BOC's Leduc: Too Early To Tell Impact Of US Tariffs For Canada

By Yali N'Diaye

     OTTAWA (MNI) - Bank of Canada Deputy Governor Sylvain Leduc indicated

Thursday in a question and answer session following a speech in Quebec City that

it would likely take a few months for the central bank to assess the impact of

U.S. tariffs on Canadian steel and aluminum.

     Earlier Thursday, the Trump administration announced that starting Friday,

Canada, along with Mexico and Europe, would no longer be exempt from tariffs on

certain steel and aluminum products imported by the U.S. of 25% and 10%,

respectively.

     Canada is the largest exporter of steel to the U.S. and the Conference

Board of Canada stressed that Canada would be "hit hard" as 85% of its steel and

aluminum is exported south of the border, accounting for 16% of U.S. steel

imports and 40% of aluminum imports.

     Prime Minister Justin Trudeau qualified such tariffs as "unacceptable", and

Foreign Minister Chrystia Freeland announced similar countermeasures against the

U.S. to take effect on July 1.

     For Leduc, "it will take a little bit of time to evaluate the impact" of

U.S. tariffs. "This is too early to tell" and the BOC will have to analyze data

over the next few months, he said.

     --WATCHING DATA

     In his speech earlier, Leduc said that "elevated trade policy uncertainty"

is restraining business investment, although the latter is still expected to

increase.

     Although the environment is uncertain, he said in answering questions, "I

think we will do what's right given the data," especially housing and the

sensitivity of the economy to interest rates.

     While the BOC has underlined the progress made on wages and inflation, it

still needs more clarity on its understanding of housing adjustments to tighter

mortgage rules and higher interest rates, and on the sensitivity of the economy

to interest rates.

     It is still too early to tell how much this sensitivity to interest rates

has changed, Leduc said.

     He repeated that the BOC still expects a rebound in housing resale

activity.

--MNI Ottawa Bureau; +1 613 869-0916; email: yali.ndiaye@marketnews.com

[TOPICS: M$C$$$]