The recent back-and-forth tariffs between Canada and the United States are causing big problems for the economy. These tariffs, which are taxes on imported goods, are meant to protect local industries, but they’re also making life harder for everyday people. Prices are going up, wages aren’t keeping pace, and businesses are feeling the squeeze. Even the Bank of Canada is worried—it recently cut interest rates by 0.25% to try to boost the economy. But with inflation rising and people’s spending power shrinking, the road ahead looks tough for both consumers and businesses.

Why Prices Are Going Up

Tariffs make imported goods more expensive. For example, if Canadian businesses have to pay more for steel, aluminum, or other materials from the U.S., they’ll likely pass those costs on to consumers. This means higher prices for things like cars, appliances, and even food packaged in aluminum. When prices rise faster than wages, people’s “real income” (what their money can actually buy) goes down. In simple terms, your paycheck doesn’t stretch as far as it used to, and you end up feeling poorer.

How This Hurts Spending and Jobs

When people have to spend more on basics like food and housing, they cut back on extras like eating out, vacations, or new gadgets. This drop in spending hurts businesses, especially small ones that rely on steady sales to stay afloat. If businesses start losing money, they might have to lay off workers or put expansion plans on hold. This creates a vicious cycle: less spending leads to fewer jobs, which leads to even less spending, and so on.

The Housing Market Could Take a Hit

The housing market is also at risk. Tariffs are driving up the cost of materials like steel and aluminum, making it more expensive to build homes. This could slow down new construction, which is bad news in a country where affordable housing is already hard to find. On top of that, if people are worried about the economy, they might delay buying a home altogether. This could cool down the real estate market, affecting everyone from builders to real estate agents to mortgage lenders.

The Bank of Canada’s Response

To help ease the pressure, the Bank of Canada cut interest rates by 0.25%. The idea is to make borrowing cheaper, so people and businesses are more willing to spend and invest. For example, lower interest rates could mean cheaper mortgages, which might encourage more homebuying. But there’s a catch: if prices keep rising (inflation), the benefits of lower rates might not be enough. People could still struggle to afford everyday items, and the Bank might have to raise rates again to keep inflation in check.

The Big Picture

The tariffs between Canada and the U.S. are creating a messy situation. Higher prices, lower incomes, weaker spending, and a shaky housing market are all connected problems that could hurt the economy for a long time. While the Bank of Canada’s rate cut is a step in the right direction, it might not be enough to fix everything. Policymakers need to tread carefully to avoid making things worse for families and businesses. In the end, the goal should be to protect the economy without leaving everyday Canadians to foot the bill.