Trump said he would rather abandon the trilateral trade pact than renegotiate it
Ninety-six percent of the financial market participants who help shape Canada's rate and bond expectations flagged an increase in trade tensions as a top risk to growth, and they did so before Washington rolled out its latest tariffs on Canadian goods.
That finding comes from the Bank of Canada's second-quarter Market Participants Survey, released Monday.
Tightening global financial conditions ranked second among downside risks at 65 percent, the survey showed, followed by geopolitical risk at 42 percent.
On the upside, 92 percent of respondents pointed to an easing of trade tensions.
On rates, the median respondent expected the central bank to hold its policy rate at 2.25 percent through the end of 2026 before lifting it to 2.75 percent by the close of 2027.
Forty percent judged the risks around that path as skewed higher, against 28 percent who saw a lower path and 32 percent who called the risks balanced.
Respondents put median real GDP growth at 1.3 percent this year, recovering to 1.9 percent by the end of 2027.
That 2026 figure sat 0.3 percentage points below the previous survey in May, the Financial Post reported.
Almost all of those polled, 96 percent, saw the economy running below its potential, per the survey, and they pegged the median odds of a recession within a year at 25 percent.
On inflation, the median forecast eased from 2.6 percent at the end of 2026 to 2.1 percent a year later.
The survey ran ahead of the central bank's own July 15 Monetary Policy Report, which forecast slower growth of 0.7 percent this year and 1.8 percent in each of the following two years.
More businesses were finding ways to work through the uncertainty even with the Canada-US-Mexico Agreement now under annual review, the Bank of Canada said in a July 15 statement carried by the outlet, and government spending was adding to activity.
"Uncertainty is high, and we're prepared to adjust monetary policy as needed," Governor Tiff Macklem told reporters after the rate decision that day, as reported by the Financial Post, warning that rates could still rise if high oil prices bled into other goods and services.
The survey's caution has since met a sharper trade fight.
Trump said Tuesday he would rather abandon the trilateral pact than renegotiate it, telling Fox News, "I don't care. I mean, I don't really want to. I'd rather be independent."
"Mexico and Canada need us. We don't need them," the president added.
That same day, Reuters reported, Canada's minister responsible for US trade, Dominic LeBlanc, arrived in Washington with the country's chief negotiator to the US, Janice Charette, for the first in-person talks since the new duties.
The 50 percent tariff on about US$20bn of Canadian goods, including wine, hockey sticks, and cement, takes effect August 19, according to the Financial Post.
The renewed threats have unsettled Canadian businesses, with the heaviest cost falling on investment that firms have put on hold rather than the duties themselves, according to a Canadian Chamber of Commerce Business Data Lab report cited by CTV News.
Delaying spending on machinery, research and development, or staff postpones future growth, wages, and productivity, the lab's vice-president, Patrick Gill, told the same outlet.
Forecasters remain split on how far rates will climb.
National Bank of Canada strategists said the link between oil prices and Bank of Canada policy expectations had weakened even as it held firm elsewhere, according to the Financial Post.
If market pricing proved accurate, they cautioned, "the BoC could deliver more tightening than any other central bank in our advanced economy sample next year."
Among the big six banks, end-of-2027 rate calls ranged from no change at 2.25 percent at Toronto-Dominion and Bank of Montreal to 3.25 percent at Royal Bank of Canada, with Bank of Nova Scotia at 3 percent and both CIBC and National at 2.75 percent.
