Governor Tiff Macklem addressed the Canada-UK Chamber of Commerce in London, United Kingdom, discussing how geopolitical, economic, and social forces are transforming global trade. He highlighted the benefits of open trade post-World War II and emphasized its importance for small open economies like Canada. However, he noted that global trade growth has slowed over the past 15 years due to changing production dynamics, geopolitical tensions, and waning public support.
"Global trade is being rewired, recast and redirected—and that has major implications for a country like ours," Macklem stated.
Three significant trends in global trade were identified: advanced economies leading the slowdown in trade, a shift from goods to services trade driven by digital delivery capabilities, and evolving global trade relationships with increased competition from China. These trends have impacted Canada’s export growth while boosting service exports, particularly in digital services such as computer and financial services. Trade tensions have also heightened supply chain risks for Canadian businesses.
Macklem emphasized the need for Canada to adapt to these changes: "Canada needs to be ready for the opportunities and the disruptions."
He stressed that as global trade shifts, Canada should position itself as a stable alternative supplier while maintaining strong existing trade relationships. Preparing for future supply shocks will be crucial as these disruptions could affect businesses and jobs and potentially increase inflation volatility.
"The Bank’s role is to manage the inflation risks and work to ensure a strong economy for all Canadians," Macklem explained. Although the Bank of Canada does not set trade policy, understanding global trade shifts is essential due to their impact on costs and inflation.
Governor Macklem's full speech can be accessed online.