Bank of Canada: GDP level would be permanently hit by protracted US trade war

The Bank of Canada's governing council felt that a protracted trade conflict with the U.S. would permanently shrink the level of domestic gross domestic product, the minutes of a policy decision meeting showed on Wednesday.

The BoC trimmed its key policy rate by 25 basis points to 3 percent on January 29, its sixth reduction in a row, but cited the risks to the economy should US President Donald Trump go ahead with a threat to impose a tariff on all imports from Canada.

Trump agreed last week to pause those tariffs on almost all goods imports for a month, but on Sunday said he would impose a 25 percent tariff on all steel and aluminum imports.

"It was clear that a protracted trade conflict would lead to a decline in economic activity," the minutes said. "Governing Council members also noted that the adverse impact on the level of GDP would be permanent, and the growth of GDP would be reduced until the Canadian economy adjusts to the tariffs."