Canada's Banks See Trade War as Sectoral Shock, Not Macroeconomic Consequence

Canada's six largest banks have expressed confidence in the country's ability to withstand an escalated trade war with the US, despite potential sector-specific impacts. According to their chief executives, client spending remains strong and loan delinquencies are manageable.

RBC CEO Dave McKay pointed out that more than 80% of Canadian exports to the US still cross the border duty-free. However, Scotiabank's Derek Holt noted that there 'are no winners in trade wars, only losers', including American consumers and businesses.

The banks' economics departments have been less optimistic, with National Bank predicting 100,000 to 130,000 job losses if tariffs hold and governments do not cushion the shock. TD Economics estimates a 0.3 to 0.6 percentage point shave in GDP growth over the next year due to US measures.

Ottawa plans retaliatory measures starting September 8, which could add another 0.1 percentage points to the drag on GDP. The situation remains fluid, with varying outcomes projected by economists and potential structural problems within Canada's economy highlighted.