United States President Donald Trump has not officially imposed 25 per cent tariffs on Canadian goods, but his threats have already created a “bit of stasis” among Canadian banking clients who have become more cautious about their next steps, executives say.

The tariffs, originally to be imposed on Feb. 4, were delayed by a month after Canada promised to take tougher action against supposedly high illegal migration and drug smuggling from its end. With a week to go, Trump hasn’t shown any signs of pulling back.

“People are holding their powder dry and waiting to see what’s going to happen,” Phil Thomas, Bank of Nova Scotia’s chief risk officer, said on a call with analysts on Tuesday. “As a result, whether it’s on the retail side, the corporate side or the commercial side, you kind of see a bit of stasis right now. It’s causing people to sort of pause and think about what they’re going to do.”

Bank of Montreal chief executive Darryl White said his clients in both the U.S. and Canada have adopted a “more cautious posture around capital deployment.”

Both Bank of Nova Scotia and Bank of Montreal — which reported their results on Tuesday — set aside money to tackle the potential impacts of the tariffs, but they weren’t able to provide a more concrete outlook on what credit losses could look like if the tariffs are imposed.

In order to find the exact number, they have to work through a number of factors such as the size and duration of the tariffs, the degree of retaliation from Canada and the amount of government subsidies, Thomas said.

“It’s really hard to give you a range or an outcome at this point in time without having some understanding of what these tariffs look like,” he said. “If tariffs come along in Q2, we’ll do the appropriate build in Q2. It will be a sizable, but manageable build.”

Thomas said there isn’t a lot that can be done until Trump signs an executive order on the tariffs.

“We are still digesting what’s going on,” he said. “It’s difficult to act on headlines and tweets.”

Similarly, BMO chief risk officer Piyush Agarwal said the bank felt it was “prudent to consider the sensitivities in the environment” as a result of the tariff threats.

“If tariffs are implemented as announced and remain in place for a prolonged period, all else being equal, we would expect that deterioration in the economic outlook to then become part of our economic assumptions in maybe the second quarter, or whenever that gets implemented, but, as of now, I feel very good about where we landed,” he said.

White, who has the relatively unique opportunity to interact with clients on both sides of the border because of BMO’s high reliance on business in the U.S., said anxiety levels are a “little bit higher” in Canada.

“That’s not to say that there aren’t anxiety levels in the U.S. as well, with folks who also look for a certainty to the extent that they’re trading outside of the U.S. borders, which is applicable to a lot of our clients,” he said.

White said the current situation is “frustrating” for a lot of people, including his clients trying to predict where all this is finally going to land. He said he is often reminded in conversations with clients that none of these issues persisted 24 days ago.

“We’re only 24 days into this, and the shelf life of any prediction within those 24 days has been worth about 24 hours,” he said. “So, it’s difficult to figure out where all this lands.”

The tariff threats have led people to hold back on borrowing in the commercial banking business, but it’s different on the mortgage side, head of Canadian banking at Scotiabank, Aris Bogdaneris said.

“Interestingly enough, as rates have come down, you start to see that pent-up demand in the mortgage business starting,” he said. “However, if the tariffs do get implemented, and, of course, the economy contracts, you’ll probably see the mortgage business also start to come down, but we don’t see that yet.”

• Email: nkarim@postmedia.com

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