OTTAWA – Bank of Canada governor Tiff Macklem is encouraging businesses to explore export markets beyond the United States to make the economy less vulnerable to current and future trade disputes.
Macklem, speaking to a business crowd in St. John’s, N.L., on Wednesday, said it was “very welcome news” that Prime Minister Mark Carney and U.S. President Donald Trump agreed at the G7 Summit earlier this week to nail down a new trade and security deal within 30 days.
“The recent progress toward a new trade deal is encouraging, and we are following developments closely. We are all invested in the future of the trade relationship between Canada and the United States,” he said in prepared remarks.
But Macklem also stressed the importance of diversifying to new export markets given recent global trade upheaval.
Disruptions during COVID-19 showed Canadian firms the consequences of not having diverse supply chains, Macklem said. And he said today’s trade dispute is demonstrating how vulnerable businesses can be without diverse export markets.
“Growing new markets for our exports builds scale and competitiveness. But there’s an added imperative – diversification adds resilience,” he said.
Macklem used Newfoundland and Labrador as a case study for his point, noting that only a third of the province’s goods exports head to the United States compared to roughly three-quarters for the rest of Canada. Most of the province’s oil is now shipped to Europe and other countries, for instance, and services exports are boosting the St. John’s tech sector, he noted.
Macklem said the rest of Canada has an opportunity, particularly among services exports, to expand trade beyond the United States. Efforts to build national infrastructure and tear down interprovincial trade barriers would also make diversifying goods exports easier, he said.
“The United States will always be our single biggest trading partner, but we can improve our resilience and grow our prosperity by expanding both our internal trade and overseas markets for our products,” he said.
The Bank of Canada held its benchmark interest rate steady at 2.75 per cent for the second time in a row earlier this month.
The central bank’s next decision is set for July 30, and Macklem reiterated that future cuts could be in the cards if economic growth weakens further but inflation remains contained in the trade dispute.
While labour market impacts are largely concentrated in trade-sensitive sectors so far and other industries are still showing some growth, Macklem said that, “if demand stays soft, at some point more businesses will cut jobs.”
Tracking inflation’s response to tariffs is “complicated,” the central bank head noted. A slower economy dampens price pressures but the tariffs themselves can make goods more expensive for Canadians.
While the removal of the consumer carbon prices helped push inflation down to 1.7 per cent in April, inflation excluding taxes was 2.3 per cent in the month, which Macklem said was “slightly stronger” than the Bank of Canada expected.
He said core measures of inflation were also showing “unusual volatility” and “could be firmer” than the central bank thought. Macklem pointed to higher goods prices affecting the underlying inflation figures, which could be starting to reflect new costs related to tariffs.
“The prospect of a new Canada-U.S. trade deal offers hope that tariffs will be removed. But until we have a deal, inflation will be affected by both U.S. tariffs and Canadian counter-tariffs,” he said.
This report by The Canadian Press was first published June 18, 2025.
