Tariffs Cloud Bank of Canada Rate Outlook

The Bank of Canada's overnight rate has held steady at 2.25% since October 2025, despite expectations that it would make a change this year.

However, recent developments in US-Canada trade negotiations have raised questions about the bank's next move on September 2.

The US has imposed new tariffs on Canadian exports, including 50% levies on approximately 5% of Canadian goods, which will increase Canada's average effective tariff rate to around 6% from 3%.

RBC Economics warns that the hardest hit sectors will be plastic products, electrical machinery, furniture, and wood products, with US President Trump announcing plans to raise tariffs on Canadian autos and auto parts to 50% on January 1.