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The Canadian economy ended 2024 in a strong position. However, the trade conflict and tariffs are expected to slow growth and add to price pressures. The outlook is very uncertain because of the unpredictability of US trade policy and the magnitude of its impact on the Canadian economy.

The United States has threatened, imposed and suspended tariffs on its trading partners, including Canada. Many tariffs remain in place, and it is unclear what will happen next. This section outlines two illustrative scenarios for how US trade policy could unfold.

The trade conflict has made the outlook for the Canadian economy highly uncertain. There is a range of scenarios for how US trade policy could unfold, which leads to a wide range of outcomes for Canadian inflation and economic growth.

Given the unprecedented shift in the direction of US trade policy, there is considerable uncertainty about how tariffs could impact the economy. The degree to which prices will rise and economic activity will weaken is unclear.

Governor Tiff Macklem discusses the Monetary Policy Report and the key issues involved in the Governing Council’s deliberations about the monetary policy decision.

The Canadian economy ended 2024 strong. However, the escalating trade conflict is diminishing growth prospects. While tariffs are expected to increase price pressures, removing the consumer carbon tax has lowered energy prices. The unpredictability of US trade policy, and the speed and magnitude of the shifts, are making the economic outlook very uncertain.

The Canadian economy ended 2024 in a strong position. However, the trade conflict and tariffs are expected to slow growth and add to price pressures. The outlook is very uncertain because of the unpredictability of US trade policy and the magnitude of its impact on the Canadian economy.

At the end of 2024, global economic growth was solid, and inflation had eased further toward central banks’ targets. Since then, the United States has imposed large and broad-based tariffs on most of its trading partners.

Canada’s potential output growth is anticipated to slow due to declining population growth and the ongoing trade conflict. The range for Canada’s neutral interest rate lies between 2.25% and 3.25%.

The removal of the consumer carbon tax will temporarily lower inflation and result in a one-time reduction in the level of consumer prices, mostly reflecting a decline in gasoline prices.