Fav of CanadaFav of Canada
  • Home
  • News
  • Money
  • Living
  • Entertainment
  • Health
  • Sci-Tech
  • Travel
  • More
    • Sports
    • Web Stories
    • Global
    • Press Release

Subscribe to Updates

Get the latest Canada's trends and updates directly to your inbox.

What's On

Will the Bank of Canada and U.S. Fed cut interest rates this week?

July 28, 2025

Blue Jays will be buyers at MLB trade deadline

July 28, 2025

Judge blocks Trump admin’s efforts to defund Planned Parenthood

July 28, 2025
Facebook X (Twitter) Instagram
Fav of CanadaFav of Canada
  • Home
  • News
  • Money
  • Living
  • Entertainment
  • Health
  • Sci-Tech
  • Travel
  • More
    • Sports
    • Web Stories
    • Global
    • Press Release
Fav of CanadaFav of Canada
You are at:Home » Bank of Canada says trade war ‘poses greatest threat to Canadian economy’
News

Bank of Canada says trade war ‘poses greatest threat to Canadian economy’

By favofcanada.caMay 8, 2025No Comments3 Mins Read
Facebook Twitter Pinterest Telegram WhatsApp Email Tumblr LinkedIn
Share
Facebook Twitter Pinterest WhatsApp Email

OTTAWA, May 8 (Reuters) – A prolonged trade war could increase the risks to Canadian financial stability by hurting banks and other institutions and making it harder for households and businesses to pay down debt, the Bank of Canada said on Thursday.

In its annual Financial Stability Report, the central bank said the financial system was resilient.

But the impacts of tariffs slapped by U.S. President Donald Trump on Canada and Ottawa’s subsequent counter-tariffs could hurt financial stability, especially if it continues for a long period of time.

“A long-lasting trade war poses the greatest threat to the Canadian economy. It also increases risks to financial stability,” the bank said.

The BoC said in the near term, the unpredictability of U.S. trade policy could cause further market volatility and strains on liquidity. In an extreme case, market volatility could turn into market dysfunction.

In the medium to long term, a prolonged global trade war would have severe economic consequences, it added.

Get the day's top news, political, economic, and current affairs headlines, delivered to your inbox once a day.

Get daily National news

Get the day’s top news, political, economic, and current affairs headlines, delivered to your inbox once a day.

Governor Tiff Macklem told reporters that the uncertainties were so great that “our analysis is not a projection, it is an assessment of vulnerabilities.”

If the trade war continues some households, especially those carrying higher levels of debt, might default on their payments, the bank said, adding the risk was concentrated mainly amongst households without a mortgage.

This could hurt a strong banking system which has built a robust liquidity base and access to funds, the BoC said.

“If credit losses occur on a large enough scale, banks could cut back on lending in response. Struggling households and businesses would have less access to credit to get through tough times. This cycle could exacerbate the economic downturn,” it said.

The BoC also highlighted a heightened risk from hedge funds which have been taking increasing exposure to Government of Canada bonds. In some cases they have bought almost half of all the auctions of government bonds.

But a bulk of their purchases is supported by debt, making them more likely to pull back from the market in periods of stress, threatening the bond market.

As interest rates started coming down in Canada last year, overall level of household debt dropped and insolvencies amongst businesses fell, and banks and non-bank financial institutions increased ability to absorb shocks.

Those households with a mortgage who will be renewing this year or next are generally in a more resilient position to make payments due to lower interest rates, but if impacted by job loss or loss of income, some households might be hit.

This scenario could be repeated among businesses too, the bank said, adding that those with existing vulnerabilities such as high leverage, weak profitability and low cash reserves are at risk of falling behind on debt payments.


Related Articles

Will the Bank of Canada and U.S. Fed cut interest rates this week?

By favofcanada.caJuly 28, 2025

Auto theft in Canada fell 19% in 1st half of 2025, industry group says

By favofcanada.caJuly 28, 2025

Toronto mayor proclaims ‘The Weeknd weekend,’ gives performer key to the city

By favofcanada.caJuly 28, 2025

Carney cuts Confederation Bridge tolls, ferry rates to fulfill election promise

By favofcanada.caJuly 28, 2025

Jewish Canadians were the most targeted religious group in 2024, data shows

By favofcanada.caJuly 28, 2025

Carney set for affordability announcement as next U.S. tariff date looms

By favofcanada.caJuly 28, 2025
Add A Comment

Leave A Reply Cancel Reply

Don't Miss

Blue Jays will be buyers at MLB trade deadline

By favofcanada.caJuly 28, 2025

The Toronto Blue Jays are the best team in baseball with a 63-43 record heading…

Judge blocks Trump admin’s efforts to defund Planned Parenthood

July 28, 2025

Auto theft in Canada fell 19% in 1st half of 2025, industry group says

July 28, 2025

Toronto mayor proclaims ‘The Weeknd weekend,’ gives performer key to the city

July 28, 2025
Stay In Touch
  • Facebook
  • Twitter
  • Pinterest
  • Instagram
  • YouTube
  • Vimeo
Our Picks

Carney cuts Confederation Bridge tolls, ferry rates to fulfill election promise

By favofcanada.caJuly 28, 2025

Jewish Canadians were the most targeted religious group in 2024, data shows

By favofcanada.caJuly 28, 2025

Carney set for affordability announcement as next U.S. tariff date looms

By favofcanada.caJuly 28, 2025
About Us
About Us

Fav of Canada is your one-stop website for the latest Canada's trends and updates, follow us now to get the news that matters to you.

We're accepting new partnerships right now.

Email Us: [email protected]
Contact: +44 7741 486006

Our Picks

Will the Bank of Canada and U.S. Fed cut interest rates this week?

July 28, 2025

Blue Jays will be buyers at MLB trade deadline

July 28, 2025

Judge blocks Trump admin’s efforts to defund Planned Parenthood

July 28, 2025

Subscribe to Updates

Get the latest Canada's trends and updates directly to your inbox.

Facebook X (Twitter) Instagram Pinterest TikTok
  • Privacy Policy
  • Terms of use
  • Advertise
  • Contact
© 2025 Fav of Canada. All Rights Reserved.

Type above and press Enter to search. Press Esc to cancel.