As the U.S.-Canada trade war escalates, Royal Bank of Canada RY-T chief executive officer Dave McKay is calling for a reduction of barriers to economic growth within Canada and consideration of financial supports to help businesses and consumers weather the hit from tariffs.
Mr. McKay said in an e-mail to all RBC employees Sunday evening that Canada should remove internal trade barriers, expedite energy and infrastructure projects, invest in technological innovation and improve tax competitiveness, according to the memo seen by The Globe and Mail.
U.S. President Donald Trump’s administration is imposing a 25-per-cent tariff on all Canadian goods except energy products, which will be taxed at 10 per cent. Canada plans to retaliate on $155-billion worth of American-made products. The tariffs were due to take effect Tuesday until Canada received a one-month reprieve late Monday afternoon.
“There are no winners in a prolonged trade war between allies, especially two nations that each have their own deep-rooted identity, unique culture and strong sense of independence,” Mr. McKay said.
“The tariffs could severely impact jobs and hurt affordability for Canadian and American workers and families, and many small and mid-sized businesses will be put at risk as the cost of doing business goes up.”
Some of Canada’s biggest bank CEOs have jumped into the discussion on how the country and the financial sector could mitigate the effects of tariffs.
In an exclusive interview with The Globe on Thursday, Canadian Imperial Bank of Commerce CM-T CEO Victor Dodig joined the call for the federal government to appoint a “border czar,” as well as offer financial support for businesses affected by the trade war.
In a separate interview, National Bank of Canada NA-T CEO Laurent Ferreira urged Ottawa to relax regulatory and tax burdens and implement its own reforms – including a “Buy Canada Act” – aimed at protecting the Canadian economy.
RBC is in discussions with Ottawa to develop programs and resources that could help its clients navigate the economic effects of the trade war.
“I want you to know we’re already working closely with the Canadian government to develop tools to support clients, just as we did during the pandemic,” Mr. McKay said.
During the pandemic, Canada’s banking regulator lowered capital reserve requirements for large banks by cutting the domestic stability buffer, which requires lenders to build a cash cushion to mitigate the blow of an economic downturn. By lowering the buffer, the Office of the Superintendent of Financial Institutions freed up hundreds of billions of dollars in lending capacity for businesses and consumers.
The federal government also provided financial support through payment deferral programs.
RBC economists said in a report on Sunday that the impact of tariffs on Canada’s economy will be severe. If the tariffs and countertariffs continue for any length of time, the measures “could wipe out Canadian growth for up to three years, with the largest impacts in the first and second years,” Frances Donald and Nathan Janzen said.
They estimated that Canada’s unemployment rate, which was 6.7 per cent in December, could rise by two to three percentage points as the trade war drags on. The last time jobless numbers jumped that high was September, 2020, during the pandemic lockdowns.
Mr. McKay said that, as tensions escalate around the world, Canada and the U.S. should be strengthening their relationship. But the trade war also presents an opportunity for Canada to diversify its trading partners in global markets.
For years, economists and experts have been urging the federal government to increase trade with other countries and reduce Canada’s reliance on the U.S. market.
“On a personal note, and as a Canadian business leader, I believe this is the moment to unite the country behind a long-term economic agenda,” Mr. McKay said. “The world wants what Canada can provide in great abundance. We can feed and fuel the growing world and be a leader in sectors like energy, agriculture, critical minerals, advanced manufacturing and technology.”
RBC is Canada’s largest lender, but it also operates in the U.S. and British markets, which the bank refers to as its second and third homes. The bank has more than 97,000 employees and 17 million clients in Canada, the U.S. and 27 other countries.
“As we navigate the weeks ahead, I’ll ask each of you to do what we have always done, and that’s stay focused on our clients and communities when they need us most,” Mr. McKay said to the bank’s employees. “Our bank has the financial resilience and expertise to help our clients navigate difficult economic times.”