Bank of Canada Governor Warns of Depression-like Conditions Looming Over Canada

by

In a rare moment of candor, Bank of Canada Governor Tiff Macklem has drawn a stark comparison between Canada’s economic outlook and conditions reminiscent of the Great Depression. The tension with the U.S. is palpable, and Macklem wasted no time addressing the unsettling reality: increased trade friction with the U.S., especially in light of President Trump’s new tariffs, could send the Canadian economy into a tailspin. If there’s one thing we’ve learned from history, it’s that trade wars never end well.

Macklem painted a grim picture, warning that this uncertainty around U.S. trade policy isn’t just some temporary disruption; it could be the catalyst for structural changes to Canada’s economy. That’s code for major, long-term damage. Canada, highly reliant on trade, especially with its southern neighbor, could see lasting consequences as tariffs create ripples throughout industries already struggling with inflation and supply chain headaches.

At a time when the global economy is already staggering, Macklem’s words are a reminder that the bigger storm is brewing. Inflation is ticking up, and supply chains are still in chaos, but these are just the tip of the iceberg. This isn’t just about holding inflation between 1% and 3% anymore. Macklem’s speech underscored how keeping price stability is becoming an increasingly difficult task as global and domestic issues collide. He called for a review of Canada’s monetary policy, signaling that Canada’s financial strategy might need an overhaul just to survive what’s ahead.

But perhaps the most sobering takeaway from Macklem’s speech is the toll on Canadian businesses and households. A prolonged trade war could leave the average Canadian squeezed, and those already stretched thin may find themselves with fewer options. This isn’t a short-term issue—it’s a looming storm that needs careful, strategic planning if it’s going to be weathered successfully. Canada’s economy is facing a make-or-break moment.

Sources:

https://www.bankofcanada.ca/2025/02/tariffs-structural-change-and-monetary-policy/