The Bank of Canada reports improved financial health for Canadian households and businesses at the beginning of the year, with reduced debt and lower insolvency rates. However, the emergence of a U.S.-initiated trade war has increased economic risks. Governor Tiff Macklem highlighted that tariffs and associated uncertainties could severely undermine global economic growth and lead to worrying consequences, including potential rises in mortgage arrears and employment challenges if the trade conflict persists.
The Canadian economy and financial system face a new threat. U.S. trade policy has taken a dramatic protectionist shift. Tariffs and uncertainty have sharply reduced prospects for global economic growth.
The country's financial system has faced unprecedented shocks in recent years, and it has proven resilient. But proactive steps taken by households and businesses... put the system on a more resilient footing.
In a scenario where tariffs remain for some time, the Bank of Canada sees the potential for Canadians to fall behind on mortgage payments at levels not seen in a generation.
A long-lasting trade war poses the greatest threat to the Canadian economy, warning about both near-term market volatility and more medium-term risks of a prolonged trade war.
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