Bank of Canada Warns Tariffs Could Slash Q4 Growth in Half, And Toronto Delinquencies Are Already Rising

By Mudit Chhura  |  Co-Founder, IndiBrick  |  Read Time: 7 Mins

Bank of Canada Governor Tiff Macklem delivered one of his bluntest warnings yet this week. Speaking to a crowd in Halifax, Macklem said that if the latest wave of US tariffs remains in place, Canada's fourth-quarter economic growth could be roughly cut in half, falling to below 1 percent. It is a sharp reversal from the momentum the economy had just started to rebuild.

This warning lands on top of an already crowded few weeks of economic news, a rate hold citing trade risk, an escalating tariff war, and rising odds of a December rate hike driven by oil. Here is what Macklem actually said, why it matters, and why one number buried in the data should matter even more to homeowners across the GTA.

What Macklem Actually Warned

In prepared remarks to the Halifax Partnership, Macklem acknowledged that businesses had spent the past year adapting to earlier rounds of tariffs, and that growth had genuinely resumed. But that was before trade talks with the United States broke down again, triggering a fresh 50 percent tariff on a wide range of Canadian goods and new import restrictions affecting nearly 28 billion dollars in Canadian exports.

Metric	Figure
Q2 2026 GDP growth	3.3%, the economy's strongest pace in three years
Q4 2026 growth, if tariffs remain in place	Could be roughly halved to below 1%
Value of Canadian exports newly affected	Nearly $28 billion
Canada's annual inflation rate	3%, above the Bank's 2% target
National mortgage delinquency rate (90+ days)	0.24% in Q4 2025, up from 0.21% a year earlier

Macklem was careful to note that he does not expect a large direct impact on the broader economy, but said targeted sectors would be hit hard, and that the unpredictability of US trade policy has raised uncertainty for everyone, warning that the latest escalation could push businesses back into a reassessment stage, delaying investment and hiring decisions they had only just started to make again.

This isn't going away any time soon, but people are getting on with it. People are figuring out how to move forward.

The Number That Should Concern GTA Homeowners Most

Buried inside the broader economic data is a statistic that matters more locally than almost anything else in this story. While the national 90-day-plus mortgage delinquency rate remains low by historical standards, it rose to 0.24 percent in the fourth quarter of 2025, up from 0.21 percent the year before. In the Toronto area specifically, delinquencies jumped 45 percent year over year.

That is not a rounding error. A 45 percent increase in a single region signals that renewal shock, rate pressure, and now trade-driven economic uncertainty are converging on GTA homeowners faster than the national numbers suggest. Combined with Macklem's warning about weaker fourth-quarter growth, this is exactly the kind of environment where getting ahead of your mortgage situation matters more than waiting to see what happens next.

A Bank Caught Between Two Opposing Pressures

Macklem's comments highlight a genuinely difficult balancing act. Weaker growth from tariffs would normally argue for lower interest rates to support the economy. But elevated oil prices, driven by the ongoing conflict in the Middle East, are pushing inflation in the opposite direction. The Bank has said it does not want to raise rates and restrain growth if inflationary pressure turns out to be contained, but it also cannot ignore inflation running persistently above target.

This is precisely why market pricing has shifted so quickly in recent weeks, from cut expectations, to a hold, to meaningfully elevated odds of a hike by December. Borrowers should not expect a clean, predictable path from here.

What This Means for Buyers, Owners, and Self-Employed Borrowers

• If you are behind or falling behind on payments, reach out to your lender or broker early, before delinquency becomes default, since options narrow considerably the longer a payment gap continues
• Self-employed and business owners in trade-exposed sectors should expect income volatility to continue and keep documentation current to support any refinancing or renewal conversation
• Anyone renewing in the coming months should start that conversation now rather than waiting, given the elevated odds of a December rate move in either direction
• Buyers should not assume weaker growth automatically means lower rates, the Bank has been explicit that inflation risk could push policy the opposite way

Frequently Asked Questions

Why did the Bank of Canada warn about fourth-quarter growth?

Bank of Canada Governor Tiff Macklem warned that if new US tariffs affecting nearly 28 billion dollars of Canadian exports remain in place, fourth-quarter economic growth could be roughly halved to below 1 percent, reversing recent momentum in the economy.

Are mortgage delinquencies rising in Toronto?

Yes. While the national 90-day-plus mortgage delinquency rate remains low historically, it rose to 0.24 percent in the fourth quarter of 2025, and delinquencies in the Toronto area specifically increased 45 percent year over year.

Will weaker growth lead to lower interest rates in Canada?

Not necessarily. While weaker growth would typically support lower rates, the Bank of Canada is also facing elevated inflation risk from high oil prices and tariffs, which has increased the odds of a rate hike rather than a cut in the near term.

What should I do if I'm struggling with my mortgage payments?

Contact your lender or a mortgage broker as early as possible. Options for adjusting a mortgage, such as refinancing or restructuring, are generally more available before a payment gap becomes a formal delinquency or default.

The Bottom Line

Canada's economy was finally regaining momentum. This latest round of tariff escalation threatens to undo a meaningful chunk of that progress in a single quarter, and the early warning signs are already showing up in Toronto-area mortgage delinquency data. For GTA homeowners, the message from this week's data is not to panic, but it is to stop waiting for clarity that may not arrive anytime soon.

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