MNI: Canada Business Sentiment Falls After Trump Tariff Threat
MNI (OTTAWA) - Canada's Federation of Independent Business says sentiment declined after Donald Trump threatened a 25% tariff, in one of the first confidence readings since the U.S. president-elect's Nov 25 announcement.
The small business group's three-month outlook index fell 4.7 points to 46.6, the lowest since the start of 2024, and the 12-month outlook declined 3.4 points to 56.4.
Risk of a trade war comes on top of a domestic economy seen as weak by half of firms surveyed, a drag that's led the central bank to lead the G7 with 175 basis points of rate cuts this year. Governor Tiff Macklem says tariffs are a major new source of uncertainty for Canada. (See MNI INTERVIEW: BOC Faces Recessionary Risk On Tariff Hit: Lane)
"The combined challenges of U.S. tariff threats, uncertainty stemming from the recently announced and temporary [federal sales tax] holiday, and the Canada Post strike have created a `perfect storm,'" the group's economics director Andreea Bourgeois said in a statement. Merchants have complained the sales tax rules are cumbersome to implement and the postal strike hurts small firms who relied on that service over private couriers.
“Encouragingly, manufacturing and construction sectors report optimism indexes above 60. However, these gains could be temporary if U.S. tariffs take effect in 2025, posing significant risks to sustained growth,” she said. (See MNI INTERVIEW: Trump Tariffs Will Decimate Canadian Loggers)
Full-time staffing plans remain subdued, with 17% of firms intending reductions and 15% hiring. Planned wage increases of 2.2% are a notch below September to mark the lowest since July 2021. That could encourage BOC officials because wages were seen as one of the last inflation hotspots.