Ongoing

trade

tensions remain the top economic liability for Canadian business and financial leaders, according to a

Bank of Canada

survey released Monday.

In its quarterly survey of 27 financial market participants, the central bank said 93 per cent of respondents cite an increase in trade tensions as the number one downside risk to their growth outlook for Canada, followed by the tightening of global financial conditions (41 per cent) and weak consumer spending (37 per cent).

Last month, the Bank of Canada said the upcoming joint review of the Canada–United States–Mexico Agreement (

CUSMA

) in July is a “key source of uncertainty” for the country’s economic growth. The deal allows most goods to flow across borders duty-free and exempts CUSMA-compliant Canadian goods from certain U.S. tariffs.

Whether U.S. President

Donald Trump

wants to keep the trade pact intact is unclear. In 2018, he praised the deal he initiated and helped negotiate as the “most modern, up-to-date, and balanced trade agreement,” but last month he called CUSMA “irrelevant” and said it has “no real advantage.”

The Bank of Canada survey was conducted between Dec. 16 and Dec. 30, following its Dec. 10 decision to keep its benchmark

interest rate

at 2.25 per cent. The central bank held the rate steady again at its most recent announcement on Jan. 28, as the economy navigates a period of “structural adjustment.”

Survey respondents unanimously believe the Bank of Canada will hold its policy rate at 2.25 per cent for the rest of the year. In 2027, the median expectation is that the bank will raise it to 2.5 per cent, and then raise it again to 2.75 per cent in the fourth quarter.

In its January 28 rate announcement, the central bank projected Canada’s economy will grow 1.1 per cent in 2026 and 1.5 per cent in 2027 “as population growth slows and Canada adjusts to U.S. protectionism.”

The survey respondents’ outlook was a little sunnier, however, with a median estimate that gross domestic product will grow 1.6 per cent by year-end and 1.9 per cent by the end of 2027. They put the probability of a

recession

in the next six months at 20 per cent.

The Bank of Canada said its preferred measures of core

inflation

eased from three per cent in October to around 2.5 per cent in December. The consumer price index rose 2.1 per cent on an annual average basis in 2025, and the bank expects inflation will hover around two per cent “with trade-related cost pressures offset by excess supply.”

Market participants have similar expectations. The median forecast that headline inflation will be at 2.1 per cent by the end of 2026 and 2.1 per cent by the end of 2027.

  • Macklem says loss of CUSMA would mean recession for the Canadian economy
  • Fate of Canadian economy will depend on how we adapt to structural changes, Macklem says

• Email: jswitzer@postmedia.com