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Investing.com -- In a recent report, the Bank of Canada detailed how Canadian businesses and households are reacting to escalating trade tensions sparked by U.S. tariffs. The preliminary survey, conducted from January 29 to February 28, 2025, underscores growing uncertainty in economic decision-making.
The report reveals that both businesses and consumers view the economic climate as unpredictable amid evolving U.S. tariff plans. This uncertainty is complicating investment, hiring decisions, and price-setting ahead of potential Canadian retaliatory measures.
Households are tightening their belts as worries over job security and financial health mount. Many are planning to reduce spending, with anxiety particularly acute among those working in trade-dependent sectors.
Canadian companies are revising their sales outlooks downward, with declining order books and subdued demand in manufacturing and discretionary sectors. However, a noticeable “Buy Canadian” sentiment is offering some resilience against the negative impacts of trade tensions.
Rising costs are prompting businesses to consider price increases, driven by a depreciating Canadian dollar, increased tariffs, and costlier imported capital goods. Approximately half of the surveyed companies plan to pass on these cost increases to customers, even as stiff competition and weak demand may temper such measures.
The Bank of Canada intends to maintain regular consultations as the trade conflict continues to evolve, leaving both households and businesses wary of future inflationary pressures. Investors, policymakers, and industry leaders are now closely watching these dynamics as the trade conflict reshapes Canada’s economic landscape.