Batten down the hatches? Canadians cut spending amid tariff fears

Wary of economic hardships, Canadians are becoming more cautious with spending and planning savings, the Bank of Canada noted in its summary of deliberations on Wednesday.

The impact of U.S. President Donald Trump’s tariffs is already showing up in the spending habits of Canadians, the Bank of Canada noted on Wednesday.

Wary of economic hardships, Canadians are becoming more cautious with spending and planning savings, the Bank of Canada said in its summary of deliberations after its most recent rate cut earlier this month.

“Tariffs on steel and aluminum and threats of additional tariffs, compounded with the unpredictability of the US administration, were already affecting the economic decisions of consumers and businesses and this was significantly weakening the near-term outlook,” the Bank of Canada said.

On March 12, the Trump administration’s steel and aluminum tariffs went into effect, prompting Ottawa to issue retaliatory tariffs.

Hours later, the Bank of Canada cut its benchmark rate by 25 basis points in an already scheduled decision date, bringing it down to 2.75 per cent. This was the bank’s seventh consecutive interest rate cut.

Bank of Canada governor Tiff Macklem said in a statement Wednesday that while Canada’s economy had entered 2025 on “solid footing,” with inflation remaining close to the bank’s two per cent target rate since last summer, Trump’s tariffs pose a new challenge.

On April 2, the U.S. is set to impose sweeping and “comprehensive” reciprocal tariffs on all its trading partners.

Trump said the tariff would differ depending on the tariffs and other trade measures individual countries impose on U.S. goods.