**Bank of Canada Governor Tiff Macklem, pictured on Sept. 23, during a speech to the Saskatchewan Trade and Export Partnership and the Greater Saskatoon Chamber of Commerce. / SCREENSHOT**

Canada faces a permanently weaker economy unless it acts decisively to boost productivity, attract investment and diversify trade in response to rising U.S. protectionism and global trade fragmentation, Bank of Canada Governor Tiff Macklem said Tuesday in a speech to the Saskatchewan Trade and Export Partnership and the Greater Saskatoon Chamber of Commerce.

“We can live with the structural impact of a more protectionist United States — the lower path. Or we can improve our productivity and competitiveness,” Macklem said. “Canadians have embraced the power of economic patriotism—elbows up. But now we need to roll up our sleeves and do the hard work to be more competitive.”

Macklem outlined several solutions, starting with reducing barriers within Canada itself. “There is momentum to eliminate interprovincial trade barriers. We need to take a comprehensive approach that lowers the cost of doing business across the country. This includes removing trade barriers and many small regulatory differences. It also includes mutually recognizing provincial labour accreditation for many professions,” he said.

Governments could also “remove unintended barriers to investment by shortening regulatory approvals and reducing regulatory uncertainty.” Longer-term investments are also essential.

Time to ‘follow through’

“Here I would include better east–west transportation links to grow our internal market and get our products to overseas markets. I’d also include new port capacity to reduce our dependence on the United States,” he said.

Canada already has access to international opportunities, Macklem said, noting Canada has trade agreements with 50 countries beyond the United States. “But businesses and governments could do more to leverage these agreements,” he said.

He warned that past calls for diversification after the 2009 recession faded without much action. “This time we need to follow through.”

Macklem highlighted Canada’s strengths, including democratic rule of law, energy and natural resources, access to quality education, but he said we can’t take those for granted. Increasing productivity means “everything from housing to health care becomes more affordable. Productivity growth is what sustains increases in our standard of living,” he said.

Last week, the Bank of Canada cut its key policy rate to cushion the blow. “Monetary policy cannot undo the damage caused by tariffs, but it has a role to play supporting the economy through this period of adjustment while maintaining price stability,” Macklem said. “We are proceeding carefully with particular attention to the risks and uncertainties. And as we demonstrated last week, we are prepared to respond to new information. We will support economic growth while ensuring inflation remains well controlled.”

The message, Macklem concluded, is that Canada cannot afford to wait. “There is no better time than now to deepen investment, improve productivity and expand our market. We have the capacity to overcome the negative impact of new trade restrictions with the United States. Elbows up has been galvanizing, but now we need to roll up our sleeves. There is a lot of hard work to do.”