The Bank of Canada warns that a prolonged trade conflict with the United States could permanently reduce Canada's GDP and have lasting negative impacts on the economy. US President Donald Trump's threats of tariffs on Canadian imports have raised concerns for the Bank of Canada, which cites the potential for decreased economic activity, reduced incomes, supply chain disruptions, and increased inflation.
Canada 's economy could face lasting damage from a prolonged trade war with the United States, according to the Bank of Canada 's governing council. Minutes from a January 29th policy meeting revealed the council's concerns, particularly in light of former US President Donald Trump's threats to impose tariffs on all Canadian imports. \\\While Trump eventually agreed to a month-long pause on most tariffs, he subsequently announced a 25 percent tariff on all steel and aluminum imports from Canada .
The Bank of Canada warned that a drawn-out trade conflict would inevitably lead to a decline in economic activity and permanently reduce Canada's GDP. The council acknowledged the difficulty in predicting the trajectory of US trade policy, but stressed the potential for severe repercussions if a full-blown trade war materialized. \\\Canada, which exports nearly 75 percent of its goods and services to the US, has indicated its intention to retaliate against any tariffs. This tit-for-tat exchange could further escalate tensions, potentially leading to higher inflation in Canada. Consumer prices have remained relatively stable within the Bank of Canada's target range, but the sluggish economy has prompted a series of aggressive interest rate cuts. The January rate reduction was partly influenced by the uncertainty surrounding tariffs and the desire to stimulate economic growth. The Bank of Canada also highlighted the possibility of decreased incomes, supply chain disruptions, and a weakened Canadian dollar if trade tensions escalate. The council will continue to closely monitor the evolving situation and its impact on various sectors of the Canadian economy
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