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Election front-runners Mark Carney and Pierre Poilievre are making promises that sound like those made in most other elections as they crisscross the country: new spending and tax cuts on things people want to hear about, such as housing and energy, and vague promises to pay for it by trimming the fat.  

But this election is different, given that Canada may soon be facing a host of substantial new costs as it reconsiders its relationship with the United States in the wake of U.S. President Donald Trump’s trade war .

Those costs include direct financial support as a result of a slew of tariffs that have been imposed or threatened, as well as costs associated with reorienting the Canadian economy toward other markets, building supply chain resilience and expanding military spending to meet North Atlantic Treaty Organization (NATO) commitments. The potential for a wider economic slowdown and possibly even a revenue-sapping recession will only add to the bill.

“The bottom line is it’s going to be expensive,” said Rebekah Young, a vice-president and economist at the Bank of Nova Scotia who published a report last month that considered the early impact of U.S. policies on Canadian “ballot box” budget issues.

“Irrespective of what leaders set out as their platforms over the coming weeks, if we find ourselves in a much darker place, they’re going to have to rewrite some of those fiscal plans, or it’s going to be rewritten for them.”

She said nothing has tamped down her view since penning her report, with the risk of the darker scenarios she envisioned, including costly stimulus programs in Canada, only increasing after Trump unleashed varying levels of double-digit tariffs on more than 50 trading partners on April 2, even though he then delayed the stiffest tariffs until July.

“If we face much more serious economic shocks, particularly coming from south-of-the-border policies, whoever is leading the country is going to be ratcheting up stimulus programs,” Young said, pointing to programs rolled out to stabilize the economy following the shocks from the great financial crisis in 2008 and the COVID-19 pandemic in 2020.

That doesn’t appear to be slowing the pace of promises on the campaign trail, which has led many to predict increasing deficits are unavoidable, regardless of who wins, especially given the spectre of a North American and perhaps worldwide economic slowdown.

The Liberals plan to put the federal government back into the business of building the country’s supply of homes by using $25 billion in financing. There are also planned tax cuts for the middle class and capital spending to boost productivity.

Carney has said his government, if re-elected, would create a $5-billion fund for infrastructure projects at Canadian transportation hubs to help refocus trade beyond the U.S. Border security will also be beefed up through new investments, new equipment and hiring 1,000 border services officers. He said the cost of the Liberals’ platform will be available to voters before the advance polls close on Monday.

Poilievre, meanwhile, has focused on tax cuts, pledging to drop the rate on the lowest income tax bracket to 12.75 per cent from 15 per cent and defer capital gains on investments provided they are reinvested in Canada. He has also pledged to cut “wasteful” foreign aid.

But there are spending plans, too, albeit with a pledge to cap government spending by finding equal savings for every new expenditure. Conservative promises include building a $1-billion road connecting critical mineral mining sites to Ontario highways, a $250-million-a-year addiction recovery program and a program to reimburse cities for 50 per cent of each dollar they cut in housing development costs.

Both party leaders have also announced plans to create energy corridors to reduce Canada’s reliance on the U.S. and to streamline approval processes.

A price to be paid

No matter who wins, Doug Porter, Bank of Montreal’s chief economist, said he expects to see a reversal of the downward trend that reduced the federal government’s deficit to around $50 billion this past fiscal year, which ended March 31.

“When you add it all up, we’re looking at almost certainly a widening of the deficit. I wouldn’t be shocked if the deficit goes back above $60 billion in the current year, especially given the fact that the economy is going to be struggling with a trade war,” he said.

“Fiscal policy now, at least temporarily, has to go the other way for a spell, where we’re probably going to have to tolerate somewhat wider deficits, at least for this year and maybe next year.”

Porter said he’s “horrified” by the thought of pandemic-level government spending, though he acknowledged some tariff relief measures may be necessary.  

The politicians seem to agree.

Poilievre has already promised to create a “Keep Canadians Working Fund” that will provide up to $3 billion in short-term credit lines and low-interest loans to companies affected by tariffs. Carney, meanwhile, has relaxed employment insurance requirements so that laid-off workers can get benefits right away and has allowed corporate tax payments and GST remittances to be deferred. All that could be just the start.

“I still think there is room, especially in a tough situation, for Ottawa to borrow a little bit more,” Porter said, adding that Canada has retained its borrowing capacity despite years of deficits and there is an appetite for debt in countries with a triple-A rating.

However, one corner of the financial markets has signalled an increase in concern amid the tariff turmoil of the past couple of weeks. While still low risk, the five-year credit default swap on Canadian bonds — which reflects the cost of insuring against a default — rose to 30 basis points on April 10 after sitting flat at 25 basis points through most of March, according to Jan Edvard Ericsson, an associate professor of finance at McGill University who specializes in risk in corporate bond and credit derivative markets.

“I don’t know how active this market is, but the (bottom line) would be that the cost of insuring against default in Canadian treasury markets has increased quite a bit in the last two weeks,” he said.

Trump delayed the harshest of his reciprocal tariff threats on April 9, following a week of tumbling stock markets and soaring U.S. bond yields. But persistent concerns about the widening of trade disruptions across the globe and the increased risk of recession , which add a layer to the price tag that Canada’s government will be faced with to assuage an aggressive U.S. administration, come at a difficult time for the country.  

The federal government hasn’t fully reined in the deficits run up during COVID-19, which ground the economy to a halt, followed by a slow recovery period marked by inflation. A path to reducing the deficit no longer seems as sustainable as it did just six months ago.

During the first full year of the pandemic, fiscal 2020-21, the deficit soared to $328.7 billion as a result of increased health and social spending and reduced revenues, according to Statistics Canada. It still topped $90 billion the following year and, despite a dip in fiscal 2022-23, it swelled back up to $62 billion the year after that, well above the $39.4-billion deficit in 2019.

In the previous couple of years, the deficits were below $20 billion and represented less than one per cent of gross domestic product (GDP), though Porter said that was partly due to low interest rates.

A $48-billion deficit was forecast for 2025 before Trump began sabre-rattling on trade, a figure Scotiabank’s Young said could quickly balloon in the event a full-blown trade war is not averted.

Based on past crises, she said she wouldn’t be surprised to see potential stimulus spending of around two per cent of GDP, or $60 billion, on top of material shortfalls stemming from revenue losses owing to much weaker economic activity. Combined, that could add another $100 billion to spending over the next two years.

“Election risk adds further to fiscal pressures. Middle-income tax relief along with ramped-up military investments alone could tally up to $10 billion a year before any offsets through cost cutting,” she said.

While both of the front-running candidates and their parties are talking about making cuts and fiscal restraint, the easy targets they’re espousing may not be enough.

“Even aggressive attrition of the public-service footprint would likely only make a small dent in spending pressures, given compensation reflects only 12 per cent of total federal outlays,” Young said.

On the spending side of the ledger, boosting the military will require significant outlays.

As Canadian political leaders laid out their latest promises this month, U.S. Secretary of State Marco Rubio upped the ante on NATO-spending commitments, demanding that member countries spend an eye-watering five per cent of GDP to fund the defence alliance.

The Liberal government has pledged to crank up the country’s NATO commitment to the current expectation of two per cent of GDP by 2030, with spending on track to reach $60 billion a year by the end of the decade. Poilievre has also supported more defence spending.

Young pegs the budgetary increase — beyond what was already planned for less aggressive NATO spending — at an incremental $10 billion to $15 billion a year on the accelerated timeline through 2030.

However, if a higher threshold must be met, as Rubio has suggested, whoever is elected could be forced to come up with an additional $100 billion annually by 2030, she said.

Borrow to invest

Whichever party forms the next government would be wise to pay for competing priorities by looking first at borrowing and spending that will improve Canada’s position regardless of what this or any U.S. administration is pushing, according to David Detomasi, a professor of international business at Queen’s University who specializes in political economy and military studies.

“There is borrowing that you do for investment that should lead the country to be in a better place down the road,” he said. “Those are things like pipelines, like ports; things like that build the infrastructure, particularly east-west, that should generate a return.”

Such projects could be financed through public-private ventures and risk-allocation mechanisms that would take some of the load off government, he said.

Detomasi said the government could be forced to rethink spending on some social programs, such as Old Age Security , where people with considerable means are nevertheless eligible for top-ups, though such cuts are unlikely to be popular politically.

“There’s a growing bulge in government deficits that is due to the promises that have been made to people who are about to retire,” he said. “We have to decide what kind of debt is good and what debt isn’t.”

Ottawa has room to cut costs beyond the public service, where both employment and the use of consultants have soared over the past decade. A Macdonald-Laurier Institute report released on April 3 said spending cuts of nearly 15 per cent would only bring Ottawa back in line with the proportion of GDP spent before a steady ramp-up began 10 years ago.

There is a school of thought that the next government can find ways to pay for this current crisis without dragging the country into years of rising deficits and debt repayments by tapping into a playbook from the mid-1990s.

Christopher Ragan, an associate professor of macroeconomics and public policy at McGill University, said the next government should commit to a program of closely scrutinizing all programs and services, ranking them and then cutting spending from the bottom rather than simply resigning itself to borrowing.

“This is the really hard part of government: to set priorities,” he said. “If defence is now a No. 1 priority, or No. 2 priority after health care … what can we kick off the list?”

If spending isn’t prioritized in this way, given the demands imposed by the current U.S. administration, it can only mean higher taxes, further borrowing or both, Ragan said, adding this would push Canada towards the dangerous path the country was on 30 years ago. That resulted in a debt downgrade and a warning that the International Monetary Fund might have to step into the country’s fiscal affairs.

“My fear is that we wake up one morning and … ‘Oh my god, the bond buyers no longer want to buy our bonds.’ And that’s exactly what happened in 1995 for Canada,” he said.

Things don’t even have to get that extreme for bond markets to react negatively in response to a country’s fiscal plans. After Trump announced his broadest and deepest tariff threats in early April, there was a selloff of U.S. government bonds, which was unusual since equity markets were also tumbling.

“The backup in yields was mostly driven by rising real yields and not higher inflation premiums … indicating a more fundamental drop in demand,” BMO’s Porter said.

Another example is the United Kingdom’s bond market that was shaken in 2022 in response to concerns that prime minister Liz Truss was going to fund large tax cuts paid for by borrowed money.

“The (U.S.) bond market will be critical to watch in the months to come because Trump’s fiscal policy will (also) be expansionary,” Craig Alexander, president of Alexander Economic Views Inc. and a former chief economist at Toronto-Dominion Bank, said. “Tariff revenues will be inadequate to cover tax costs. So, a Truss-style bond crisis could be in store for America if they are not careful.”

As for Canada, he said the country may have no choice but to run large deficits to pay the full cost of a multifaceted pivot away from the U.S. for trade and foreign investment.

“Could it cost us our triple-A credit rating? The answer is, yeah, it could,” he said. “But it might be what you have to do in order to respond to this existential crisis facing Canada.”

Ragan said Canada’s debt and deficits would have to climb much higher for a replay of the bond drama in this country in the 1990s. Government debt represented more than 70 per cent of GDP — compared to around 40 per cent today — and the Liberals of the day instituted drastic cuts, including to the public service and transfer payments to provinces.

But it concerns him that there seems to be little fear among Canadian politicians about heading towards a repeat scenario even in the face of the current trade imbroglios and threats from the U.S. administration.

“We’re in a situation that is politically a little bit tougher (to effect such change), which is that it’s very easy for governments now, provincial and federal, to be complacent,” Ragan said.

Provincial governments also aren’t ignoring the concerns businesses are feeling. For example, Doug Ford ’s Conservative government in Ontario announced $9 billion of relief for businesses on April 7, including six-month tax deferrals to help them keep workers employed.

Temporary relief and stimulus packages are a valid response to a crisis, but Robert Shepherd, a professor at Carleton University’s School of Public Policy and Administration, said governments across Canada should be approaching the increased fiscal demands and unsteady economic outlook far more broadly.

He said elected officials would be well advised to use these turbulent times to move away from their usual budgeting practices and institute comprehensive reviews of strategic priorities and spending to reduce program inefficiencies and cost overruns as well as accommodate new policy and program priorities.

“This is not simply about moving money around from one pot to another to address different priorities,” he said. “There is so much more that has to be done first.”

Shepherd said some senior government officials have endorsed the idea laid out last year in a C.D. Howe Institute study that suggested governments would insulate themselves from the fiscal upheaval of crisis after crisis if they built in frequent and comprehensive reviews of their spending and strategic priorities.

“The essential point is that all spending has to be reviewed, as well as setting up the conditions for a strategic review of our policy and governance arrangements to support smarter spending,” he said. “It could be decided from such a strategic review that defence spending has to increase. The question then becomes, what does one have to give up to support that spending while maintaining other priorities?”

The C.D. Howe study said strategic reviews in countries such as the Netherlands, Denmark, Ireland and Spain have led to fiscal sustainability — from controlling deficit size and the amount of public debt to properly managing the debt-to-GDP and interest-cost-to-revenue ratios. They can also improve long-term public policy outcomes by reducing overlaps and identifying areas to direct spending and investment to create strategic advantages for the future.

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“Rooted in the understanding that policies and programs reflect the context and assumptions of governments and societies when they were designed, this perspective asks what happens when domestic and international contexts evolve precipitously,” the authors said. “They identify the mounting pressures, reallocation possibilities, and emerging challenges which all political parties … should consider and address.”

With little insight so far on the campaign trail about whether the next Canadian government will embrace such an approach, Detomasi said the first six weeks for whoever wins will set the tone.

“You’ve got a double whammy hitting our financial wherewithal,” he said. “So, (they’ve) got to figure out a way to not only pay for what Mr. Trump wants, but to also somehow pay for the promises that are currently being made.”

• Email: bshecter@nationalpost.com

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With the U.S. and China escalating their trade war, experts say China believes it can both inflict more damage on the U.S. and tolerate more pain.

The French language leaders’ debate kicked off on Wednesday night with U.S. President Donald Trump’s trade war one featured as one of the first topics discussed. Participants included Liberal Party leader Mark Carney, Conservative Party leader Pierre Poilievre, Bloc Québécois leader Yves-François Blanchet and New Democratic Party leader Jagmeet Singh. The leaders exchanged barbs on energy, affordability and who is the best person to handle Trump. Here, the Financial Post breaks down five key economic takeaways from the debate.

Supply management will not be sacrificed in trade war

Trump’s trade war and the need to reach some sort of agreement with the U.S. in order to put an end to tariffs was one of the night’s big topics. Poilievre said if elected, he would attempt to fast-track such an agreement with the Americans, but added that Trump is hard to control. Carney had previously promised to begin negotiations on an economic and security agreement with the U.S., if elected. While both leaders were short on detail on how to achieve this, the question of whether Canada’ supply management would be subject to any future negotiation was asked. All party leaders promised that supply management would not be touched, despite concessions being made on the three last trade deals negotiated by Canada, including the Comprehensive and Progressive Agreement for Trans-Pacific Partnership (CPTPP), the Canada-European Union Comprehensive Economic and Trade Agreement (CETA) and the Canada-United-States-Mexico Agreement (CUSMA). Blanchet said Trump wants to flood the Canadian market with Wisconsin dairy, which he says is less regulated and contains more hormones.

More oil production and more pipeline projects

Both Carney and Polievre said they would like to see an increase in oil production in Canada, with Poilievre wanting to see more pipelines built to get Canadian oil to market. Carney said “we need to have pipelines” while also investing in other technologies like carbon capture. Blanchet and Singh would only like to see increased investments go to green energy technology. The question of jurisdiction and regulations as it relates to pipelines and major energy projects became a contentious part of the debate when Blanchet accused Carney of planning to use executive powers to get major projects approved, without consulting the provinces. Carney clarified that he would use executive powers to fast-forward federal approvals, but that projects will still require sign-off from provinces and First Nations. When asked if he would impose a pipeline even if First Nations and provinces did not want it, Poilievre brought up the example of the now-cancelled Northern Gateway Project, which he noted was supported by 80 per cent of First Nations, while 20 per cent were against. He argued that a case like that should be “majority rules.” Both Poilievre and Carney said Canada should wean itself off the reliance on the U.S. for imported oil and become energy self-sufficient.

Housing at the centre of affordability crisis

Housing dominated the debate on affordability among the leaders. Carney has promised to double housing construction, bringing the amount of homes built yearly to 500,000. The Liberal Party has said it will achieve this by creating a new agency called Build Canada Homes, cutting municipal development charges in half and invest more prefabricated and modular homes. Polievre has promised to build 15 per cent more homes each year, cut the goods and services tax on new homes up to $1.3 million and sell 15 per cent of federal buildings to be redeveloped for affordable housing. During the debate, Singh attacked both Poilievre and Carney’s credibility when it comes to solving the housing crisis. Singh pointed to Poilievre’s time as housing minister under former prime minister Stephen’s Harper’s last government, with Singh claiming he built just six homes. Poilievre interjected arguing 200,000 homes were built under his tenure and the average house price was $450,000. Singh also pointed to Carney’s ties to Brookfield Asset Management, an investment firm Singh argues has benefited from the housing crisis by driving up rents in the properties it owns.

Cap on immigration until economy can catch up

There was a consensus among all the leaders that Canada’s immigration system is not working, noting long processing times and lack of capacity when it comes to absorbing the levels of immigration in Canada over the last few years. Carney said the immigration system is not working, especially after the pandemic, and that he would keep the cap on immigration for a couple of years. Poilievre blamed the Liberal government’s immigration policies for causing a housing crisis in Canada and said immigration should go back to levels where population does not surpass housing, jobs and resources in healthcare. Singh and Blanchet also brought up the abuses in the temporary foreign worker program, arguing corporations should not have use of the program, and fraud in the program should be brought to an end.

“Harry Potter” financials?

All leaders were grilled for not producing fully costed platforms ahead of the first leaders’ debate. Poilievre promised his party will release a costed platform in the “coming days” and Carney promised the Liberal plan will become public this weekend, teasing it will create $500 billion of investment in the Canadian economy. Carney, Poilievre and Singh have all promised middle-class tax cuts for Canadians, but have been short on details on how they plan to pay for them. Carney and Poilievre have also promised to make cuts to the government departments, with Poilievre promising to make cuts to consultants and bureaucracy, while Carney says he will make cuts by attrition and keep transfers to individuals and the provinces untouched. Blanchet called these “Harry Potter” financial frameworks that will require “magic” in order to work. When the question of whether more programs like Pharmacare should be the federal government’s priority or increases for the Canada Health Transfer to the provinces, Singh was in favour of both, while the remaining three leaders choose the latter.

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Randall Bartlett, deputy chief economist at Desjardins Group , talked with Financial Post’s Larysa Harapyn about how the Bank of Canada rate will go lower, but not too low. “It will want to make sure that it’s keeping its foot near the break to ensure that those higher inflation expectations don’t get entrenched,” he said.

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• Email: lharapyn@postmedia.com

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The Bank of Canada held its benchmark interest rate at 2.75 per cent on Wednesday amid “pervasive uncertainty” over how U.S. tariffs and the trade war will affect Canada’s economic outlook.  

“The major shift in direction of U.S. trade policy and the unpredictability of tariffs have increased uncertainty, diminished prospects for economic growth, and raised inflation expectations,” the central bank said in a release.  

Here’s what economists think about the Bank of Canada’s decision.

‘We see this as a pause’: CIBC Economics

“We see this as a pause, one tied to the bank’s lack of clarity on the outlook ahead, rather than the end of the easing cycle — unless the tariff threat disappears in short order,” Avery Shenfeld, chief economist of CIBC Capital Markets, said in a note.  

With the caveat that “many other trade policy scenarios are possible,” the Bank of Canada’s Monetary Policy Report outlined two U.S. trade policy scenarios and the outcomes for Canada’s economy — one in which tariffs are limited in scope, leading to temporarily weak growth and inflation remaining around the two per cent target; and the second: a protracted trade war that pushes the economy into recession and inflation temporarily rises above three per cent in 2026.  

Speaking to these scenarios, Shenfeld noted that one “hawkish development” is that the Bank of Canada sees the current output gap as only zero to –1 per cent.  

“But a zero or tiny gap is, in our view, inconsistent with the elevated level of unemployment,” Shenfeld said. “If, as we expect, data from here to the June meeting provides early signs of a contraction of GDP in Q2, thereby widening the output gap, the bank will feel more pressure to respond with a rate cut at that time.”  

‘Mostly dovish’: Capital Economics

The Bank of Canada’s decision to keep interest rates unchanged was “not a huge surprise,” given gains in core prices, concerns over future price increases and uncertainty about how much policy support Canada’s economy will need in the face of ever-changing trade policy, said Stephen Brown, deputy chief North America economist at Capital Economics, in a note.  

“Nonetheless, the bank’s communications were mostly dovish, which lends some support to our view that it will eventually cut interest rates to two per cent this year, rather than pause at 2.25 per cent, as market pricing implies,” said Brown.  

Brown noted that the central bank’s announcement emphasized “monetary policy cannot resolve trade uncertainty or offset the impacts of a trade war. What it can and must do is maintain price stability.”  

“But our sense is that the upside risks to inflation are lower than what the bank might have thought just a week ago, with the March CPI data more favourable, oil prices showing little sign of picking back up, the loonie rebounding and the Canadian government granting various exemptions from its retaliatory tariffs on U.S. imports,” said Brown.  

‘Deserving of further rate cuts’: TD Economics

“In reading the interest rate announcement and MPR, one would have thought the Bank of Canada decided to cut rates today,” James Orlando, director and senior economist at TD Economics, said in a note. “It highlighted the downside risks to the economy, with both scenarios showing a level of weakness that is deserving of further rate cuts.”  

Orlando said signs of economic “fragility” include weakening home sales, shrinking retail sales and a rise in unemployment.  

“Inflation also eased last month, which opened the door for rate cuts today, but the Bank of Canada decided not to walk through it,” said Orlando.  

Looking forward, Orlando said the central bank should resume cutting rates at its next meeting on June 4 and is expected to cut by 50 basis points over the rest of the year. “Canada’s economy has started to show signs of weakness, which we think will continue over the coming months.”  

Scope to ‘make a big splash’ in June: Desjardins

“Despite a number of market participants looking for a cut, the decision was in line with our view and that of the majority of forecasters,” Royce Mendes, managing director and head of macro strategy at Desjardins Capital Markets, said in a note.  

“We expect that by the time of the next Bank of Canada rate decision, the hard economic data will have deteriorated,” said Mendes. “Moreover, with inflation and inflation expectations set to benefit from the downward pressure exerted by the removal of the consumer carbon tax, we see scope for central bankers to make a big splash as early as June.”  

If trade tensions continue to de-escalate, Mendes said there is room for the Bank of Canada to debate whether they need to cut rates by 50 basis points at the next announcement in June. He said Desjardins continues to forecast a terminal policy rate of 1.75 per cent later this year.  

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‘More clarity’ needed: Oxford Economics

In a note on Wednesday, Tony Stillo, director of Canada economics at Oxford Economics, and Michael Davenport, its senior economist, said Oxford Economics’ April baseline forecast falls closer to the Bank of Canada’s illustrative scenario of a lengthy trade war, where current tariffs remain in place, the Canadian economy falls into a year-long recession and inflation rises above three per cent.  

“While we can’t entirely rule out a couple more 25 basis point rate cuts this year, we don’t think the Bank of Canada will reduce rates below 2.25 per cent — the low end of its neutral range — at least until it gets more clarity on the path for trade and fiscal policy,” said Stillo and Davenport.  

• Email: jswitzer@postmedia.com

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As economists predict an impending recession in the United States , the potential impact on Canadian businesses stands as a stark reminder of the immediate need for proactive measures.

The Bank of Canada ’s quarterly Canadian Survey of Consumer Expectations, released in early April, said 67 per cent of consumers are anticipating a recession, up dramatically from 47 per cent last quarter.

Canada requires a comprehensive strategy to generate wealth and attract investment to not only mitigate the risk of recession, but also to support our long-term prosperity.

Wealth generation should start with recognizing the true value of Canada’s greatest treasure: our natural assets. Canada’s public sector needs to assign value to our natural assets on the balance sheets of all levels of government.

Our nation’s rich inventory of natural resources, from pristine lakes and sprawling forests to abundant wildlife reserves and critical minerals , is a significant motivation behind U.S. political figures expressing interest in Canada becoming the 51st state.

Recognizing and leveraging these resources can contribute to maintaining Canada’s economic independence and help foster stability in the face of global challenges.

Government balance sheets do not currently assign a value to natural resources . We need to quickly change this and use innovative thinking to create wealth for strategic investments in Canada’s future.

The tides are shifting and this may present the opportunity we need to get our natural assets reflected in government financial statements. Standards have been proposed by the International Public Sector Accounting Standards Board that would enable governments to recognize certain natural assets on their balance sheets.

This recognition is not just an accounting exercise, but a strategic move to strengthen Canada’s competitiveness and guard our sovereignty. Assigning value to our natural assets can be the first step to the creation of a sovereign wealth fund, one that is supported by these assets.

A nature-based sovereign wealth fund would leverage those assets that are core to our national identity while supporting both the conservation of those assets and strategic investments in national priorities to drive economic growth. Such a fund could strategically invest in artificial intelligence, clean energy, sustainability and advanced manufacturing to drive economic growth.

Through assigning value to our natural assets, governments create monetizable and redeployable assets. For example, it could complement the issuance of green bonds — a form of debt financing for environmental projects. The funds from this financing can support the preservation of these assets, as well as strategic initiatives for Canada’s future.

Unprecedented times call for progressive actions. Canada should not rely on waiting for events such as private purchases or the transfer of rights to its natural resources in order to acknowledge the value of its natural assets.

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Former prime minister Pierre Trudeau once said, “We peer so suspiciously at each other that we cannot see that we Canadians are standing on the mountaintop of human wealth, freedom and privilege.”

The time is now for us to recognize our uniquely Canadian wealth and secure our nation’s prosperity.

Bailey Church leads the National Public Sector Accounting Advisory service line at KPMG and the KPMG Global IPSASB network.

Retailers are already seeing the “ buy Canadian ” movement pay off as consumers favour local products amid the trade war with the United States. Metro Inc. said sales of Canadian products in its stores are now outpacing total sales.

Metro, along with other Canadian grocery retailers such as Loblaw Cos. Ltd.   and Empire , had started labelling items that are “made in Canada” as customers seek to identify locally-produced products and avoid buying U.S. imports .

During Metro’s second quarter earnings call, chief executive Eric La Flèche said the company is putting “even more emphasis” on local and Canadian-made products and optimizing their visibility, whether in store, online or through promotional tools.

“Customers are responding well. Sales of Canadian products are outpacing total sales and the gap has accelerated over the past few weeks,” La Flèche told analysts on Wednesday.

The CEO said that aside from highlighting Canadian products, Metro is also sourcing products from its international suppliers to respond to the needs of customers.

Since U.S. President Donald Trump’s 25 per cent tariff on Canadian goods only came into effect on March 4, La Flèche said that they, along with Canada’s counter tariffs, did not impact Metro’s internal food inflation in the second quarter ended March 15.

The situation, however, remains highly volatile, he said, adding that the retailer is working with vendor partners to find alternative sources of supply whenever appropriate. He also said that some U.S. vendors have been working with the grocer to mitigate the effect of counter tariffs.

“Counter tariffs are not good for inflation,” said chief financial officer François Thibault, who is retiring at the end of the week.

Thibault said the company needs to manage through this on the food side by finding (alternative) sources of supply to keep costs and minimize inflation. “But it puts some inflationary pressures,” he added.

With Trump’s tariffs still in flux, the grocer is trying to wait and see before making big changes, said Thibault.

He said Metro has seen some cost increases related to counter tariffs and has asked for six weeks notice from those suppliers.

“ So, starting now, some small cost increases or related tariffs can start to be reflected,” he said, adding that the company is working with vendors to minimize costs for Metro as well as retail prices for the customer.

The grocer reported $4.9 billion in sales in the second quarter of 2025, a 5.5 per cent increase from the prior year. It said sales were positively impacted by the transfer of two significant pre-Christmas shopping days to the second quarter.

Its food same-store sales were up 5.3 per cent in the second quarter, and up 3.9 per cent when adjusting for the Christmas shift. Online food sales were up 26.2 per cent versus last year.

Pharmacy same-store sales were up seven per cent, with a 7.8 per cent increase in prescription drugs and a 5.3 per cent increase in front-store sales.

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Operating income totalled $461 million, or 9.4 per cent of sales, before depreciation and amortization and impairments of assets in the quarter. This is a five per cent increase from the same quarter last year.

Net earnings were $220 million compared with $187.1 million in 2024, up 17.6 per cent. Fully diluted net earnings per share were $0.99, up 19.3 per cent from $0.83 in 2024.

On an adjusted basis, these numbers are $226.6 million compared with $206.4 million in 2024 and $1.02 versus $0.91, respectively.

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A growing number of Canadians can’t afford to sell their car , never mind buy a new one.

In the first quarter, the number of people who were underwater, or had negative equity in a vehicle — meaning the value of their car was less than the outstanding balance owed on their car loan — more than tripled, according to data from Clutch.ca, a Toronto-based online car merchant.

Based on a sample of nearly 10,000 vehicles Clutch sought to buy in the first quarter, 23.5 per cent of the sellers were underwater, compared to 7.2 per cent last year in the same period.

Clutch chief executive Dan Park described it as a hangover from both the pandemic and the supply chain snafus of recent years, which shut down parts of the global auto production supply chain for months at a time, causing new and used vehicle prices to shoot up.

But the values of some vehicles purchased back then that are entering or re-entering the used vehicle marketplace have not held up.

“What you have are these people that show up to try to sell their car and they’re expecting a cheque to put money in their pockets,” he said. “Instead, the bank is asking them for a cheque to cover the loan balance, which is a shock for people.”

If Clutch proposes a purchase price for a car based on its internal formula that is below the car’s loan value , then the sellers either need to take out a new loan to cover the difference or pay it off themselves. Vehicle loans are typically secured by the vehicle itself. If the borrower defaults, the lender can take possession of the vehicle.

As a result, more sellers are backing out of the proposed sale. In the first quarter, 86 per cent of people with negative equity declined to sell compared to 58 per cent last year.

Overall, Park said the amount of negative equity increased by 52 per cent in the past year to $7,710 on average, up from $5,050 from the first quarter last year.

Although many homeowners closely watch the value of their home, he said many vehicle owners have little sense about the value of their car, which may be the second-most valuable asset they own.

“The challenge is it’s really hard to get rid of your car if you don’t have the money to get rid of the car,” Park said. “Not many people have $7,000 of cash sitting around in the bank account to sell their car.”

But people sometimes need to sell their car for one reason or another. As a result, Park said Clutch has made deals with financial firms that can offer loans of up to $15,000 to help people with negative equity.

The situation demonstrates one way that the broad-based price inflation that started infecting the economy in 2020 is casting a long shadow over the economy and consumers.

In the first quarter of 2021 , a new car cost an average of $45,400, while a used car cost $27,100, according to Autotrader.ca, the online vehicle marketplace. Prices then rose and approximately peaked in the third quarter of 2023 at $67,800 and $39,100 , respectively.

By the fourth quarter of 2024, the most recent data available from Autotrader, prices had stabilized and even slightly fallen, with new and used prices at $65,200 and $34,400 , respectively.

Nevertheless, that amounts to a 43 per cent rise in new vehicle prices on average since 2021 and a 27 per cent rise in used vehicle prices, far in excess of the Bank of Canada’s inflation target range of one per cent to three per cent per year.

But some analysts believe vehicle prices are set to rise yet again given the barrage of U.S. tariffs on both vehicles, steel and aluminum, as well as the threat of imposing tariffs on auto parts next month. Already, two out of five automakers in Canada have temporarily paused some manufacturing here amidst uncertainty about market conditions.

Baris Akyurek, vice-president of insights and intelligence at Autotrader.ca, said he is seeing “unseasonal” changes in pricing once again, with average used car prices creeping up in March by about 0.3 per cent from the previous month to $36,800.

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“In ‘normal’ years, we see a decline in prices in March,” he said, adding that used vehicle prices fell by 2.1 per cent a year ago.

Nevertheless, Park said he’s surprised by how many sellers do not realize they are underwater on their cars.

“The extent to which the proportion of folks with negative equity has gone up is quite staggering,” he said. It’s “kind of a crazy concept if you think about it — the idea of ‘being able to afford to sell your car.'”

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Premier Doug Ford says new bill introduced Wednesday will help strengthen the economy of the province and country. Ford also signed MOUs with the premiers of Nova Scotia and New Brunswick to support free trade between the provinces.

Last month, the United States imposed heavy tariffs on all automobile imports, including on vehicles manufactured in Canada and Mexico. The levy is slated to be extended to some auto parts as of May 3. This comes after sweeping tariffs were levied on Canadian steel, aluminum and many other goods.

Automotive manufacturing contributes over $18 billion to the Canadian economy and is responsible for well over half a million direct and indirect jobs, according to the Canadian Vehicle Manufacturers’ Association .

Still, according to the CVMA, up to 12,000 auto parts workers are already off the job because of the tariffs. The Conference Board of Canada has estimated that 160,000 jobs could be lost across the economy in the current quarter alone if U.S. tariffs remain in place.

The federal government has retaliated against U.S. tariffs with countermeasures of its own and has committed to providing immediate financial support to the automotive sector. The Government of Ontario also announced $11 billion in fiscal relief to help employers keep workers on the job.

I wholeheartedly support the steps that are being taken to protect Canadian workers from the immediate pain wrought by U.S. trade action. Everything must be done to protect strategic, well-paid union jobs.

But, while there’s a chance the U.S. president could temporarily reverse or pause some of the auto tariffs, the U.S. government has made clear its intent to repatriate automotive manufacturing jobs. Despite the strong political support we have seen, the possibility of Canada permanently shedding a portion of its automotive jobs cannot be discounted.

In the face of this threat, additional structural solutions must be considered to ensure Canadian workers are safeguarded well into the future, including private sector initiatives.

Beyond immediate retaliatory measures, I believe one element of Canada’s response must include efforts to retrain workers in sectors affected by U.S. tariffs, so that they may pursue meaningful careers without the threat of disruption hanging over them like a sword of Damocles.

One opportunity lies in efforts to decarbonize global electricity grids and increase the supply of low carbon energy. As part of this effort, 31 nations have pledged to triple the production of emissions-free nuclear energy by 2050, according to World Nuclear News.

The drive to develop nuclear includes Canada, particularly in Ontario, where Bruce Power and Ontario Power Generation are together planning to add some 18,000 megawatts to their nuclear capacity.

The opportunity for Canada to become a global purveyor of nuclear engineering services is immense. The domestic nuclear ecosystem already supports over 89,000 stable and well-remunerated jobs across a wide variety of professional and skilled trades fields in Canada, according to the Canadian Nuclear Association.

But our supply chain is already maxed out. My company, AtkinsRéalis , added almost 1,000 employees to our nuclear division last year alone, and will need more in the immediate future. As Canada looks to support the deployment of new nuclear capacity at home and abroad, the need for additional skilled labour will only continue to grow across the supply chain.

We must seize every opportunity to provide new livelihoods for workers by developing sectors of the Canadian economy that are impervious to U.S. trade actions. Millwrights, electricians, boilermakers, engineers and assembly-line workers: All could find a home in the nuclear sector with targeted retraining.

Some may view this initiative as an opportunistic gesture. I view it instead as making a virtue out of necessity. I take no pleasure in writing these words, and wish the circumstances were not so. But we are reminded daily that disruption and uncertainty are here to stay.

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Government has an important role to play in marshalling the country’s resources to deal with economic uncertainty. I believe private sector business leaders must also take initiative, notably by considering how they might welcome dislocated workers into their ranks.

I look forward to engaging with governments, labour unions and other business leaders in the weeks and months to come as we navigate these unprecedented times.

Joe St. Julian is the president of nuclear at AtkinsRéalis

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California Gov. Gavin Newsom said Wednesday his state will file a lawsuit challenging U.S. President Donald Trump's authority to impose sweeping tariffs, which have set off a global trade war.

The Bank of Canada today maintained its target for the overnight rate at 2.75 per cent, with the Bank Rate at three per cent and the deposit rate at 2.70 per cent.

The major shift in direction of U.S. trade policy and the unpredictability of tariffs have increased uncertainty, diminished prospects for economic growth, and raised inflation expectations. Pervasive uncertainty makes it unusually challenging to project GDP growth and inflation in Canada and globally. Instead, the April Monetary Policy Report (MPR) presents two scenarios that explore different paths for U.S. trade policy. In the first scenario, uncertainty is high but tariffs are limited in scope. Canadian growth weakens temporarily and inflation remains around the two per cent target. In the second scenario, a protracted trade war causes Canada’s economy to fall into recession this year and inflation rises temporarily above three per cent next year. Many other trade policy scenarios are possible. There is also an unusual degree of uncertainty about the economic outcomes within any scenario, since the magnitude and speed of the shift in U.S. trade policy are unprecedented.

Global economic growth was solid in late 2024 and inflation has been easing towards central bank targets. However, tariffs and uncertainty have weakened the outlook. In the United States, the economy is showing signs of slowing amid rising policy uncertainty and rapidly deteriorating sentiment, while inflation expectations have risen. In the euro area, growth has been modest in early 2025, with continued weakness in the manufacturing sector. China’s economy was strong at the end of 2024 but more recent data shows it slowing modestly.

Financial markets have been roiled by serial tariff announcements, postponements and continued threats of escalation. This extreme market volatility is adding to uncertainty. Oil prices have declined substantially since January, mainly reflecting weaker prospects for global growth. Canada’s exchange rate has recently appreciated as a result of broad U.S. dollar weakness.

In Canada, the economy is slowing as tariff announcements and uncertainty pull down consumer and business confidence. Consumption, residential investment and business spending all look to have weakened in the first quarter. Trade tensions are also disrupting recovery in the labour market. Employment declined in March and businesses are reporting plans to slow their hiring. Wage growth continues to show signs of moderation.

Inflation was 2.3 per cent in March, lower than in February but still higher than 1.8 per cent at the time of the January MPR. The higher inflation in the last couple of months reflects some rebound in goods price inflation and the end of the temporary suspension of the GST/HST. Starting in April, CPI inflation will be pulled down for one year by the removal of the consumer carbon tax . Lower global oil prices will also dampen inflation in the near term. However, we expect tariffs and supply chain disruptions to push up some prices. How much upward pressure this puts on inflation will depend on the evolution of tariffs and how quickly businesses pass on higher costs to consumers. Short-term inflation expectations have moved up, as businesses and consumers anticipate higher costs from trade conflict and supply disruptions. Longer term inflation expectations are little changed.

Governing Council will continue to assess the timing and strength of both the downward pressures on inflation from a weaker economy and the upward pressures on inflation from higher costs. Our focus will be on ensuring that Canadians continue to have confidence in price stability through this period of global upheaval. This means we will support economic growth while ensuring that inflation remains well controlled.

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Governing Council will proceed carefully, with particular attention to the risks and uncertainties facing the Canadian economy. These include: the extent to which higher tariffs reduce demand for Canadian exports; how much this spills over into business investment, employment and household spending; how much and how quickly cost increases are passed on to consumer prices; and how inflation expectations evolve.

Monetary policy cannot resolve trade uncertainty or offset the impacts of a trade war. What it can and must do is maintain price stability for Canadians.

The Bank of Canada on Wednesday held its key policy rate at 2.75 per cent, its first pause after seven consecutive cuts, and said the uncertainty around U.S. tariffs made it impossible to issue regular economic forecasts.

The Bank of Canada held its interest rate at 2.75 per cent on Wednesday, citing uncertainty brought on by United States trade policy for its first pause after a string of seven consecutive cuts that began in June 2024.

“At this meeting, we decided to hold our policy rate unchanged as we gain more information about both the path forward for U.S. tariffs and their impacts,” Bank of Canada governor Tiff Macklem said in prepared remarks in Ottawa. “Faced with pervasive uncertainty, Governing Council will proceed carefully, with particular attention to the risks.”

U.S. President Donald Trump’s trade actions have caused global market volatility and increased uncertainty for Canadian businesses and households. Tariffs remain in place on Canadian steel and aluminum, motor vehicles and goods not in compliance with the Canada-United-States-Mexico Agreement (CUSMA) . On April 2, Trump introduced tariffs on countries worldwide, before announcing a 90-day pause on April 9, while keeping a 10 per cent baseline tariff on most countries. Canada is not subject to the 10 per cent tariff.

“The path of U.S. trade policy remains highly unpredictable,” said Macklem. “There is also considerable uncertainty about the impacts of a trade war on our economy.”

In light of the volatility, the Bank of Canada did not think it was useful to provide a forecast, instead opting to publish two scenarios in its monetary policy report to help illustrate the possible impacts on the Canadian economy.

In “Scenario 1” the bank assumes most tariffs imposed are negotiated away, but the process remains unpredictable until the end of 2026. In “Scenario 2” a number of tariffs remain in place on a permanent basis, causing a long-lasting global trade war and ongoing uncertainty.

The first scenario shows Canada’s GDP stalling in the second quarter of 2025, with exports falling sharply and business investment contracting. Domestic demand is weak over the near term, with quarterly consumption growth modest in 2025, before slowly strengthening in 2026 and 2027. In this scenario, the removal of the federal consumer carbon price lowers energy prices starting in April of this year, reducing CPI inflation by 0.7 percentage points for one year and bringing average inflation for the year to 1.5 per cent.

The second scenario has Canada’s economy contracting over the next year, with growth averaging -1.2 per cent for four quarters, before gradually recovering to around 1.8 per cent in 2027. Inflation averages close to two per cent through the first quarter of 2026, before rising to three per cent in the second quarter, before going back down to two per cent in 2027. This scenario also has business investment declining significantly and an increase in unemployment, due to Canadian exporters reducing production and laying off workers.

“To be clear, these are only two of many possible scenarios, and even these do not span the possible outcomes,” said Macklem. “The April 2 announcement put the situation closer to Scenario 2, but the partial rollback on April 9 and new exemptions in recent days have moved trade policy back towards the middle of the two scenarios.”

The Canadian economy ended on a strong note at the end of 2024, but trade uncertainty is already having an impact this year. The Bank of Canada estimates growth to have slowed to 1.8 per cent in the first quarter of 2025 and growth in consumption to have slowed from 5.5 per cent in the fourth quarter of 2024, to 1.5 per cent during the first quarter of this year. Business investment is expected to have declined by two per cent, reflecting the results from the bank’s recent business outlook survey which showed a large portion of firms planned to hold back on strategic new investments, in light of the trade situation.

Macklem was asked why the bank did not cut, in light of the declines in business investment, consumer spending and lower real estate activity. In response, the governor said the bank was navigating “carefully.”

“Our goal is to ensure that Canadians stay confident in price stability,” he said.

Bank of Montreal chief economist Douglas Porter, said not much time should be spent “parsing every word from the bank” given how quickly the economic landscape can shift, but added BMO expects the Bank of Canada will cut again this year, as trade uncertainty drags on growth.

“We believe that the deep trade uncertainty will weigh heavily on growth in Q2 and Q3, blunting inflation pressures, and eventually prompting the bank to trim rates further, ultimately taking them slightly below neutral – which would be entirely appropriate in a world of trade trauma,” he said in a note.

Rosenberg Research & Associates Inc. founder and president David Rosenberg  said an “economic storm” still lies ahead, which could see the unemployment rate climb as high as eight per cent. Rosenberg said the concerns over inflation are misplaced and he expects the bank will continue its easing cycle.

“While it was no surprise to see the bank hold its fire today, this easing cycle is far from over, and the Bank of Canada will end up doing quite a bit more than the two additional rate cuts the markets have priced in,” he said in a note to clients.

“I will stick with the historical record that each of the past five easing cycles going back the past quarter-century saw the trough in the policy rate at two per cent or lower (and two did not involve a recession, which now looks to be in the cards).”

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Macklem reiterated that monetary policy cannot completely offset the impacts of a trade war, but the central bank will continue to monitor not only the uncertainty associated with the tariffs, but the uncertainty of how businesses, households and governments will react to those tariffs.

“Monetary policy will ensure inflation remains well controlled and support economic growth as Canada confronts this unwanted trade war,” said Macklem. “As always, we will be guided by our monetary policy framework and our commitment to maintain price stability over time.”

• Email: jgowling@postmedia.com

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The Bank of Canada needs to cut interest rates to get housing activity moving again or risk Canada’s economic growth, economists warn.

Home sales in Canada fell for the fourth straight month, down 4.8 per cent in March from February and 20 per cent from November, according to Canadian Real Estate Association (CREA) data, even though the shelter component of Statistics Canada’s consumer price index slowed year over year to 3.9 per cent in March from 4.2 per cent. On a monthly basis, it came in below 0.2 per cent for the second consecutive month.

Economic uncertainty brought on by United States President Donald Trump ‘s chaotic trade war has been singled out as the main culprit for making homebuyers squeamish about taking the housing plunge.

But two economists also think interest rates remain too high to turbocharge the sector, which is a major contributor to Canada’s economy and also highly sensitive to interest rates.

“There was so much worry when the Bank of Canada began to cut rates that it would ignite a renewed housing sector bubble,” David Rosenberg , founder of Rosenberg Research and Associates Inc., said in a note. “As we said then, and as we are seeing in real time, those concerns were and are unfounded.”

Canada’s real estate market, once among the world’s hottest has been on ice for the past four months.

Sales have slumped, but prices are sliding as well, CREA said in a release on Tuesday.

The national average home price fell 3.7 per cent year over year to $678,331 in March, while the national composite MLS home price index declined one per cent last month, which was “the largest monthly decrease since November 2023,” CREA said.

Meanwhile, “the shelter components (of inflation ) are starting to play a leading role in the disinflation process,” Rosenberg said.

Disinflation is bad news because it can lead to recessions or economic slowdowns and higher unemployment .

“So, this prior source of upside inflation pressure is clearly subsiding (especially rents and mortgage interest costs),” Rosenberg said. Mortgage inflation grew 10 per cent in March, down significantly after peaking at 31 per cent year over year in August 2023.

Housing prices are still relatively elevated compared to incomes, but “there is a risk that prices will continue to decline unless the Bank (of Canada) cuts interest rates much further than we currently forecast,” Stephen Brown and Harry Chambers, economists at Capital Economics Ltd., said in a note.

Weakness in Canada’s housing market is becoming more widespread, they said.

Much of the weakness last year could be attributed to slowing apartment sales as “investors shunned the market amid falling rents,” they said, but it now appears to have shifted to single-family homes occupied by owners.

Prices for that type of housing were down a bit more than one per cent in March compared with a drop of around 0.7 per cent in apartments.

“This would seem to suggest that weaker demand from owner-occupiers, likely amid increased economic uncertainty, is to blame for the renewed weakness in the housing market,” Brown and Chambers said.

Furthermore, CREA said the ratio of sales to new listings continued to slump, suggesting home prices will do the same.

“That is exactly what happened last month, with the MLS house price index falling by one per cent,” Brown and Chambers said. “That suggests our forecast for prices to soon stabilize, and fall by just 1.5 per cent in 2025, now looks too optimistic.”

Rosenberg Research is calling for the Bank of Canada to cut interest rates to at least 2.25 per cent, which is the low end of the neutral range.

Questions about your personal finances ahead of the federal election? Join us today at noon for a live online Q&A with Ted Rechtshaffen, president and portfolio manager at TriDelta Private Wealth, and Jason Heath, certified financial planner at Objective Financial Partners Inc. Register here

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Russia’s ruble has surged to become the best performing global currency, posting this year’s strongest gains against the U.S. dollar to outpace even the traditional safe haven of gold.

The ruble has strengthened 38 per cent versus the dollar on the over-the-counter market since the beginning of this year, data compiled by Bloomberg shows. While the greenback has reeled from mounting pressure caused by United States President Donald Trump’s escalating tariff wars, Russia’s currency has also been buoyed by factors unique to the country, including record-high local interest rates. — Bloomberg

Read the full story here.

 

• Bank of Canada announces its interest rate decision and releases monetary policy report at 9:45 a.m. ET
• OMERS chief executive Blake Hutcheson speaks on investing in challenging times at the Canadian Club Toronto
• Today’s Data: U.S. retail sales for March.
• Earnings: Metro Inc., Alcoa Corp., Kinder Morgan Inc.

 

• Why the future of Old Age Security is making seniors anxious this election
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In the lead-up to the federal election on April 28, we’ve heard many proposals from party leaders that will directly affect your pocketbook. The impact of tariffs — including the spectre of job losses and inflation, along with the resulting stock market volatility — has made personal finance policies especially important for voters. Check here for a rundown of the key promises from each of the three main candidates. 

Are you worried about having enough for retirement? Do you need to adjust your portfolio? Are you starting out or making a change and wondering how to build wealth? Are you trying to make ends meet? Drop us a line at wealth@postmedia.com with your contact info and the gist of your problem and we’ll find some experts to help you out while writing a Family Finance story about it (we’ll keep your name out of it, of course).

McLister on mortgages

Want to learn more about mortgages? Mortgage strategist Robert McLister’s Financial Post column can help navigate the complex sector, from the latest trends to financing opportunities you won’t want to miss. Plus check his mortgage rate page for Canada’s lowest national mortgage rates, updated daily.

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Today’s Posthaste was written by Gigi Suhanic with additional reporting from Financial Post staff, The Canadian Press and Bloomberg.

Have a story idea, pitch, embargoed report, or a suggestion for this newsletter? Email us at  posthaste@postmedia.com .

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Canadians approaching retirement age are among those most vulnerable to market volatility caused by U.S. President Donald Trump's trade war, with one Ottawa grandmother contemplating a return to work to compensate for her recent losses.

Higher prices are showing up on some items that are being counter-tariffed by Canada. But levies were left off many food items from the U.S., which has moderated the overall impact on grocery budgets.