In its April Monetary Policy Report, the Bank of Canada said tariffs and trade uncertainty are expected to continue affecting the Canadian economy, including sectors tied closely to automotive manufacturing and retail. The central bank said current U.S. tariffs are expected to remain in place and continue having a “persistent negative effect on economic activity.”
While many Canadian goods still enter the United States tariff-free under the Canada-United States-Mexico Agreement, tariffs remain in place on steel, aluminum, automobiles and other industries connected to North American vehicle production. The Bank of Canada report said businesses globally are expected to pass much of those added tariff costs on to consumers over time.
“In all countries, three-quarters of the increased costs from tariffs are passed on to consumer prices within six quarters,” the report said.
The central bank also projected inflation will rise close to three per cent in the near term before easing back toward its two per cent target in early 2027. Higher oil prices tied to conflict in the Middle East are expected to contribute to those pressures.
According to the report, higher gasoline prices reduce household purchasing power because consumers have less money available to spend elsewhere. That dynamic could affect vehicle affordability and consumer demand at a time when Canadians continue facing economic uncertainty and elevated borrowing costs.
The Bank of Canada also said businesses shifting supply chains away from the United States may face higher input costs, adding pressure across manufacturing and retail sectors. At the same time, the report suggested weak demand may limit how much companies can raise prices.
The Bank of Canada forecasts Canada’s gross domestic product growth at 1.2 per cent in 2026, rising modestly to 1.6 per cent in 2027.
