Bank of Canada Governor Tiff Macklem says the country needs to diversify its trade away from the United States.
During a speech about global trade disruption delivered to business leaders, Macklem argued that Canada has waited too long to reduce its economic dependence on the neighbouring U.S. and is now paying the price.
Macklem said that U.S. President Donald Trump’s tariffs have damaged trade-sensitive industries and slowed Canada’s economic growth, perhaps permanently.
The central bank governor also said that Canada needs to develop new global markets for its products and reduce internal barriers that hurt the country’s productivity.
Macklem also stressed that this time is different and that Canada and the U.S. aren’t going through a “cyclical downturn” and people shouldn’t expect a return to the previous relationship between the two countries.
The comments come a week after the Bank of Canada lowered its benchmark interest rate by 25-basis points to 2.50% amid growing signs of weakness in the economy.
Macklem said that the impacts of U.S. tariffs have been more muted than feared but cautioned that the full consequences have yet to be seen.
He called for better east-west transportation corridors and improvements to port infrastructure to help get Canadian goods to overseas markets.
Macklem also called for an end to interprovincial trade barriers, harmonizing regulatory frameworks across provinces, and an overall boost to Canadian productivity.
“Canadian leaders – business, political and economic leaders – need to chart a new course. We should have been making these changes 15 years ago. But the next best time is now,” he said.
The Bank of Canada is scheduled to next decide on interest rates Oct. 29.
