TORONTO — The fallout from the U.S.-led global trade war has turned out to be less dramatic than many anticipated, but tariffs continue to warrant the Bank of Canada’s close attention, governor Tiff Macklem said at The Logic Summit in downtown Toronto Monday.

“I don’t think we’re overdoing it on tariffs,” Macklem said, referring to the central bank’s monetary policy response. “They’re the highest they’ve been in 80 years, since the 1930s… We can’t replace 75 per cent of our trade with the U.S.”

Financial markets have recovered after nosediving on April 2, dubbed “Liberation Day,” when U.S. President Donald Trump announced massive tariffs on countries around the world. Trump has since significantly walked back many of those measures, but levies continue to dominate the Bank of Canada’s decision making.

Macklem said the central bank has limited tools to address the situation, a message he has repeated in recent months. Inflation is too hot to stimulate the economy through massive interest rate cuts and stimulus programs, tools the government and central bank used to get Canada through the COVID-19 pandemic and the 2008 financial crisis, Macklem has said.

“We can’t target the heavily tariffed sectors… we can’t help companies develop new markets or reconfigure their supply chains,” he said. “There’s only so much we can do.”

Last week, the Bank of Canada cut the rate private lenders use to calculate borrowing costs to 2.25 per cent, with Macklem saying it was likely the central bank’s last adjustment for a while unless economic conditions change dramatically. The Bank of Canada predicted Canada will avoid recession, but growth will be weak, with gross domestic product increasing 1.2 per cent this year and 1.1 per cent in 2026. The central bank said the economy can’t handle much more growth than that without stoking inflation.

“Our priority is to make sure the tariff problem doesn’t become an inflation problem,” Macklem said at Monday’s summit. Policies that would help restore Canada’s productive capacity, such as growing internal trade and improving east-west transportation, are outside the central bank’s mandate, he said.

Many academics and investors have moved on to another concern: a possible stock market bubble caused by inflated AI valuations. Chipmaking giant Nvidia estimates global AI infrastructure spending could reach US$4 trillion by 2030, but a Massachusetts Institute of Technology study from July suggests 95 per cent of organizations are getting zero return on that investment. 

Macklem said he doesn’t see AI causing a crash as serious as the 2008 financial crisis, as the financial system is better capitalized and more resilient today. He said AI may cause a painful period of disruption, but hopefully in the service of long-term economic and productivity gains.

“You can’t block the disruption,” he said. “If you don’t have any disruption, it’s hard to get to the top line.”

Read more from The Logic Summit 2025 here.