Bank of Canada says US tariffs could trigger deep recession

OTTAWA, April 16 (Reuters) - If U.S. tariffs trigger a global trade war, inflation in Canada would spike and the country would enter a deep recession, according to a Bank of Canada scenario released on Wednesday.

Citing the high level of uncertainty, the central bank did not issue its regular quarterly economic forecasts. Instead, it provided two scenarios as to what might happen.

In the first scenario, most tariffs are negotiated away, and Canadian and global growth weaken temporarily. Canadian inflation falls to 1.5% for a year and then returns to the bank's 2% target.

In the second scenario, the tariffs spark a long-lasting global trade war. Canada enters a significant recession, inflation spikes above 3% in mid-2026 before returning to 2%.

The bank, which stressed that many other scenarios were possible, estimated annualized first quarter GDP was 1.8%, down from the 2.0% it forecast in late January.

(Reporting by David Ljunggren, editing by Promit Mukherjee)

((Reuters Ottawa bureau; [email protected]))

Keywords: CANADA CENBANK/FORECASTS

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