Capital markets expert says tariffs have yet to impact growth
The Canadian economy may be of concern to investors and their advisors in these uncertain times, but it continues to show remarkable resilience in the face of adversity.
In an RBC article, George Davis, Managing Director of Fixed Income, Currencies & Commodities in Capital Markets, notes that the narrative has changed from early‑year jitters, sparked by tariff threats and a slide to a 22‑year low in the loonie, to one of cautious optimism.
“So far the tariff hit on Canada hasn’t been as bad as we thought, nor has the hit to growth,” he says.
The article highlights the softening effect of the USMCA trade agreement which has limited the scope of tariffs on Canada and Mexico compared to other major US trading partners, although Davis acknowledges that the effective tariff rate applied to Canadian goods imported into the US was 2.5% before ‘liberation day’, climbed to 3.5% afterwards, and is now at 4.6% due to steel and aluminum levies. But this is still well below other US trading partners who are hit with 10% at best.
RBC’s forecasts have been redrawn to reflect the current situation with growth projections raised from approximately 1% in 2025 to 1.6 %, and from 0.9 % in 2026 to 1.3 %. Meanwhile, interest rate cuts have been postponed, and the loonie is expected to rebound modestly, not suffer further.
However, the article notes that uncertainty remains as trade deals are negotiated and tariffs are still planned. Geopolitical strains add another layer of risk.
“All of that uncertainty has caused people to question the validity of being overweight in US assets,” Davis says. “We’ve seen some investors pull back on their US exposure, and that’s caused the US dollar to weaken across the board.”
