Apr 30, 2026
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Canadian businesses were already navigating a tough trade environment before a war half a world away made everything harder. The Bank of Canada's (BoC) April 2026 Monetary Policy Report (MPR) confirms what many owners and workers are already feeling: costs are up, hiring has slowed, and the path forward is lined with uncertainty.
What's squeezing Canadian businesses right now?
The immediate pressure is not just one factor, but a mix of issues with immediate and long-term consequences. U.S. tariffs — currently averaging 5.1% on Canadian imports (1) — have been grinding down exports for more than a year. Steel exports to the United States have fallen by half. Lumber shipments are running roughly 20% below 2024 averages. Aluminum producers, facing a 50% tariff, watched exports collapse before partially recovering by redirecting sales to Europe at lower margins.
On top of that, the war in the Middle East has pushed Brent crude oil to around US$100 per barrel — well above the US$60 the BoC assumed in January, before all this global turmoil. Higher fuel costs mean higher transportation, freight and production costs, which are being passed along the supply chain. In the April MPR, the Bank notes that "higher gasoline and food prices weigh on household purchasing power," and businesses in consumer-facing sectors are feeling that spending squeeze directly.
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In a recent statement to Money.ca, Principal Economist for the Canadian Chamber of Commerce, Andrew DiCapua, explained that the Bank is navigating a difficult balancing act. "The Bank finds itself in a tricky spot. Inflation expectations are climbing for both businesses and consumers. In the face of this, they are holding the line and projecting stability."
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How bad is the job market?
According to the MPR and recent Statistics Canada data, the labour market is soft without being in crisis. The Bank reports that the unemployment rate has remained in a range of roughly 6.5% to 7% for the past 12 months. Wage growth is holding between 3% and 3.5% — enough to roughly keep pace with inflation, but not enough to reflect a healthy, tight labour market.
The real issue is where the weaknesses lie — and it's not equal, but concentrated in a few key areas. As the MPR states:
"Employment growth has slowed overall since early 2025, with employment contracting in sectors hit hard by higher US tariffs."
That means workers in manufacturing, steel production, softwood lumber and auto parts are absorbing the sharpest shocks.
As the Bank noted, adjustments are occurring mainly through reduced hiring rather than outright layoffs — but for workers in tariff-exposed industries, fewer job openings mean fewer options.
Is CUSMA the wildcard that changes everything?
For business owners with exposure to the U.S. market, the single biggest unknown is the 2026 review of the Canada-United States-Mexico Agreement (CUSMA). The Bank identifies this as the main downside risk in its April MPR — and started to raise concerns over this agreement in early March.
The base case assumes the deal holds. But the Bank flags that a worse outcome — including possible U.S. withdrawal — could mean reduced access to U.S. markets, weaker business investment and a chill on spending and hiring that would extend far beyond tariff-affected sectors.
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DiCapua notes that commodity costs are already complicating the picture. "Rising commodity prices are adding to inflationary pressures, and the Bank now expects headline inflation to remain above target this year. The reality is that global commodity prices are likely to stay elevated."
What's the outlook for the rest of 2026?
The Bank projects gross domestic product (GDP) growth of 1.2% in 2026 — modest, and barely above the pace of population growth. Consumption growth is expected to average just above 1%. Business investment intentions remain weak in tariff-exposed sectors, though there are signs of improvement in domestic-demand-driven industries.
Consumer price index (CPI) inflation is expected to peak at roughly 3% in April before gradually declining back toward the Bank's 2% target in early 2027 — assuming oil prices normalize. But that's a significant caveat. As a result of this energy-driven inflationary pressure, the Bank is now considering a scenario where persistently elevated oil prices will keep inflation close to 3% for more than a year; this scenario would require an interest rate increase (or more) to bring inflation back under control.
For now, DiCapua says the rate path looks relatively stable: "With the Canadian economy still facing headwinds, the risk of persistently high inflation remains relatively contained. For now, the path for interest rates looks largely flat for the time being."
What should business owners and workers do now?
For businesses with concentrated exposure to tariff-affected sectors — steel, lumber, aluminum, auto — this is the moment to assess diversification options: New markets, new products, different supply chains. The Bank notes that businesses reporting less hesitancy to enter new U.S.-alternative markets are faring better than those waiting for trade certainty to return.
Workers in trade-exposed industries should treat this as a signal to build a financial cushion. A larger emergency fund — closer to six months of expenses rather than three — offers meaningful protection against a labour market where new opportunities in your sector may be slow to appear.
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The Bank is not forecasting collapse. But it is describing an economy under simultaneous pressure that businesses and workers cannot afford to ignore.
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Bank of Canada (1)
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Romana King is the Senior Editor at Money.ca. She writes for various publications, and her book -- House Poor No More: 9 Steps That Grow the Value of Your Home and Net Worth -- continues to be an Amazon bestseller. Since its publication in November 2021, this book has won five awards, including the New York CPA Society's Excellence in Financial Journalism (EFJ) Book Award in 2022.
