Canada Central Bank Holds Rate Steady Citing US Tariff 'Threats'
Canada remains uniquely vulnerable to Trump's trade war given the deep, broad ties between the neighboring economies.
Trump's threat to hike tariffs to 35 percent on certain goods if no new trade deal is reached by Friday could wreak further havoc across a Canadian economy already strained by US protectionism.
"Let's hope there's an agreement between Canada and the United States. Let's hope it's a good agreement," Bank of Canada Governor Tiff Macklem told reporters after announcing the rate pause.
He conceded, however, that "there is a sense that US policy may well remain unpredictable."
"There's a sense that...it's going to be hard to restore that trust," in the United States as an economic partner, he added.
A statement from the bank said that "while some elements of US trade policy have started to become more concrete in recent weeks, trade negotiations are fluid (and) threats of new sectoral tariffs continue."
Canada was the first G7 country to begin cutting rates last year, following several hikes to tame pandemic-fuelled inflation.
But Wednesday marked the bank's third consecutive pause, caution largely driven by Trump's policies.
"It's hard to be as forward-looking as usual when you've got an unusual amount of uncertainty," Macklem said.
A central bank forecast released Wednesday outlined a scenario where the impact of new US tariffs could be relatively muted, if new levies do not apply to goods compliant with an existing trade deal Trump signed -- and praised -- during his first term.
The bank said 100 percent of energy exports and 95 percent of all other exports, excluding auto parts, could be compliant with the United-States-Mexico-Canada-Agreement (USMCA).
But Trump's auto tariffs are expected to remain in place, bringing further pain to a Canadian sector that has already seen layoffs and shift cuts triggered by the president's push to have more cars made entirely in the United States.
Canada's auto plants are highly integrated with US production sites, with parts crossing back and forth across the border multiple times during assembly.
Canadian Prime Minister Mark Carney has in recent days tried to temper expectations about the prospect of a comprehensive trade deal with the United States.
He has said a tariff-free deal with Washington may not be possible, and that he would not sign an agreement that did not benefit Canada.
The prime minister, who previously led the Bank of Canada and the Bank of England, has also said a recently agreed US-EU pact should not be viewed as a template for Canada.
"There are differences. One is geographic proximity," Carney said this week.
The Bank of Canada did not rule out more rate cuts later this year to help struggling borrowers.
"The Bank appears to be getting a little more comfortable with the notion that the Canadian economy will need the support from further interest rate cuts in the future," CIBC economist Andrew Grantham said in statement, reacting to Wednesday's announcement.
But Macklem stressed the bank would act if it sees tariffs driving inflation.
"We are going to make sure that a tariff problem does not become an inflation problem," he told reporters. Canadian Prime Minister Mark Carney and US President Donald Trump at a G7 meeting in June AFP
Hashtags
Try Our AI Features
Explore what Daily8 AI can do for you:
Comments
No comments yet...
Related Articles
Int'l Business Times
33 minutes ago
- Int'l Business Times
Trump Targets Tariff Evasion, With Eye On China
As the United States ramps up tariffs on major trading partners globally, President Donald Trump is also disrupting strategies that could be used -- by Chinese companies or others -- to circumvent them. Goods deemed to be "transshipped," or sent through a third country with lower export levies, will face an additional 40-percent duty under an incoming wave of Trump tariffs Thursday. The latest tranche of "reciprocal" tariff hikes, taking aim at what Washington deems unfair trade practices, impacts dozens of economies from Taiwan to India. The transshipment rule does not name countries, but is expected to impact China significantly given its position as a manufacturing powerhouse. Washington likely wants to develop supply chains that are less reliant on China, analysts say, as tensions simmer between the world's two biggest economies and the US sounds the alarm on Beijing's excess industrial capacity. But "it's a little more about the short-term effect of strengthening the tariff regime than it is about a decoupling strategy," said Josh Lipsky, chair of international economics at the Atlantic Council. "The point is to make countries worried about it and then have them err on the side of not doing it, because they know that Trump could then jack up the tariff rates higher again," he added, referring to tariff evasion. The possibility of a sharply higher duty is a "perpetual stick in the negotiations" with countries, said Richard Stern, a tax and budget expert at the conservative Heritage Foundation. He told AFP that expanding penalties across the globe takes the focus away from Beijing alone. Experts have noted that Vietnam was the biggest winner from supply chain diversions from China since the first Trump tariffs around 2018, when Washington and Beijing engaged in a trade war. And Brookings Institution senior fellow Robin Brooks pointed to signs this year of significant transshipments of Chinese goods. He noted in a June report that Chinese exports to certain Southeast Asian countries started surging "anomalously" in early 2025 as Trump threatened widespread levies. While it is unclear if all these products end up in the United States, Brooks cast doubt on the likelihood that domestic demand in countries like Thailand and Vietnam rocketed right when Trump imposed duties. "One purpose of the transshipment provisions is to force the development of supply chains that exclude Chinese inputs," said William Reinsch, senior adviser at the Center for Strategic and International Studies. "The other purpose is to push back on Chinese overcapacity and force them to eat their own surpluses," he added. But Washington's success in the latter goal depends on its ability to get other countries on board. "The transshipment penalties are designed to encourage that," Reinsch said. Lipsky added: "The strategy that worked in the first Trump term, to try to offshore some Chinese manufacturing to other countries like Vietnam and Mexico, is going to be a much more difficult strategy to execute now." Lipsky noted that Beijing could see the transshipment clause as one targeting China on trade, "because it is." "The question is, how China takes that in the broader context of what had been a thawing relationship between the US and China over the past two months," he added. While both countries temporarily lowered triple-digit tariffs on each other's exports, that truce expires August 12. The countries are in talks to potentially extend the de-escalation, although the final decision lies with Trump. It will be tough to draw a line defining product origins, analysts say. Customs fraud has been illegal for some time, but it remains unclear how Washington will view materials from China or elsewhere that have been significantly transformed. The burden lies with customs authorities to identify transshipment and assess the increased duties. "That will be difficult, particularly in countries that have close relations with China and no particular incentive to help US Customs and Border Protection," Reinsch added. Analysts have noted signs of transshipment of Chinese goods this year AFP
Int'l Business Times
6 hours ago
- Int'l Business Times
US Envoy Witkoff To Visit Moscow On Wednesday
US envoy Steve Witkoff will meet on Wednesday with Russian leadership in Moscow, an American source confirmed, as President Donald Trump's deadline to impose fresh sanctions over Russia's war in Ukraine looms. The source did not specify if the meetings will include Russian President Vladimir Putin, whom Witkoff has met with several times previously. Trump has given Russia until Friday to halt its offensive in Ukraine or face new penalties. The White House has not outlined specific actions it plans to take on Friday, but Trump has previously threatened to impose "secondary tariffs" targeting Russia's remaining trade partners, such as China and India. The move would aim to stifle Russian exports, but would risk significant international disruption. Despite pressure from Washington, Russia has continued its onslaught against its pro-Western neighbor. Three rounds of peace talks in Istanbul have failed to make headway on a possible ceasefire, with the two sides appearing as far apart as ever. Moscow has demanded that Ukraine cede more territory and renounce Western support. Kyiv is calling for an immediate ceasefire, and Ukrainian President Volodymyr Zelensky last week urged his allies to push for "regime change" in Moscow. In recent weeks, Trump has increasingly voiced frustration with Putin over Moscow's unrelenting offensive. When reporters asked Trump on Monday what Witkoff's message would be to Moscow, and if there was anything Russia could do to avoid the sanctions, Trump replied: "Yeah, get a deal where people stop getting killed." Kremlin spokesman Dmitry Peskov said Monday it considered the talks with Witkoff to be "important, substantial and helpful" and valued US efforts to end the conflict. Putin, who has consistently rejected calls for a ceasefire, said Friday that he wants peace but that his demands for ending his nearly three-and-a-half-year offensive were unchanged. Russia has frequently called on Ukraine to effectively cede control of four regions Moscow claims to have annexed, a demand Kyiv has called unacceptable. Putin also wants Ukraine to drop its ambitions to join NATO. The visit comes after Trump said that two nuclear submarines he deployed following an online row with former Russian president Dmitry Medvedev were now "in the region." Trump has not said whether he meant nuclear-powered or nuclear-armed submarines. He also did not elaborate on the exact deployment locations, which are kept secret by the US military. Russia, in its first comments on the deployment, urged "caution" Monday. "Russia is very attentive to the topic of nuclear non-proliferation. And we believe that everyone should be very, very cautious with nuclear rhetoric," the Kremlin's Peskov said.
DW
8 hours ago
- DW
Ukrainian refugee aid across Europe compared – DW – 08/05/2025
German politicians are debating whether to slash financial assistance for Ukrainian refugees. How does the country stack up against its EU neighbors when it comes to generosity in helping those fleeing war? Markus Söder, premier of Bavaria, Germany's largest state, wants to do away with current rules governing access to aid money for Ukrainian refugees living in Germany. The head of the Christian Social Union (CSU), part of Germany's conservative CDU/CSU union, is of the opinion that Ukrainian refugees should get less money in general — no matter if they are new arrivals or have been living in Germany for years. Söder's proposal far exceeds the changes promised in the CDU/CSU's coalition agreement, which it signed with the Social Democrats (SPD) in May to form the current government. In the contract — which forms the basis for the coalition's existence — signatory parties agreed to cut financial assistance to new Ukrainian refugees applying for asylum in the country. The coalition agreement, however, explicitly exempted cuts for Ukrainian refugees already living in Germany. To date, Ukrainian refugees fleeing to Germany have all been afforded so-called citizens' money [Bürgergeld] payments, meaning they receive the same amount of welfare assistance that an unemployed German would. For single adults, that means a sum of €563 ($650) each month. Further, German taxpayers cover the cost of rent and health insurance for their guests. In all, that means Germany is among the most financially generous countries when it comes to assistance for Ukrainians forced to flee their homes because of war. Unlike others, Ukrainian refugees are also given permission to immediately enter the German labor market upon arrival. Bavaria's Söder now wants to slash that assistance to people applying for asylum. That would mean a monthly stipend between €353 and €441 for single adults, depending on their living situation. Families would also receive between €299 and €391 monthly for each child they have, with payments varying according to age. The European Union (EU) classifies Ukrainian refugees as individuals "deserving of temporary protection" under a mechanism established in 2001. These guidelines were activated for the first time in 2022, shortly after Russia launched its full-scale invasion of Ukraine. The guidelines stipulate that EU host countries must provide refugees, in this case Ukrainians, with access to housing, employment and health care. The guidelines do not, however, define the value of those payments and/or services, leading to great disparities across the 27-member bloc. To view this video please enable JavaScript, and consider upgrading to a web browser that supports HTML5 video Poland does not hand out monthly payments and Warsaw has even gone so far as to do away with its previous one-time payment of roughly €70 for each adult refugee arriving from Ukraine. Ukrainian refugees in Poland are instead given a personal identification number, giving them access to jobs, education and free health care. Ukrainian parents are given a monthly €190 payment for their first child, with smaller payments for each child after that. Parents caring for children with a disability or those with chronic illnesses may also apply for welfare assistance. In Hungary, the government of Prime Minister Viktor Orban — known for his anti-immigrant sentiments — tightened rules defining which Ukrainian refugees it feels are "deserving of temporary protection." Western Ukraine, for instance, is now viewed as a safe place of origin in the eyes of Hungary's lawmakers, meaning refugees hailing from those parts have no right to free housing at state-run refugee facilities. The international NGO Human Rights Watch (HRW) decried the move, saying it put thousands of Ukrainians on the streets. Adult refugees considered worthy of protection are afforded a €55 monthly payment as well as about €34 a month for each child in their family. In Belgium, single adult refugees from Ukraine receive approximately €1,100 per month in assistance, the highest rate in the EU. Moreover, they receive publicly funded health insurance and have the right to publicly funded housing. Furthermore, refugees can apply for financial assistance for the acquisition of furniture, clothing, medical necessities (including glasses) and food. Ukrainian refugees in Sweden do not receive monthly stipends but daily cash allotments. Adults can receive up to about €180-€190 by month's end but only if they have no other income. Payment for children adds up to roughly €140 per month. Additional funds are available for items such as winter clothing or baby carriages. Ukrainian refugees theoretically have access to funds for things like glasses, yet they generally only have the right to medical assistance in emergency situations or in the case of care that cannot be delayed. The United Kingdom (UK) must no longer adhere to EU rules since it famously left the bloc during the so-called Brexit. There, the government allots Ukrainian refugee families about €30 each week for their eldest child, with another €20 a week for all others. Additional payments are provided to assist in covering childcare costs for those children too young to attend school. Retirees (from age 66 for females, 67 for males) are eligible for payments of up to €230 a week. Rules governing adult refugees who have yet to reach retirement age are more complicated and must often be calculated on an individual basis. One assistance program, Homes for Ukraine, is designed to help Ukrainians find living accommodation with UK citizens, for example. The program pays out a roughly €230 one-time payment to refugees, while at the same time it sets up a €400 monthly payment for individuals hosting them — these hosts must also vouch for the refugees they house. Lastly, the UK's "Universal Credit" program provides further financial support to refugees only if their savings fall below a certain threshold. The amount of money they can receive and what it can be used for depends on the refugee in question and their current financial situation. To view this video please enable JavaScript, and consider upgrading to a web browser that supports HTML5 video
