The Bank of Canada published preliminary results from its business and consumer surveys and trade-sensitive consultations, assessing how the US-initiated trade conflict is affecting Canadians’ economic decisions. The findings point to a highly unpredictable environment driven by shifting expectations for a broad-based 25% US tariff and potential Canadian retaliation, making it harder for firms to set prices and make hiring and investment decisions. Households report increased concern about job security and financial health and intend to spend more cautiously, with job security worries especially evident among workers in industries where more than 30% of jobs depend on exports to the United States. Businesses have revised down sales outlooks, with forward-looking indicators such as order books and sales enquiries falling, particularly in manufacturing, while some firms cite “Buy Canadian” sentiment as a partial offset. Many businesses report scaling back hiring and capital expenditure plans, citing tighter credit conditions for some firms and higher costs for imported capital goods, although most are continuing existing projects aimed at maintaining capacity and improving productivity; oil and gas firms expect only modest near-term effects but see tariffs as reducing medium-term investor appeal. On pricing, firms increasingly report higher costs linked to a weaker Canadian dollar since October 2024, supply chain effects from tariffs and trade restrictions affecting other countries, and costlier supplier diversification, alongside difficulty negotiating price contracts amid policy uncertainty. Around half of surveyed businesses plan to raise prices if tariffs are imposed on their inputs or products, and around three-quarters of those expect to pass through more than half of tariff-related cost increases to customers; both households and businesses also report higher short-term inflation expectations. The Bank will continue regular consultations, and it will publish additional results from these surveys and consultations on April 7, 2025.
Bank of Canada 2025-03-12
Bank of Canada reports trade-conflict uncertainty is curbing household spending and business plans and lifting inflation expectations
The Bank of Canada's preliminary findings highlight the US-initiated trade conflict's impact on Canadian economic decisions. The unpredictable environment complicates pricing, hiring, and investment decisions for firms, while households express increased job security concerns. Businesses report reduced sales outlooks and scaled-back hiring and capital expenditure plans, with many planning price increases if tariffs are imposed.