The Bank of Canada Governor Tiff Macklem expressed optimism about a potential new trade deal between the U.S. and Canada, emphasizing the importance of removing tariffs to prevent inflation from rising. U.S. President Donald Trump and Canada’s Prime Minister Mark Carney have agreed to work towards a trade agreement within 30 days to address the ongoing trade conflict caused by tariffs and counter duties.

Macklem highlighted the significance of restoring open trade between the two countries for job creation, economic growth, and price stability. He stressed that if tariffs are not eliminated, they could lead to higher consumer prices, impacting Canada's exports, hiring, and investment.

Given Canada's heavy reliance on the U.S. market, Macklem emphasized the need to roll back tariffs to maintain economic stability. He noted that until a deal is reached, inflation could be influenced by both U.S. tariffs and Canadian counter-tariffs.

While Canada's annual inflation rate has recently eased, core inflation measures have exceeded the central bank's target range. The Bank of Canada expressed concerns about rising underlying inflation and the potential for tariffs to sustain elevated prices over an extended period.

Macklem cautioned that if current tariffs persist, there is a historical precedent of about 75% of tariff costs being passed on to consumers over approximately 18 months. He warned that continued uncertainty could lead to increased caution among households and businesses, potentially resulting in more job cuts in the future.