The Bank of Canada (BoC) has lowered its policy rate to 2.25%, marking its second consecutive cut in 2025. This decision comes amid a challenging economic backdrop filled with trade uncertainty, a soft labour market, and weakening business investment. While rate cuts are traditionally aimed at stimulating growth, their effectiveness in the current environment is not guaranteed.
The rhetoric surrounding this cut will be why now. With the Canadian economy contracting by 1.6% in Q2 2025, and growth in Q3 remaining radio-silent, and with the unemployment rate at 7.1%, due to job losses concentrated in trade-sensitive sectors like manufacturing and transportation, it’s a wonder that Inflation has eased to 2.4%. These conditions have given the BoC room to act without fueling price pressures.
The main driver in the decision is the ongoing trade tensions with the United States, including the additional 10% tariffs on Canadian goods because DJT can’t wrap his head around Ronald Regan’s ideology of being against tariffs. How dare a Republican, or anybody for that matter, be against tariffs? For those who take things literally, that was sarcasm! But this latest decision by the Trump Administration, along with his entire tariff policy, has disrupted supply chains and eroded business confidence. There have been auto sector layoffs and massive production shifts, including Stellantis moving it’s Jeep Compass manufacturing production from Brampton to Illinois, underscoring the fragility of Ontario’s industrial base.
There are far-reaching, macroeconomic implications to this cut as well. Lower rates tend to reduce borrowing costs, potentially boosting consumer spending and housing activity. However, tariffs and global uncertainty continue to weigh on global exports and investment. Moreover, in surveys conducted by the BoC, they reveal that nearly 50% of businesses prioritize maintenance over expansion, citing weak demand and tariff-related uncertainty. So even with cheaper credit, businesses are hesitating to commit to long-term projects. None of this bodes well for the labour market, despite a surprise gain of 60,000 jobs in September. Employment growth throughout the year has been uneven and unsteady, as the local and national manufacturing and transportation sectors remain vulnerable.
For Brampton, it’s local economy is deeply tied to manufacturing, logistics, and retail, making it highly sensitive to both interest rates and trade dynamics. Lower rates may ease financing for equipment upgrades, but tariff uncertainty and production relocations overshadow any of those benefits. The Stellantis exit is a major blow to local suppliers and local employment. When it comes to transportation and warehousing, cheaper credit could support fleet expansion and logistical upgrades, but demand will heavily depend on trade flows and consumer spending, both of which remain volatile. Finally, on the retail and real estate front, rate cuts may revive housing activity and consumer spending, benefiting retail businesses and developers. The flip side to that is high vacancy rates and affordability challenges persist, limiting the sector’s rebound.
There are measures being taken that will be perceived to soften the economic blow. The Canadian government has already started exploring ways to reduce its reliance on U.S. markets by looking to domestic and alternative trade partners in Asia, the Middle East and Europe. There are untapped markets in the Caribbean and Africa, which could boost investments in agricultural technology to help food security. These markets have not been explored yet, but there should be some urgency on tapping into these markets while the window is opened. We know that these agreements take time to formulate and put into action and time is something we don’t have the luxury of having if the economic blow is to be softened. There have also been investments in automation by using lower borrowing costs to upgrade technology and improve productivity. But for the impact to be truly softened, especially in Brampton, businesses should be looking to leverage local demand by focusing on sectors less exposed to global trade shocks, such as healthcare services and e-commerce logistics.
While the BoC’s rate cut offers short-term relief, it cannot fully offset structural challenges like tariffs and global uncertainty. For Brampton businesses, the key lies in adaptation and strategic investment, not just reliance on monetary policy.
For the Brampton Board of Trade, I am Ansar Khan, Manager, Finance. Should you have any questions, concerns, or comments, please feel free to reach out at akhan@bramptonbot.com.
