“The pervasive uncertainty created by constantly altering U.S. tariff threats has shaken enterprise and client confidence,” he mentioned.
 “The uncertainty alone is already inflicting hurt.”

Macklem warned that the financial injury may very well be “extreme,” relying on how steep tariffs are and the way lengthy they’re stored in place. He mentioned that, if the dispute continues, progress within the second quarter of 2025 would take successful.

What led to this price lower

Avery Shenfeld, chief economist with CIBC Capital Markets, mentioned in a word to purchasers on Wednesday that proof Canada’s economic system was heating up heading into 2025 probably would’ve been sufficient for the central financial institution to take a “wait-and-see strategy” on additional cuts—however then got here the commerce warfare.

U.S. President Donald Trump delivered on weeks of tariff threats towards Canada on March 4, although these import duties have already shifted with a sequence of changes, delays and reversals.

Wednesday marks the subsequent part of Trump’s tariff agenda; 25% tariffs on imports of Canadian metal and aluminum coming into the U.S. took impact simply after midnight. Canada introduced it could hit again with retaliatory tariffs the identical morning.

The Financial institution of Canada’s newest rate of interest announcement got here alongside a supplemental survey of customers and companies particularly reacting to the spectre of tariffs from late January by way of February.

How are Canadians taking all of it in

That information steered that Canadians are planning to spend less as they fear about losing their jobs within the commerce dispute, notably in sectors like manufacturing which are susceptible to tariffs.

Almost half of companies within the survey additionally steered they’ll be able to shortly move on the higher costs tied to tariffs onto customers, particularly in the event that they’re clear with customers about why costs are rising.