Ottawa — In a striking interview with Reuters, Bank of Canada Governor Tiff Macklem delivered a sobering message on the fragility of the Canadian economy, warning of an “unusual potential” for a fresh shock as geopolitical tensions and unpredictable U.S. trade policy converge to cloud economic forecasts.

Macklem’s comments come as the central bank held its benchmark interest rate steady, maintaining its cautious stance amid elevated global uncertainty and volatile trade dynamics.

“There is unusual potential for a new shock, a new disruption,” Macklem told Reuters, highlighting that geopolitical risks are unusually elevated and more likely than usual to pull Canada’s economy off track.

The governor pointed to a string of provocative actions by the United States under President Donald Trump — from threats over Greenland, to political interference in Venezuela, and repeated warnings of tariffs on Canada — as factors that could derail Ottawa’s carefully calibrated economic projections.

One of the flashpoints Macklem cited was Trump’s threat to impose a 100% tariff on Canadian goods if Ottawa pursues a trade deal with China — a move economists say could significantly disrupt the tightly integrated North American supply chain.

Despite these headwinds, the Bank of Canada’s latest monetary policy report projects modest growth in 2026 and 2027 and inflation near its target. But Macklem stressed that the risk of being wrong has increased.

“We are feeling like there are more things that can go wrong around that forecast. That forecast is more vulnerable,” he said, underscoring the difficulty of predicting economic trends in such turbulent times.

Markets currently see no interest rate cuts scheduled through 2026, yet paradoxically, some investors are pricing in a possible rate hike in the year’s final quarter, reflecting deep uncertainty about the economy’s direction.

Macklem didn’t just single out trade threats — he also highlighted concerns over the independence of the U.S. Federal Reserve, describing recent political pressure on Fed Chair Jerome Powell as a source of volatility.

Macklem said he personally reassured Powell of his support, praising his leadership “under difficult circumstances” and noting that stable U.S. monetary policy is crucial for both the U.S. and Canadian economies.

“A Federal Reserve that is providing stability to the U.S. economy is good for the U.S. economy; it’s good for the Canadian economy,” Macklem remarked.

Macklem also drew attention to the broader implications of political unpredictability, arguing that foreign investors are increasingly nervous about U.S. policy shifts, prompting them to hedge currency risk — a trend that has weighed on the U.S. dollar’s status as the global safe-haven currency.

“There’s not a lot of great alternatives,” he said, pointing to the dilemma facing global investors as traditional anchors of financial stability become less reliable.

Macklem’s unusually candid warnings suggest that Canada’s economic path is more uncertain than its official forecasts imply. With trade tensions, geopolitical risks, and central bank independence all in flux, policymakers — and markets — may need to brace for surprises.

Whether these threats materialize into actual shocks or remain behind-the-scenes risks, Macklem’s remarks mark a rare moment of caution from one of the world’s most respected central bankers — and a reminder that even strong economies are vulnerable in an unpredictable era.