Canadian Banks Brush Off Trade Tensions, Citing Resilient Economy

Canada's largest banks are downplaying the impact of the latest trade tensions between Canada and the US, citing resilient economic fundamentals.

During third-quarter earnings calls this week, executives from Royal Bank of Canada, Scotiabank, CIBC, and National Bank acknowledged the uncertainty created by the renewed escalation in tariffs, but described the situation as manageable.

According to Royal Bank's CEO Dave McKay, most Canadian exports continue to avoid tariffs despite the latest trade measures. 'While Canada and the US have yet to come to a longer-term solution, we note the average effective tariff rate remains low at approximately six per cent, with over 80 per cent of exports remaining duty-free,' McKay said.

Scotiabank's CEO Scott Thomson also described the current trade tensions as manageable, emphasizing the bank's confidence in Canada's economic resilience. 'The fundamentals in Canada are pretty good, if you look at the job growth numbers, if you look at the fiscal capacity on the back of oil prices, and if you look at some of the activity that’s starting because of the prime minister’s agenda, you actually have a backdrop that’s pretty good,' Thomson said.

CIBC's chief risk officer Frank Guse noted that the bank has built additional reserves for tariff-related risks, which represent less than one per cent of its total loan portfolio. 'We’ve also run a variety of stress testing on the portfolios to ensure we remain well prepared for a range of outcomes,' Guse said.