Canada Unveils Retaliatory Tariffs and Relief Package

The retaliatory tariffs announced today largely match the Section 338 tariffs imposed on Canada last week, reflecting a response which is politically popular but economically insignificant – and, importantly, does not raise the stakes in the trade war further (pending a potential US response). We expect the new tariffs to give only a minor boost to inflation, while the relief measures also unveiled today will offset around half of the potential drag on growth from new US tariffs. Paired with the damaging effects on business sentiment from renewed trade tensions, this all makes near-term interest rate hikes less likely.