The Bank of Canada’s quarterly business outlook survey signalled widespread business optimism with sales outlooks remaining robust, supported by strong foreign and domestic demand.

The business outlook survey indicator rose to its highest level since the second quarter of 2011. Responses to most survey questions were above their historical averages, the central bank said Friday.

However, the Bank of Canada said almost all of the interviews with firms for the survey were done before the U.S. announcement on tariffs on steel and aluminum imports from Canada.

Escalating trade tensions between Canada and the U.S. since then, including the threats of additional tariffs on the auto sector, have raised concerns for the economy.

Also, protectionist risk has been rising since May, Eric Lascelles, chief economist at RBC Asset Management in Toronto, told Advisor.ca in mid-June. That said, he explained it’s difficult to find an economic model that illustrates protectionism results and that current protectionist measures would need to increase significantly to reach trade war status.

Read: Are your clients at risk from protectionism? Experts weigh in

Concerns for U.S. businesses are also rising. As a June 28 report from Moody’s Analytics says, the good news of a rise in operating profits south of the border is being “marred by considerable uncertainty.”

John Lonski, chief economist of Moody’s Capital Markets Research, writes, “What may degenerate into an extended trade war of attrition could preserve financial market volatility indefinitely.”

Further, he says, “Given the global complexities of modern supply-chain management, a surprisingly large number of U.S.-based businesses may delay capital spending and staffing plans until trade-related uncertainties are sufficiently resolved.”

In particular, Lonski says, “To the degree tariffs increase the costs of materials and inventories, businesses will tighten their control of other costs; the most prominent being employee compensation.”

Meanwhile, for Canada, the BoC’s survey of about 100 firms found the balance of opinion on future sales growth was marginally positive as domestically-oriented firms, including those tied to housing in some regions, expected a moderation in growth.

Firms that were optimistic about their sales prospects often expected benefit from sustained foreign or domestic demand, improving commodity prices or new products or initiatives to increase market share.

“In particular, firms serving foreign customers reported that orders have improved compared with 12 months ago, and they expect export sales to increase at a greater rate over the next year,” the report said.

Based on this data, it seems, “Firms were generally upbeat about the economy in May and early June,” says National Bank’s Krishen Rangasamy in a June 29 report. The BoC survey’s “aggregate indicator rose near an all-time high in Q2,” he adds.

However, it’s likely that business optimism “took a subsequent dive, especially after the disastrous G7 meeting of June 8th/9th when Canada-U.S. trade relations took a turn for the worse,” he cautions.

What’s more, the survey also said the number of firms that would have significant difficulty meeting an unanticipated increase in demand has increased to levels not seen since before the 2008-09 recession.

“Reports of labour shortages are most prevalent in British Columbia, but are also common in Central Canada,” the report said.

The Bank of Canada survey came as Statistics Canada also reported Friday that real GDP edged up 0.1% in April over the previous month. Economists had expected no change for the month.

Gains in the manufacturing and utilities sectors more than offset declines in construction and in mining, quarrying, and oil and gas extraction to help the output of goods-producing industries rise 0.2%.

Activity in the manufacturing sector rose 0.8% in April as the output of both durable and non-durable manufacturing grew.

Services-producing industries were essentially unchanged overall for the month.

Both the business outlook survey and the latest reading on GDP will be scrutinized by the central bank ahead of its interest rate decision next month.

Read: At 0.1%, real GDP edges above expectations for April

The Bank of Canada kept its key interest rate target on hold at its last rate announcement, but the central bank’s accompanying statement was interpreted by many economists as suggesting that rates could head higher later this year.

However, the Trump administration announced tariffs on steel and aluminum imports a day after the last rate announcement and has since made threats of additional tariffs on other goods including automobiles. Canada has responded with its own plans for tariffs on U.S. steel and aluminum imports, as well as duties on a wide range of other goods.

Bank of Canada governor Stephen Poloz said earlier this week the escalating cross-border trade fight and new mortgage rules will “figure prominently” in the central bank’s upcoming interest-rate decision.

Read: Why investors should keep a close eye on the loonie

The governor added the central bank will continue to focus on economic data it can model rather than trying to follow political rhetoric.

The Bank of Canada has raised its key interest rate target three times since last summer–moves that have prompted Canada’s big banks to raise their prime lending rates. The central bank’s target for the overnight rate sits at 1.25%.

The business outlook survey was conducted from May 3 to June 5.