Bank of Canada Raises Alarm Over US Tariffs

The Bank of Canada has issued a stark warning regarding the financial risks posed by the recent imposition of tariffs by the US administration. The primary concerns revolve around the "unpredictability" of these measures and their potential to unleash "severe economic consequences."

Potential for Market Volatility and Dysfunction

Bank of Canada Governor Tiff Macklem and Senior Deputy Governor Carolyn Rogers elaborated in the Financial Stability Report that the immediate concern is the "unpredictability of US trade policy," which could lead to increased market volatility and liquidity strains. They cautioned that, in extreme scenarios, this volatility could escalate into market dysfunction.

Long-Term Economic Repercussions

Furthermore, the report highlights the medium-term dangers of a prolonged global trade war, warning of diminished growth, higher unemployment rates, and broader financial system impacts. The bankers emphasized the cascading effects such a scenario would have on the economy.