Canadian officials nod to US tariff discussions at G7, hint that “excess capacity” may exist

Bank of Canada (BoC) Governor Tiff Macklem and Canadian Finance Minister François-Philippe Champagne gave dueling talking points on Thursday, reviewing their G7 experiences this week. Both officials acknowledged that broad discussions about US tariffs took place, but warned that “excess capacity” may exist on the other side of US import taxes, which is the nicest way possible for an economist to say that demand for goods in a post-tariff environment may be too low to support the global economy’s growth.

Key Champagne highlights

Champagne noted that the post-summit communique agreed to and issued by all attending finance ministers and central bankers stressed the importance of G7 unity, despite not being “watered down” to appease US Treasury Secretary Scott Bessent. Much of the G7 meeting was focused on US trade discussions, specifically around tariffs. However, the talks were overall constructive, with participants agreeing that “excess capacity” remains an issue in the face of high import taxes being imposed by the US. According to Canadian FinMin Champagne, G7 ministers have much more work to do on addressing supply chain issues, as well as cracking down on financial crimes and dangerous growth policies.

Key Macklem highlights

BoC Governor Macklem struck a similar tone to FinMin Champagne, noting that G7 discussions were constructive. Macklem also revealed that the G7 has successfully convinced the International Monetary Fund (IMF) to take on more work on dealing with global financial imbalances. However, Governor Macklem did point out that, despite positive discussions and ongoing progress on trade, Canada’s economy is still poised to take a hit from US tariffs, with Canadian Gross Domestic Product (GDP) growth and overall consumption expected to be weaker compared to Q1 after tariffs caused a pull-forward effect in import markets.