How U.S. Tariffs Could Reshape Canada’s Economy: OECD Report

The OECD warns that Canada’s economy could face challenges due to Donald Trump’s tariff policies, which could lead to higher inflation and interest rates. The organization has cut Canada’s growth forecast significantly, citing policy uncertainty that may affect business investments and consumer spending. If widespread tariffs are imposed, inflation is projected to rise above the Bank of Canada's target range, potentially pushing interest rates up by 1 to 1.25 percentage points. The impact on Canada is expected to be more severe than on other major economies. However, if tariff exemptions under CUSMA continue, Canada’s growth prospects could improve. The Bank of Canada may have room to cut rates in a “lighter tariff scenario,” but widespread tariffs would keep borrowing costs elevated.