**Bank of Canada building in downtown Ottawa. / ISTOCK PHOTO**

The Trump factor has been undercutting all-important business and consumer confidence in the economy, according to the Bank of Canada. On Monday, the central bank released its quarterly business and consumer outlook surveys, based on surveys in January and February before the full force of the tariffs hit.

On the business outlook, the Bank said:

Business sentiment has deteriorated, and uncertainty is widespread due to the trade conflict with the United States. Firms are developing plans to mitigate the effects of tariffs on their operations but see many challenges ahead.
Fewer businesses than last quarter expect sales growth to improve over the coming year.
In the current economic environment, many businesses are delaying important decisions, such as those related to investment and hiring, until they have a clearer outlook. Hiring intentions are weak.
Firms no longer expect growth in their input prices to slow. Two-thirds of businesses believe that their costs would be pushed higher if widespread tariffs are implemented. As a consequence, many firms would increase their selling prices.
Near-term inflation expectations are higher than last quarter, with firms believing the inflationary impacts from tariffs will outweigh reduced pressures from weak demand.

With consumers, the Bank reported:

Overall, results of the first-quarter 2025 survey show that the escalating trade conflict with the United States is damaging consumer sentiment.
Confidence in the labour market has weakened sharply. This is because many consumers—notably those working in sectors that are highly dependent on trade—are worried about losing their job. In this context, consumers have also become more pessimistic about their financial health. Consumers expect the trade conflict to lead to a higher cost of living. This is reflected in their short-term inflation expectations, which rose in the first quarter of 2025.
Although consumption plans had been improving over several quarters, consumers now intend to spend more cautiously given the uncertainty around the trade conflict. In addition, elevated housing costs and the high prices of many goods and services continued to weigh on households’ spending plans.

But the emerging patriotic fall-out in Canada from the tariffs may help offset the negative economic impact of Trump’s protectionist foray a bit.

In a new report, the Bank of Montreal said, “The ‘Buy Canadian’ movement is deepening, and recent years have taught us that behavioural forces matter in the economy. We judge that this shift in attitudes could add roughly $10 billion to the Canadian economy annually, lifting (GDP) growth by 0.3 points.”

However, it won’t be all gravy for patriotic shoppers, the Bank said: “While (the GDP uptick) is meaningful, there are also costs—buying Canadian can be impractical in some cases, and can come with less selection at higher prices.”

Canadians also appear likely to be spending more of their travel money at home as a result of the clash with the U.S.

Statistics Canada said the number of Canadians returning from the U.S. by car plummeted by almost 32 per cent compared to March 2024, the third consecutive month of year-over-year declines.

The agency also said Canadian return trips by air from the U.S. were down 13.5 per cent last month compared to March 2024. Meanwhile, return trips from countries other than the U.S. were up about nine per cent over the same period.

Both the Conservatives and Liberals have said they will protect Canadian businesses and workers from the negative impact of U.S. punitive trade measures and grasp the trade crunch with the Americans as an opportunity to introduce pro-growth strategies to improve the business environment, greenlight national infrastructure projects and reverse Canad’s slide in economic productivity.