Sentiment improved, but new tariffs weigh on business outlook: BoC report

OTTAWA – The Bank of Canada’s latest outlook survey suggested that business sentiment improved on average in the third quarter, although concerns remained about rising costs and the war in the Middle East.

However, about three-quarters of the interviews with businesses for the survey took place before trade talks between Canada and the United States broke down at the end of August and new Canadian counter-tariffs were announced.

It says after the trade talks broke down, firms cited new U.S. tariffs on some goods and Canadian counter‑tariffs as factors weighing on their outlooks.

The Bank of Canada says inflation expectations have risen alongside the new tariffs and the recent increase in energy prices. 

“The tariffs are also dampening business sentiment, weakening outlooks for exports and investment, and putting upward pressure on costs and prices,” the bank said in its report.

The business outlook survey was conducted by in-person, video and phone interviews from Aug. 6 to Sept. 2.

The bank said that at the time of the survey, a lessening of the drag from both trade tensions and geopolitical uncertainty in the Middle East helped firms report better sales outlooks than in the second quarter.

The outlook survey said that roughly half the firms planned to continue passing some or all cost increases on to customers and that for several firms, those plans reflected somewhat improved demand and efforts to make up for past margin compression. At the same time, more companies than in the previous quarter said competitive pressures continue to limit their ability to increase prices.

The report also noted that business investment intentions eased slightly, but remained robust with improvements in demand conditions supporting investment plans overall.

In a separate report, also done mostly before the trade talks broke down, the Bank of Canada says its Canadian survey of consumer expectations found long-term inflation expectations rose to match those for the short term.

The consumer report also says consumers reported better financial health than in the previous quarter, though high prices and economic uncertainty continue to weigh on Canadians.

The reports comes ahead of the Bank of Canada’s next interest rate decision and monetary policy report set to be released on Oct. 28.

This report by The Canadian Press was first published Oct. 19, 2026.