Trade disputes accelerated decline in Canadian manufacturing activity

Research conducted by S&P Global revealed an acceleration in the decline of Canadian manufacturing activity in March. The Purchasing Manager Index (PMI) fell to 46.3, hitting its lowest level since December 2023. This factor points to a deeper drop in output and decreasing demand. What became particularly noticeable was a sharp decline in new orders, with their level at its lowest since May 2020. The main reason for this was increased trade tensions and the imposition of new tariffs.

Paul Smith, economics director at S&P Global Market Intelligence, noted that trade barriers weigh heavily on exports. Businesses give increasingly pessimistic projections for the manufacturing sector. The rise in raw material prices driven by trade restrictions poses additional risks to the economy and adds to inflationary pressures.

Reuters notes that Canada, which sends about 75% of its exports to the US, is particularly vulnerable to changes in the neighboring country's trade policy. Tighter US tariffs are having a negative impact on Canada’s production. These challenges force the country’s central bank to revise its monetary policy.