Bank of Canada says risk of severe global trade conflict has diminished

OTTAWA, July 30 (Reuters) – The risk of a severe and escalating global trade conflict has diminished since April and there is some clarity about what U.S. tariffs will look like, the Bank of Canada said on Wednesday.

But for the second quarter in a row, the bank did not issue regular economic forecasts, citing the uncertainty over the direction of U.S. trade policy. Instead it issued three scenarios as to what might happen.

In the current tariff scenario, based on conditions on July 27, GDP grows by about 1% in the second half of 2025 and then picks up, hitting 1.8% in 2027. Inflation stays at around 2%.

In the de-escalation scenario, where the U.S. and others cut tariffs, growth hits about 2% in the second half of 2025 and then averages 1.7% through the end of 2027. Inflation falls in the first quarter of 2026 before rising close to 2% in 2027.

In the escalation scenario, where the U.S. and others raise tariffs, growth falls in 2025 before picking up in the first half of 2026 and rising to an average of 2%. Inflation rises to just above 2.5% in the third quarter of 2026 and then falls to around 2% in 2027.

(Reporting by David Ljunggren, editing by Promit Mukherjee)

((Reuters Ottawa bureau, +1 647 480 7921; david.ljunggren@tr.com))

Keywords: CANADA CENBANK/FORECASTS