Bank of Canada Urges Diversification Amid Trade Uncertainties

The Bank of Canada is urging businesses to explore export opportunities beyond the U.S. to bolster economic resilience in a volatile global trade environment. This strategic shift aims to navigate ongoing trade disputes and build a more robust economy for the future.

Macklem’s Advice to Businesses

Speaking in St. John’s, Newfoundland and Labrador, on Wednesday, Bank of Canada Governor Tiff Macklem advised businesses to explore export markets outside the United States. He also warned about the difficulties in predicting inflation amidst trade uncertainties, making it challenging to set monetary policy.

I am very pleased to be in St. John’s today. Great discussions with the business community on the economic outlook. pic.twitter.com/F6FqX44k1Z

— Tiff Macklem (@TiffMacklem) June 19, 2025

“I really hope we get a deal, I really hope it’s a good deal, but that’s not going to solve all our problems,”

—Tiff Macklem, Bank of Canada Governor

Exports from Newfoundland and Labrador show a third going to the U.S., whereas the rest of Canada exports around three-quarters there, demonstrating the need for diversification. In 2024, Canada’s total trade with the U.S. represented 74.7% of its total trade (Statistics Canada).

Deeper Dive into Trade and Inflation

Macklem noted that shifts in trade patterns predate the recent elections and that other global conflicts are also compelling businesses to restructure supply chains. He said the impact on labour markets is largely confined to trade-sensitive sectors.

The Bank of Canada’s next interest rate decision is slated for July 30. Future interest rate cuts might occur if the economy weakens further, yet inflation remains contained within the trade dispute.

The central bank head also pointed out that tracking inflation’s response to tariffs is intricate. A weaker economy can reduce price pressures. However, the tariffs themselves can make goods more expensive for Canadians.

Inflation’s Path Forward

While inflation was at 1.7% in April due to the consumer carbon price removal, Macklem cautioned that this relief is short-lived. Excluding taxes, inflation hit 2.3% last month, which exceeded the Bank of Canada’s expectations. He expressed concern about core inflation measures exceeding three percent.

Macklem said, “The bottom line, as I indicated, is we have seen more firmness in underlying inflation, and that’s something that’s got our attention.”

The Bank of Canada will assess two inflation readings before its next interest rate decision. Statistics Canada will release May’s inflation figures on June 24.