Trade tensions could be the main theme of BoC rate statement

Bank of Canada is widely expected to cut rate in March meeting in effort to support economy in the face of harmful US trade policies after a pile of tariffs on US imports from Canada were imposed and others on a waiting list.

BoC monetary policy committee comes amid scalation of trade tension between USA and Canada, which started when the US president Donald Trump imposed 25% tariffs on US imports from Canada.

On March 4, president Donald Trump went forward with sweeping?tariffs on goods imported from?Canada?and?Mexico, while doubling punitive tariffs on China to 20%.

In response, Canadian Prime Minister Justin Trudeau imposed tariffs on $20 B worth of US imports, effective immediately. Tariffs on another $86.2 B will take effect in 21 days, according to the PM.

At the same time, Mexico’s president said?retaliatory tariffs are coming next Sunday.

It’s not over at this extent as Trump says he will hit Canada with reciprocal tariffs if Canada retaliates.

The US president said: “Please explain to Governor Trudeau, of Canada, that when he puts on a Retaliatory Tariff on the U.S., our Reciprocal Tariff will immediately increase by a like amount!”

The new week started with a new tariff imposed by Canada’s provincial government of Ontario announced plans to surcharges on electricity sold to the United States. But when Trump escalated by doubling the tariffs on US steel and aluminium US imports from Canada from 25% to 50%, Ontario pulled back on its decision and so did Trump.

The Seventh cut in a row

The central bank is expected to cu interest rate 25 bps to 2.75% from the current rate of 3.00% to be the seventh cut in a row.

Neutral rate in Canada is estimated by 2.25%-3.25%, the neutral rate is the one which is calculated in consideration of growth and inflation readings. So the rate, after the expected cut could be near the top of the neural range.

The volume of trade between USA and Canada is a huge one, which could cause bitter fallouts for both trading partners if the decided tariffs remain in place.

the Spirit of challenge

The trade volume between the two nation reached $762.1B in 2024, according to the United States Trade Representative. US exports to Canada totaled $349B while Canada’s exports to USA totaled $412.7B.

In addition, Mark Carney’s victory as a the new leadership in Canada is a sign of a strong challenge spirit dominating the political landscape of the country. The new leader is probably chosen for being the best fit for the job with long experience in financial, monetary, and economic affairs which is necessary in the trade fight started on March 4. ??