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Trade Uncertainty Makes Bank of Canada Rate Hikes Harder to Justify, Rosenberg Research Says

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The Bank of Canada should hold rates unchanged as escalating trade tensions with the United States threaten to further weaken the Canadian economy, according to Rosenberg Research in a Thursday note.

The US President Donald Trump administration's latest measures, which include bans on certain Canadian exports and higher tariffs on others, mark a sharp escalation in trade uncertainty and increase the risk of further retaliation from Canada, said Rosenberg Research.

With economic growth under pressure and the labor market weakening, further rate hikes appear increasingly difficult to justify until there is greater clarity on the trade outlook, added Rosenberg.

Businesses are likely to hold off on investment, while tariffs and elevated oil prices further weigh on economic growth and consumer spending, according to Rosenberg. Without a trade deal, unemployment could rise to 7.2% or higher by early 2027.

However, financial markets continue to expect a 25-basis-point BoC hike by year-end, followed by two further increases by April 2027, it said.

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