Canada’s 10-year government bond yield rose to 3.80% in September, the highest in over two years, after Canada’s retaliatory tariffs on US goods took effect and raised inflation risks. The counter-tariffs cover $20 billion of US goods, with duties ranging from 15% to 50% on products including steel, furniture, clothing and electronics. US tariffs imposed last month targeted $20 billion, or 5%, of Canadian exports to the US. Higher import prices increased inflationary pressures, while the escalating trade war reduced demand for Canadian bonds as safe-haven assets. Energy-driven inflation also boosted rate hike expectations. The BoC held its key rate at 2.25%, noting that inflation risks had increased while new tariffs had made the growth outlook more uncertain. Governor Macklem said policymakers were prepared to raise rates if inflation remained elevated.