Central banks live: Macklem says ‘no doubt’ the threat of tariffs ‘weighed’ on rate cut decision

Bank of Canada governor Tiff Macklem said the central bank’s projections showed US tariffs would probably put Canada into a recession.

BoC modelling, based on a scenario in which the US imposes permanent 25 per cent tariffs on every one of its trading partners and those nations respond in kind, shows a likely 2 per cent to 3 per cent reduction in growth during a prolonged trade war.

“If growth is going to be 2 per cent, if you take 2.5 per cent off, you have a negative number, so, yes people call that a recession,” he said.

Macklem said tariffs were a “tax on Americans”, and “anything they import from Canada becomes more expensive”.

Similarly, Canadian import prices will be higher but the question will be whether the cost is passed on to consumers or the importers’ bottom line.

“We are trying to show this would have a very material and severe effect on economic activity,” he said.