Tariffs Threaten to Dampen Canadian Growth

Canada's strong second-quarter GDP reading may be short-lived as potential new US tariffs weigh on trade and influence the Bank of Canada's rate decision in October.

RBC Economics notes that the Bank of Canada has already flagged tariffs as a risk that could pull Canada's fourth-quarter growth below a 1% annualized pace, even after the recent surge in activity.

As the potential impact of US tariffs looms, RBC recommends targeted government support for affected firms and workers rather than relying on interest rates to slow down the economy.

The Bank of Canada is also monitoring high global oil prices and elevated refinery margins, which could start showing up in broader everyday inflation.