Bank of Canada Governor Tiff Macklem says escalating tariffs between Canada and the United States, including Canadian surcharges of up to 50% on American goods, are unlikely to have a major lasting impact on the economy.Macklem said Canadian workers and businesses are adapting to higher tariffs and continuing uncertainty surrounding cross-border trade.“Businesses, workers, they’re adjusting,” Macklem told reporters. “Canadians are adjusting to this higher tariffed, more uncertain environment.”“It’s not easy,” he said. “It’s difficult, but they’ve got businesses to run. They are getting on. They are finding ways to do business.”Macklem said those adjustments have put the Canadian economy on stronger footing as another round of U.S. tariffs takes effect.Blacklock's Reporter said his comments came as the Bank of Canada maintained its key interest rate at 2.25%, where it has remained since Oct. 28. The Bank’s next rate announcement is scheduled for Oct. 28.Canada is set to impose new counter-tariffs of up to 50% beginning Sept. 8 on approximately $28 billion worth of American imports.The targeted products include smartphones, household appliances, chipboard, plywood and other construction materials.Macklem acknowledged tariffs imposed by both countries will increase costs for some businesses and could eventually reach consumers.“The counter-tariffs and indeed the U.S. tariffs also will add costs to some businesses,” he said. “There is no question about that. Those costs have to go somewhere, so over time they could feed through to consumer prices.”However, Macklem said most Canadians are unlikely to immediately notice the effects of the Canadian tariffs because many apply to products used by businesses rather than goods purchased directly by consumers.“With respect to the counter-tariffs themselves, they are mostly on intermediate inputs,” he said. “Not much of them is going to directly impact things that are in the Consumer Price Index. What that means is the effect is less direct.”“It’s going to take more time to pass through,” Macklem added..The central bank will continue assessing the impact as it updates its economic forecasts.“We’ll have to put a number on it, but our assessment at this point is the inflationary impact of those counter-tariffs is fairly modest,” said Macklem.He said developments in the Middle East and their impact on oil prices currently pose a larger inflation risk.“The bigger issue for inflation is what’s going on in the Middle East, I mean oil prices,” he said.Macklem also warned Canadians against expecting a quick return to the largely tariff-free trading relationship that previously existed with the United States.“I don’t think we’re going to get back to where we were,” he said. “Certainly this U.S. administration, they like tariffs. They like protectionism.”Macklem nevertheless said reducing trade barriers would benefit both countries.“I certainly hope we can get back to a better place,” he said. “Lower tariffs are good for both countries. If rationality prevails, that should happen. Governments should be doing what is good for their citizens.”
