Trade, tariffs and growth backdrop – RBC

Royal Bank of Canada (RBC) analysts point out that recent and prospective tariff changes, higher energy prices and CUSMA renewal talks will shape Canadas macro backdrop, relevant for the Canadian Dollar (CAD). They expect March trade to benefit from stronger net energy exports, while 2026 should see a more stable trade environment and support from earlier Bank of Canada (BoC) rate cuts and fiscal spending.

Tariffs, energy shock and policy support

“The monthly trade data will continue to be distorted by the timing of tariff announcements, but the U.S. tariff rate on imports from Canada was likely less impacted than most other countries by the shift in U.S. tariff policy in February in the wake of the U.S. Supreme Court ruling against IEEPA tariffs.”

“The spike in energy prices due to conflict in the middle east will push Canadas net energy trade balance higher, but will also raise costs for consumers.”

“Significant trade uncertainty remains with negotiations on CUSMA renewal set to intensify in coming months, but we continue to expect, as a base-case, that a more stable international trade backdrop in 2026 (albeit still at significantly higher tariff rates) will leave trade as less of a headwind to growth than it was in 2025.”

“That, coupled with the lagged impact of earlier Bank of Canada interest rate cuts and higher government spending plans will support further improvement in per-person (and per-worker) economic conditions in the year ahead.”