The Bank of Canada's governing council felt that a protracted trade conflict with the U.S. would permanently shrink the level of domestic GDP, the minutes of a policy decision meeting showed on Wednesday.

Amid warnings of price increases, Canada moved quickly to retaliate, China said it had planned countermeasures and Mexico said it would soon unveil its response.

Trump knows the United States has more leverage over its neighbors than they do over his country. But exploiting that position of strength could cause a historic rupture.

According to President Sheinbaum, Mexico has cut a deal with the U.S. to delay the tariffs. Under the deal, she said Mexico is sending another 10,000 members of its national guard to the southern border to combat drug traffickers, while the U.S. has agreed to do more to prevent the trafficking of high-powered weapons to Mexico.

A need to fuel faster growth and shield the economy from U.S. trade-policy uncertainty led senior Bank of Canada officials to agree on a quarter-point rate cut last month, according to minutes summarizing central bank deliberations.

The Bank of Canada’s governing council members think Canada’s economy will be hurt more by a protracted trade war than that of the United States, according to minutes released by the central bank on Wednesday.

The potential for prolonged trade war with the United States weighed heavily on the Bank of Canada when it decided to cut its interest rate to three per cent last month.