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Tariff Costs Put New Pressure on U.S. Corporate Profits

Rising tariff expenses are beginning to weigh heavily on U.S. companies, prompting executives across multiple industries to warn that profit margins may tighten in the months ahead. Many firms had initially suggested they could manage the added costs through efficiency improvements or selective price increases, but that confidence is fading as import-related expenses continue to climb. Companies that rely on global supply chains are feeling the strain most acutely. Higher costs on imported materials and components are forcing difficult decisions: pass the increases on to consumers, risking weaker demand, or absorb the costs internally, which directly erodes profitability. For many businesses, neither option is attractive. Consumer-facing brands are finding it especially challenging to raise prices further, as shoppers show growing sensitivity to even modest increases. This resistance limits the ability of firms to offset tariff-driven expenses, creating a squeeze that is beginning t...
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How the Bank of Canada is trying to bring inflation back to 2 per cent


The Bank of Canada has been struggling to tame inflation, which surged to a four-decade high in 2022 and remains above the central bank’s 2-per-cent target. The bank has raised its policy interest rate to 5 per cent, a two-decade high, but has not seen much progress in lowering core inflation measures, which strip out the most volatile price movements.

The bank is now looking for signs that inflation is on a downward track before easing monetary policy. It expects inflation to hover around 3 per cent until mid-2024, then decline to around 2.5 per cent by the end of the year and return to the target in 2025.

The main drivers of inflation have changed over time. In 2021 and 2022, inflation was largely driven by global factors, such as oil prices and supply chain disruptions. These factors have since eased, as oil prices have fallen and consumer demand has shifted from goods to services.

However, inflation is now being driven by domestic factors, such as shelter costs, wage growth and labour market conditions. Shelter inflation, which includes mortgage interest, rents, home insurance and electricity, is expected to remain high and act as a headwind against the return of inflation to the target. Wage growth has been outpacing productivity growth, which could lead to higher labour costs being passed on to consumers. The labour market has cooled, but not enough to moderate wage growth.

The bank is also monitoring the inflation expectations of consumers and businesses, which could influence their price-setting behaviour. If inflation expectations become unanchored from the target, the bank may have to act more aggressively to restore credibility.

The bank faces a delicate balancing act, as it tries to bring inflation back to 2 per cent without causing unnecessary harm to the economy. It does not want to wait too long to cut interest rates, as that could lead to an overshooting of the target and a recession. But it also does not want to cut rates too soon, as that could fuel the housing market and consumer spending, and add to inflationary pressures.

The bank is looking for “insurance” that inflation is on a path to the target, before making its next move. That could come as early as April, or as late as the summer or later in the year, depending on how the data evolve. The bank’s decision will have implications for mortgage borrowers, savers, investors and businesses across the country.

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