{"id":490235,"date":"2025-10-11T05:45:40","date_gmt":"2025-10-11T05:45:40","guid":{"rendered":"https:\/\/www.europesays.com\/uk\/490235\/"},"modified":"2025-10-11T05:45:40","modified_gmt":"2025-10-11T05:45:40","slug":"central-banks-cut-as-trade-walls-rise","status":"publish","type":"post","link":"https:\/\/www.europesays.com\/uk\/490235\/","title":{"rendered":"Central banks cut as trade walls rise"},"content":{"rendered":"

Highlights:<\/strong><\/p>\n

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We continue to expect slow growth in Canada. U.S. Section 232 tariffs are expanding, but most Canadian exports to the United States remain duty free under the CUSMA exemption.<\/p>\n

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Tracking the U.S. economy has become more difficult with the government shutdown curtailing data releases. Available data shows U.S. gross domestic product growth to be more resilient than we expected in Q3, but labour market data remains consistent with a gradual rise in the unemployment rate.<\/p>\n

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We look for the U.S. Federal Reserve to keep gradually reducing the fed funds target range (including a cut in October), but with 50 basis points fewer reductions in 2026 than previously expected.<\/p>\n

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For the Bank of Canada, we expect one more 25 bps interest rate cut this year while fiscal policy takes the lead in supporting sectors impacted by trade disruptions.<\/p>\n

Issue in focus:<\/strong><\/p>\n

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U.S. duties on Canadian softwood lumber and kitchen cabinets will be in effect from Oct. 14, de minimis imports are suspended, and additional threats loom over pharmaceutical products and medium- and heavy-duty trucks. We examine the sector-by-sector impact of these new and pending U.S. tariffs.<\/p>\n

Forecast changes:<\/p>\n

U.S. tariff announcements have continued to pile up, including new Section 232 measures on softwood lumber, furniture, and kitchen cabinets. The impact will be substantial for related producers and exporters, but is not significant enough to alter our base-case forecasts for the U.S. and Canada.<\/strong><\/strong><\/strong><\/strong><\/strong><\/p>\n

New tariff measures on lumber and furniture apply to about 1.5% of Canadian exports, adding 0.2% to the total U.S. average effective tariff rate on imports from Canada. That rate should now be converging closer to 6%, but U.S. tariff revenues collected so far have run well below calculated levels for these reasons<\/a>.<\/p>\n

Nevertheless, targeted sectors will be adversely affected (see more in Issue in Focus below). The U.S. administration\u2019s expanding use of Section 232 is also incrementally driving more Canadian goods outside of the CUSMA exemption that\u2019s shielding the bulk of trade with the U.S.<\/p>\n

More specifically:<\/p>\n