New tariffs raise concerns, but bank leaders say Canadian economy remains resilient

Canada’s largest banks say the country’s economy is showing resilience despite a renewed escalation in trade tensions with the United States.

While executives acknowledged the uncertainty created by the latest round of tariffs, most described the situation as manageable and said key economic fundamentals remain strong.

Their comments came during third-quarter earnings calls this week, as lenders outlined how they are preparing for potential risks tied to the ongoing dispute.

Bank leaders point to economic strength

Royal Bank of Canada CEO Dave McKay said most Canadian exports continue to avoid tariffs despite the latest trade measures.

“While Canada and the U.S. have yet to come to a longer-term solution, we note the average effective tariff rate remains low at approximately six per cent, with over 80 per cent of exports remaining duty-free,” McKay said during his company’s earnings call.

Executives at Scotiabank also described the current trade tensions as manageable.

“The fundamentals in Canada are pretty good, if you look at the job growth numbers, if you look at the fiscal capacity on the back of oil prices, and if you look at some of the activity that’s starting because of the prime minister’s agenda, you actually have a backdrop that’s pretty good,” Scotia chief executive Scott Thomson said on the bank’s third-quarter earnings call on Tuesday.

Trade dispute escalates

The latest round of tensions between Canada and the United States intensified after U.S. President Donald Trump imposed 50 per cent tariffs on approximately $28 billion worth of Canadian products last weekend.

Ottawa responded by introducing dollar-for-dollar tariffs on a range of American goods.

The growing trade conflict has added pressure on businesses and consumers, prompting banks to examine how prolonged uncertainty could affect lending and economic growth.

CIBC building reserves for tariff-related risks

CIBC said it continues to prepare for a variety of outcomes as trade and geopolitical tensions affect the broader economy.

Frank Guse, the bank’s chief risk officer, said the lender’s credit performance remained resilient during the quarter.

“We have built additional reserves for tariff-related risks through expert credit judgment overlays since the beginning of fiscal ‘25 and continue to build our allowance this quarter,” Guse said.

“Our most sensitive business lending exposures to the tariff impacts represent less than one per cent of the bank’s total loan portfolio. We’ve also run a variety of stress testing on the portfolios to ensure we remain well prepared for a range of outcomes.”

Optimism around Ottawa’s economic agenda

Several bank executives also expressed support for Prime Minister Mark Carney’s economic priorities, including efforts to accelerate major infrastructure and national-interest projects, diversify trade relationships and strengthen Canada’s defence capabilities.

National Bank chief executive Laurent Ferreira said uncertainty continues to weigh on business investment, but he sees encouraging signs.

“While business confidence and investment are difficult in the current context, I am encouraged by the way governments and business leaders are mobilizing around Canada’s economic priorities,” Ferreira told analysts on a third-quarter conference call Wednesday.

CIBC chief executive Harry Culham said the focus on economic resilience could create significant opportunities.

”Canada’s renewed focus on sovereignty and economic resiliency is creating one of the most significant capital mobilization efforts and opportunities our country has seen in decades. The implementation of Canada’s defence industrial strategy represents a substantial opportunity for our commercial clients,” Culham said.

Investors react positively

Heading into earnings season, analysts had raised concerns about elevated valuations after Canadian bank stocks posted strong gains earlier this year.

Despite those concerns, early reactions to the latest quarterly results appeared positive, suggesting investors remain confident in the sector’s ability to navigate the evolving trade environment.

• with files from The Canadian Press