Canada’s rate path under pressure as trade talks collapse
Before negotiations fell apart, Scotiabank’s team had been preparing to revise its 2026 and 2027 growth forecasts upward by 0.2%, citing stronger-than-expected output, labour market resilience, and elevated commodity prices. That upgrade has been set aside.
Upon factoring in the effects of new US tariffs, anticipated Canadian counter-measures, fiscal supports, and other financial assistance programs, Scotiabank now leans toward trimming Canada’s growth rate to 2.0% in 2027.
Holt’s overall assessment offers some reassurance. “We do not estimate a material impact upon the national unemployment rate and only modest effects on CPI and core CPI over 2026–27,” he wrote, noting that the Canadian dollar and the rates curve are expected to absorb some of the shock, with federal and provincial fiscal measures offering further cushion once details are announced.
Read more: What the US-Canada trade war means for the housing market
A micro shock, not a macro one — for now
The new US tariffs pushed Canada’s effective tariff rate on total goods exports to 6.5%, and to 8.6% on exports destined solely for the United States, while the composite goods-and-services rate rose to 4.6%.
