US Tariffs Weigh on Canada's Economy Amid Trade Uncertainty

The United States imposed 50% tariffs on about $20 billion of Canadian goods on August 22, affecting just over 5% of Canada's exports to the US. The measures cover products including wine, dairy, furniture, cement, clothing, steel-related goods, and hockey equipment.

Canada suspended negotiations and announced dollar-for-dollar retaliation effective September 8. Bank of America (BofA) said the direct impact of new US tariffs is expected to remain limited, but uncertainty over the duration of the trade conflict could have a larger effect by discouraging investment and potentially weighing on hiring and business confidence.

BofA expects the Bank of Canada to keep its policy rate unchanged for several months, at least through the end of this year and the first half of 2027. The bank said risks to its Canadian growth outlook remain skewed to the downside, particularly if tariff coverage expands or the conflict escalates.