Canada Warns: US Tariffs Could Cut Growth in Half by Year-End

Canada's top central banker is sounding the alarm. Tiff Macklem, the head of the Bank of Canada (the country's central bank, which controls interest rates and helps manage the economy), just warned that new taxes on trade with the United States could seriously hurt Canada's economy.

What are tariffs? A tariff is a tax placed on goods coming from another country. When the US puts tariffs on Canadian products, it makes them more expensive to sell in America, which can slow down Canadian businesses and the whole economy.

Here are the key warnings from Macklem:

• If the new US tariffs stay in place, Q4 growth (economic growth in the last three months of the year) could be cut roughly in half, dropping below 1%
• If oil prices stay near $100 a barrel, inflation (the rate at which prices rise) is expected to edge higher in coming months
• Fuel prices have jumped more than expected because of damage to global oil refining capacity

The tricky part: The Bank of Canada faces two opposite problems at once. Tariffs are slowing the economy down, but rising oil and gas prices are pushing prices up. This creates a hard choice for policymakers.

Normally, a central bank raises interest rates (the cost of borrowing money) to fight inflation. But raising rates also slows the economy — which would make the tariff damage even worse.

For now, Macklem is staying cautious. He says the bank doesn't want to raise rates just because of a temporary oil price spike, especially when growth is already weak. But he warned they can't be too slow to act either, if higher energy costs start spreading to other goods and services.

In the currency market, the Canadian dollar weakened slightly against the US dollar. The USD/CAD pair (how many Canadian dollars it takes to buy one US dollar) pushed toward daily highs around 1.4023.

Bottom line: Canada is caught between slowing growth and rising prices. The Bank is watching closely before making its next move.

This is an AI-generated summary. Read the original article at: https://investinglive.com/news/bank-of-canada-s-macklem-us-tariffs-could-roughly-halve-fourth-quarter-growth-to-below-1/