Canadians should brace for slower growth, rising costs, and increased economic uncertainty as new U.S. tariffs take effect, Bank of Canada Governor Tiff Macklem warned Thursday.
Blacklock's Reporter says his comments came as new data from the Canadian Federation of Independent Business revealed that 19% of small business owners plan to cut jobs this summer.
“We now face a new economic crisis,” Macklem told a Calgary Economic Development audience. “The uncertainty is already causing harm,” he said, adding that the full impact remains unclear.
Macklem cautioned that higher tariffs would weaken demand, slow growth, and drive inflation higher. While the mechanics of tariffs are well understood, he said, the extent to which they will reduce demand and push up consumer prices remains uncertain.
Brad Parry, CEO of Calgary Economic Development, asked Macklem if Canada was facing stagflation.
Macklem acknowledged concerns but clarified that while economic weakness and inflation were expected, it would not reach the levels seen in the 1970s.
However, he warned that retaliatory tariffs could further strain the economy.
During the stagflation period from 1974 to 1978, Canada’s economy grew at an annual average of 3.3%, while inflation averaged 9.2%, according to a 1980 Economic Council of Canada report.
Macklem’s remarks coincided with new data from the Canadian Federation of Independent Business, which described small business sentiment as “abysmal.”
Small businesses reported a 3.7% spike in expected price increases—the largest monthly jump since the pandemic. Hiring expectations also plummeted, with only 11% of businesses planning to add staff, while 19% anticipated layoffs over the next three months.
Business confidence hit a new low, falling below levels seen during the 2020 pandemic, the 2008 financial crisis, and 9/11.
Simon Gaudreault, chief economist at the Federation, blamed the downturn on the tariff dispute.
“It’s hard to make critical decisions for the long, medium, or short term when so much can change within a matter of hours,” he said. “No one knows when the tariff war will end.”
