U.S. tariffs on some Canadian goods were delayed, again, in a familiar-yet-concerning development in the ongoing trade dispute.
This latest pause, which is in place until April 2, applies to tariffs on goods covered under the Canada-United States-Mexico Agreement (CUSMA).
Canada’s economic outlook remains clouded as tariff threats hang over businesses—just like after February’s pause was announced. The country’s latest jobs report also highlights the negative effects of this ongoing uncertainty.
However, the Bank of Canada might still cut the policy rate by 25 basis points at next week’s meeting because goods currently not covered under CUSMA are still subject to the 25 per cent tariff. This accounts for just over 60 per cent of total Canadian exports into the U.S.
Prior to this, some Canadian exporters opted to pay a much lower tariff rate due to the relative ease of compliance.
Since the delay does not signal an end to tariffs nor a trade agreement, there is little relief in Canada as businesses are forced once again to wait another month.
Uncertainty might lead to Canadian businesses further delaying investments and hiring even as price stability has been restored and interest rates are dropping.
Since the beginning of the new year, some businesses—especially in manufacturing—have pulled orders forward in anticipation of tariffs, leading to increased activity. It is unclear whether this momentum will continue.
This comes after the two major caveats to the original threat of broad-based tariffs on all Canadian exports: a lower tariff rate of 10 per cent on Canadian energy exports as well as a one-month delay of auto tariffs on autos from Canada and Mexico.
While energy and manufacturing would be the most impacted affected sectors under broad-based tariffs, they are also vital to the U.S. economy.
Financial markets took a noticeable hit as tariffs went into effect, with the S&P/TSX composite falling to below the level set on Nov. 6.
The Canadian dollar has fluctuated between US $0.69 and $0.70 since mid-December.
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