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Business conditions have deteriorated due to the trade conflict with the United States, according to results from the Business Outlook Survey and the Business Leaders’ Pulse. Sales outlooks have softened, particularly for exporters. Firms reported having sufficient capacity, and many are delaying investment and hiring decisions amid uncertainty. Firms expect that widespread tariffs would raise costs and lead to higher selling prices. In this context, expectations for inflation are higher than they were last quarter.

Overall, results of the first-quarter 2025 survey show that the escalating trade conflict with the United States is damaging consumer sentiment. Confidence in the labour market has weakened significantly, and consumers have become more pessimistic about their financial health. Although consumption plans had been improving over the past several quarters, consumers now intend to spend more cautiously given the uncertainty around the trade conflict. They expect the trade conflict to lead to a higher cost of living, and this has pushed up their inflation expectations.

This is an account of the deliberations of the Bank of Canada’s Governing Council leading to the monetary policy decision on March 12, 2025.

Governor Tiff Macklem discusses how the US trade conflict and uncertainty is hurting business and consumer confidence. He also outlines what the Bank is doing to ensure the trade conflict doesn’t cause widespread or persistent inflation.

Learn about the recipient of the Governor’s Award for 2025.