Daily Spotlight: Canada Deals with Tariff Turmoil

Summary

The Bank of Canada lowered interest rates in late January, easing the overnight rate by 25 basis points to 3.00% (its sixth consecutive rate cut). The stimulus appears to be working, with the Canadian unemployment rate declining to 6.6% in January from 6.9% late last year, though still well above the 4.1% rate in the U.S. Meanwhile, trade uncertainty -- after the Trump administration instituted broad-based tariffs on the U.S.'s northern (and southern) neighbor, ostensibly to rein in the flow of illegal drugs and to encourage more onshore manufacturing -- has created a high level of uncertainty for those making economic forecasts. The most-recent tariff salvo calls for 50% tariffs on Canadian steel and aluminum, and the potential for elevated tariffs on automobiles. For its part, Canada's central bank, in lowering rates, said "if broad-based and significant tariffs were imposed, the resilience of Canada's economy would be tested." For now, many economists see economic growth in Canada falling to under 2% in 2025, despite expectations for another 50 basis points of interest-rate reduc