Canada’s Inflation Hits 2.4% as Trade Talks with US Intensify

Canada’s annual inflation rate rose to 2.4 percent in September 2023, according to data released on October 21. This increase comes as Prime Minister Mark Carney announced that Ottawa is engaged in “intensive” negotiations with Washington aimed at reducing tariffs that have been driving up consumer prices.

During a press conference in Ottawa, Carney addressed a report from The Globe and Mail, which suggested that a trade agreement with US President Donald Trump covering key sectors such as steel, aluminium, and energy could be finalized within days. “We’ll see,” Carney remarked, emphasizing that both countries are actively seeking ways to lower barriers affecting supply chains and manufacturing costs. He acknowledged that while discussions are ongoing in good faith, “some challenges remain.”

Trade Relations Under Strain

Approximately 85 percent of cross-border trade remains tariff-free under the existing United States–Mexico–Canada Agreement (USMCA). Nevertheless, tariffs imposed by Trump on various sectors, particularly steel, aluminium, and automobiles, have significantly impacted Canada’s economy, leading to job losses and straining manufacturers.

Canada is a vital supplier of steel and aluminium to US industries, and Carney has previously expressed hope for a breakthrough in negotiations regarding these materials. However, he also pointed out that Trump’s commitment to tariffs on foreign-made vehicles could have severe repercussions for Canada’s auto sector, which is integrated with US production.

Trade experts believe that a successful agreement could enhance business confidence ahead of the 2026 USMCA review. Yet, they caution that the political landscape in Washington might delay any resolution until after the upcoming US elections in 2024.

Potential Agreement on the Horizon

While Carney’s office has not disclosed specific details about the negotiations, officials did not dismiss the possibility of reaching an agreement by the end of October. The Prime Minister indicated that his government’s priorities include protecting Canadian industries while ensuring the stability of the USMCA framework.

He reiterated Ottawa’s commitment to constructive engagement with the United States, despite existing disagreements over tariffs. Analysts suggest that the results of these talks could set significant precedents for North American trade policy, particularly if they allow for adjustments to targeted tariffs without reopening the entire agreement.

The inflation data reveals that rising food costs were a principal factor behind the increase. Consumers experienced approximately 4 percent higher prices for groceries in September compared to the same month last year. Economists attribute this rise in food prices to increased import costs stemming from recent tariff changes and supply chain disruptions in global commodity markets.

As food price inflation has accelerated since April, when Trump’s tariffs were enacted, Canadian supermarkets that depend heavily on US imports are facing pressure. Retail executives warn that if tariffs remain unchanged, further price increases may occur into early 2026, exacerbating the financial strain on households.

In summary, Canada’s inflation rate reflects broader economic challenges tied to international trade dynamics, as officials strive to navigate a path toward more stable relations with the United States.