, delay hiring, and destabilize inflation expectations.
Governor Tiff Macklem warned the economic consequences of Trump’s tariffs “could be severe,” especially as Canada awaits clarity on whether exemptions under the Canada-U.S.-Mexico Agreement (CUSMA) will be preserved beyond the April 2 tariff rollout. Trump has already imposed a 25% tariff on Canadian steel and aluminum and has signaled further trade action against allied economies including Canada and the EU.
Council members debated whether to hold the rate until more data on the tariffs’ real-world effects became available. But the majority concluded that the mere threat of sustained trade disruption had altered Canada’s economic outlook enough to warrant pre-emptive action. They noted a decline in job postings and hiring intentions, suggesting that uncertainty was already slowing the country’s fragile post-pandemic labor market recovery.
Inflation remains another variable under watch. While the bank has yet to see a direct impact of the tariffs in consumer prices, it acknowledged that pass-through costs from higher import duties could emerge gradually. Members stressed the need to closely monitor long-term inflation expectations to ensure any rise remains temporary.