Canada inflation hits 3% as US tariffs loom

Canada's annual inflation rate reached 3% in July, Statistics Canada data showed Monday, as gasoline prices rose and new US tariffs threatened by President Donald Trump approached.

Statistics Canada said gasoline prices were 25.7% higher than in July 2025. The agency said the Middle East conflict, including the blockade of the Strait of Hormuz and the partial closure of Red Sea shipping routes in late July, put upward pressure on gasoline prices.

The agency also said higher tourism-related costs, including air travel, helped drive prices higher. Analysts pointed to elevated spending linked to the World Cup, which Canada co-hosted.

The 3% inflation rate is at the upper edge of the Bank of Canada's preferred range. Analysts said an interest-rate increase was unlikely soon because of risks facing the economy.

Trump has threatened to impose new 50% tariffs on a range of Canadian goods from Wednesday, August 19. Canadian negotiators have been in Washington trying to reach a deal to avert the tariffs and seek relief from sectoral levies affecting Canada's auto, steel, lumber and aluminum industries.

Canadian media reports indicated Ottawa had offered concessions, including pressure on provinces to return US alcohol and wine to shelves, but it was unclear whether a deal was imminent.

TD Bank senior economist Leslie Preston said the inflation data would not “spook” the Bank of Canada into raising rates, citing the confidence shock from on-off US tariff threats and the lack of a deal to avert the planned 50% tariffs.