07:18 AM EDT, 05/08/2025 (MT Newswires) -- Sales of autos in Canada surged 7.3% month over month to 1.98 million at a seasonally adjusted annual rate in March before pulling back to 1.92 million (SAAR) in April as demand was likely pulled forward with consumers potentially front-running any United States-Canada tariff effects, said Scotiabank.

While new vehicle sales may be elevated in the near term, the sales rate will likely slow in the coming months after front-running effects and risk possibly declining further should the impact of tariffs start to strengthen such as through distortions to supply from changes to production plans, higher prices as tariff costs get passed through to consumers, or weighing on economic activity and labor markets through increased uncertainty and direct tariff headwinds.

On April 15, the Canadian Department of Finance announced measures to support Canadian businesses and entities impacted by tariffs which include a performance-based remission framework for automakers subject to conditions such as continuing to manufacture vehicles in Canada, noted the bank.

The Bank of Canada held the policy rate at 2.75%, the midpoint of its estimated neutral range, on April 16 after having cut the policy rate at each meeting since June 2024 from a peak 5%. The future path for interest rates is largely uncertain as the BoC assesses incoming data and developments and their implications to maintaining inflation near 2%, noting that monetary policy cannot offset the impacts of a trade war and that it will support economic growth while ensuring that inflation remains well-controlled.

Scotiabank's latest forecast expects the BoC to hold the policy rate unchanged through 2025 and could see the policy rate decline over time against weakening growth and partial retaliation, versus holding or hiking should upside risks to inflation warrant tightening.

The bank's outlook for Canadian light vehicle sales of 1.86 million this year and 1.80 in 2026 faces large uncertainty, notably in the outer years to reflect developments and pressures that the tariffs will have on the automotive sector and overall economic activity.