In two consecutive decisions, the Bank of Canada has said that it was leaving its key loan rate without changes, since it gains “more information about the commercial policy of the United States and its impacts.”
The problem is that since Donald Trump claimed the presidency, to obtain more information about the commercial policy of the United States has been almost impossible. In fact, it is now very clear that uncertainty is a central part of the administration plan.
It is difficult to know from one day to another what Trump is going to do.
“We still do not know what tariffs will be imposed, if they will be reduced or increased, or how long all this will last,” said Bank of Canada, Tiff Macklem, in April. Those comments could have arrived this week.
Since then, Prime Minister Mark Carney met with Trump in Washington. Carney called those “broad” and “constructive” conversations.
The meeting was announced as a kind of restart of the relations of Canada-United States and the beginning of a road outside the commercial war. But such claims have tended to become things of turn reversals in the head in recent times.
Canada received a duplication of tariffs on steel and aluminum this week. The original 25 percent tariffs were expected to affect those industries with force. Fifty percent will hit them.
“With a 50 percent rate, we basically consider the US market closed, completely closed, closed by the door, if you wish, to the Canadian steel,” said Catherine Cobden, president and executive director of the Canadian Association of Steel Producers.
‘Strategic Uncertainty’ Part of the American Play Book
The question in the commercial policy of the heart of Canada is how anyone, from companies to central bankers, can plan such an unknown future.
And that is part of the American strategy.
The United States Treasury Secretary Scott Besent has called it “strategic uncertainty.”
Besent is one of Trump’s key economic advisors and an architect of the administration approach for commerce and tariffs. In an informative session in April, he admitted that the United States is using uncertainty as a lever to remodel global trade.
“We have created a process. I think that the opening of uncertainty will narrow, already measure that we begin to advance, announcing agreements, then there will be certainty, but you know that certainty is not necessarily something good in negotiation.”
The impact of that can be seen and feeling right in all Canada.
Automobile manufacturers have canceled plans to expand. Companies have had to redirect shipping and find new customers outside the United States, the most recent business perspective survey of the Bank of Canada, which was published in April and covers the first quarter of 2025, discovered that “the feeling has deteriorated and uncertainty is widespread.”
The commercial war is coming over the Canadian industries, whether they are exposed to the current lot of rates or not.
“It is not that many sectors really face tariffs, but any manufacturer who thinks about building a plant in Canada to serve the US market will ask if their sector could be the next one,” said the chief economist of CIBC, Avery Shenfeld, in an interview.
A recent Bloomberg survey found that most economists believe that Canada will become a recession this summer as the commercial war deepens and deaths due to uncertainty.
The CIBC forecast shows that the Canadian economy will avoid a direct recession, but will suffer six months of growth of approximately zero and an unemployment rate that continues to increase more in the month.
“Then, to some extent, you will feel a bit like a recession for those at least in the line of fire and lose their jobs,” said Shenfeld.
Economist predicts 3 more rates cuts in 2025
Until now, economic data has been stronger than expected. A large part of that can be attributed to companies that try to get ahead of tariffs during spring. Exports increased when Americans tried to obtain products through the border before having to pay the rate.
Macklem told his interest rate announcement on Wednesday that the Canadian economy was “softer but no further.”
Thomas Ryan, economist from North America with Economics capital, said he doesn’t expect that to last. The forecasts of the London analysis and consulting firm show GDP and job numbers in the coming months.
If that happens, said Ryan, the Bank of Canada will begin to reduce rates at its next meeting on July 30.
“Consequently, we judge that three more rates cuts this year are still on the table, which would reduce the policy rate to two percent,” he wrote in a research note.
In other words, the world can be flooded with uncertainty, but the impact of all those unknowns is becoming more real every day. Finally, the certainty of the impact will exceed the uncertainty of the policy that emanates from the White House. And then the Bank of Canada will have to act.
As the president of the United States, Donald Trump applies 50 percent tariffs to all imports of steel and aluminum, the Canada Bank says it will maintain its reference interest rate by 2.75 percent. Senior Commercial Reporter Peter Armstrong says that the economic uncertainty caused by the United States fluctuating commercial policy is moving the investment of Canada.
