BMO and RBC urge swift policy clarity as global investors hesitate and tariffs threaten growth
Canada’s ability to attract international capital and finance major infrastructure projects is being held back by uncertainty over trade and tax policies.
Bank of Montreal CEO Darryl White emphasized that while global investors are showing interest, they remain unconvinced due to a lack of clarity on key issues such as the US-Mexico-Canada Agreement and inter-provincial trade barriers, reported by Reuters.
White stated, “We can help with the financing, with the advice on the development of projects. We can also help with the attraction of international capital into Canada with all of the advantages that we have here.”
However, he noted that while international investors are interested, “we've got their attention, but we haven't convinced them because they don't have clarity on all these things.”
The ongoing US trade war continues to cast a shadow over Canada’s economic outlook, with BMO’s chief economist Douglas Porter describing the most likely scenario as a “muddle through” period of modest growth, as reported by BNN Bloomberg.
Porter’s analysis suggests that even if tariffs remain at current levels, Canada could see a 1.5 percent drop in long-term GDP, while a worst-case scenario involving 35 percent tariffs could trigger a moderate recession and shave five percent off long-term growth.
Meanwhile, Royal Bank of Canada CEO Dave McKay has argued that Canada’s risk-averse approach is slowing down the approval of nation-building projects.
Speaking in Calgary, McKay said, “What are we afraid of? We're afraid of making a mistake ... we've bubble-wrapped our economy and we're waiting for someone else to solve it, but we have to solve it ourselves,” according to Reuters.
He highlighted the need for the federal government to grant permitting approval to major projects as a first step, noting that global capital will only flow once investors are confident that Canada is committed to building new energy infrastructure.
Despite muted economic growth—Statistics Canada measured a 1.6 percent annualized decline in real GDP in the second quarter and preliminary data for August suggested no growth—Canada’s stock market has remained near all-time highs.
According to BNN Bloomberg, this reflects the targeted impact of tariffs on sectors such as steel, aluminum, autos, copper, and lumber.
Porter noted, “So far, the effect of the trade war is very narrow on Canada,” with most goods still entering the US tariff-free under the Canada-US-Mexico trade agreement.
To cushion the impact of tariffs, the Bank of Canada has already lowered its key rate to 2.5 percent, with further cuts expected, and the federal government has introduced fiscal stimulus and reoriented trade policies, as reported by BNN Bloomberg.
These measures have helped the economy hold up better than anticipated earlier in the year, but the future of the Canada-US-Mexico Agreement remains a significant question mark as it heads for review next year.
