Adedokun Waliyu 
At a conference held by Royal Bank of Canada Wednesday, Scotiabank’s head f risk said the lender is scanning its portfolio of customers across personal, commercial and corporate banking for those most impacted by tariffs. He said job losses caused by tariffs will determine whether retail customers are able to absorb trade war shocks.
“What keeps me awake at night will be the Canadian retail consumer,” Mr. Thomas said.
In recent years, Canada’s banks have been setting aside more provisions for credit losses – the funds lenders reserve to cover potential loan defaults – as a buffer against higher interest rates and a slowing economy.
During first quarter earnings that ended Jan. 31, the lenders adjusted their provisions slightly to account for the uncertainty prompted by U.S. President Donald Trump’s tariff threats, but reserves for the year ahead will depend on the duration of the trade war.
Increases to provisions will likely be driven by rising risk in the retail business, Mr. Thomas said. It also depends on the type of fiscal stimulus or financial support the federal government provides for consumers and businesses.
“This is where unemployment starts to become the catchword for the industry and for us more broadly,” Mr. Thomas said. “Small businesses: Will they start laying off people because tariffs are impacting their business directly? And mid-market commercial. These will be the clients that we’ll be very active with in terms of what support they need from the bank.”
The heads of Scotiabank’s businesses have been meeting more frequently to discuss what they are hearing from customers. In the past 24 hours, Scotiabank’s bankers started “a very progressive, proactive outreach” to gather intel and help the bank make more informed decisions, he said.
Mr. Thomas spoke with a mortgage broker recently who said that homebuyers are pulling out of deals because they were unsure whether tariffs would impact their job security.
“The unfortunate consequence both for the Canadian consumer and the U.S. consumer is that people are uncertain, and uncertainty creates volatility and doesn’t lead to the growth that we would want to see,” Mr. Thomas said. “We’ve been sitting in this holding pattern since coming out of COVID where we’re waiting for rates to come down, people are keeping their powder dry and it’s creating this more uncertainty and this spin cycle.
Chief financial officer Kelvin Tran said that while the immediate impact is on directly affected industries including auto, agriculture and manufacturing, a prolonged trade war would erode consumer sentiment and business investment.
“Then you have higher unemployment rate, then that seeps into the bigger economy,” Mr. Tran said during the conference.
