The trade war between the U.S. and Canada has resulted in a steep drop in Canadian exports, but overall the Canadian economy has shown resilience so far…but that could change warns Bank of Canada Governor Tiff Macklem.

Macklem was in St. John’s to address the St. John’s Board of Trade on Wednesday.

He says the economy will suffer if a new trade deal between Canada and the U.S. can’t be reached.

“The longer these tariffs stay in place, the more the weakness in exports is likely to spill into the rest of the economy. Unfortunately that means the longer they stay in place, the more job losses we could see. That’s something we’re concerned about.”

Macklem says they’re also watching closely to see what kind of an impact tariffs might have on inflation.

“We know tariffs will add costs, counter-tariffs means things we import will be more expensive, U.S. tariffs disrupt trade, that adds costs, and we don’t want the tariff problem to become an inflation problem. ”

He says the Bank of Canada is looking at both the weakness in the economy, and the upward pressure “and we’re focused on supporting the economy, while ensuring that inflation stays well controlled.”