Bank of Canada expects slower Q2 growth and warns outlook could worsen if trade tensions persist
Second-quarter economic growth is likely to slow significantly, and further declines could follow if tariff uncertainty with the United States remains unresolved, according to Bank of Canada Governor Tiff Macklem.
According to Reuters, Macklem said on Thursday that he expected the second quarter to be “quite a bit weaker” than the first.
He added that projections for future quarters would depend on the “scope and extent of tariffs,” stating, “If things move in the other direction, it’ll do worse.”
The Bank had earlier forecast annualized GDP growth of 1.8 percent for the first quarter.
Statistics Canada is expected to release Q1 figures on May 30, having projected growth at 1.5 percent.
Export activity has offered some short-term support, Macklem said, due to Canadian firms accelerating shipments to the US before new tariffs took effect in April.
However, he added that persistent uncertainty is holding back investment and consumption, which could impact broader economic performance.
“I think the more we can get uncertainty down, the more we can be forward looking as we move forward in our monetary policy,” Macklem said.
He made the remarks in Banff during a televised press conference with Canadian Finance Minister François-Philippe Champagne.
They addressed media following the release of a joint G7 communique that acknowledged a decline in economic policy uncertainty and committed to further progress.
While the communique did not mention tariffs directly, Macklem said they were a key topic in discussions among G7 leaders and central bank governors.
“There was a clear message in the communique that we are committed to continuing to reduce that uncertainty, and that includes around trade and tariffs,” he said.
“Canada is keen to sit down with the United States and work through our differences, come to agreement, get that clarity, (then) we can get back to growth clearly,” he added.
Macklem had previously avoided making forward-looking statements on the economic outlook.
His recent comments mark a shift, reflecting how US President Donald Trump’s tariff policy has disrupted financial markets and reshaped global trade expectations.
