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

G7 communique emphasizes the importance of G7 unity.
G7 found common ground on most important issues.
G7 will address risks stemming from low-value package shipments.
G7 ministers have more work to do on supply chains, financial crimes, growth policies.
G7 is on a good track to reduce instability and uncertainty.
There was a discussion of US tariffs in G7 meeting, but also constructive discussion on other issues such as excess capacity.
Wording of G7 communique was not watered down to appease (US Treasury Secretary) Bessent.

Key Macklem highlights

Tone of G7 discussions was particularly constructive.
We met pivotal moment for global economy with candor and clear focus.
G7 discussions focused on improving dialogue on tariffs, fixing problems in global trading system.
IMF, with G7 encouragement, agreed to take on more work on global imbalances.
Productive G7 finance discussions set stage for for very productive G7 leaders summit.
Canada's Q2 GDP growth to be weaker due to Q1 pull-forward of exports.
Q2 consumption going to be weaker than it was in Q1.