U.S. trade war risks Canadian progress on financial stability, says Bank of Canada [Video]

The financial picture for Canadian households and businesses was showing signs of increased health until the United States started a trade war, the Bank of Canada said on Thursday.

The central bank says in its latest Financial Stability Report that at the start of the year, households had, on average, less debt relative to their income than a year earlier, while insolvency filings by businesses had dropped significantly.

“The country’s financial system has faced unprecedented shocks in recent years, and it has proven resilient,” said governor Tiff Macklem in prepared remarks on the report.

“But proactive steps taken by households and businesses, together with substantially lower interest rates, put the system on a more resilient footing heading into 2025.”

However, the U.S.-instigated trade war has pushed risks higher overall, said Macklem.

“The Canadian economy and financial system face a new threat. U.S. trade policy has taken a dramatic protectionist shift. …