Bank of Canada says trade war poses greatest threat to Canadian economy – National [Video]

OTTAWA, May 8 (Reuters) – A prolonged trade war could increase the risks to Canadian financial stability by hurting banks and other institutions and making it harder for households and businesses to pay down debt, the Bank of Canada said on Thursday.

In its annual Financial Stability Report, the central bank said the financial system was resilient.

But the impacts of tariffs slapped by U.S. President Donald Trump on Canada and Ottawa’s subsequent counter-tariffs could hurt financial stability, especially if it continues for a long period of time.

“A long-lasting trade war poses the greatest threat to the Canadian economy. It also increases risks to financial stability,” the bank said.

The BoC said in the near term, the unpredictability of U.S. trade policy could cause further market volatility and strains on liquidity. In an extreme case, market volatility could turn into market dysfunction.

In the medium to long term, a …