Canada's Economy During Recent Canada-U.S. Trade Developments

The presentation "Research to Insights: Canada's Economy During Recent Canada-U.S. Trade Developments" provides an integrated summary of recent economic developments, highlighting key movements in the economic data during the current trade conflict. It focuses on how economic conditions have changed as trade tensions between Canada and the United States continue to unfold.

Exports (-7.5%) scaled back sharply in the second quarter of 2025, following the implementation of US tariffs on Canadian steel, aluminum, automobiles and other goods not compliant with the Canada-United States-Mexico Agreement. This was the largest quarterly decline since 2009, excluding the COVID-19 pandemic period. Real gross domestic product (-0.4%) also contracted in the second quarter of 2025 after six consecutive quarters of growth.

After increasing in the first quarter of 2025, manufacturing output and wholesaling activity contracted in the second quarter as tariffs weighed on cross-border trade. In April, 54% of manufacturers and 44% of wholesalers reported being impacted by tariffs, though the share of all businesses affected by tariffs edged steadily lower in May and June. Many businesses that engage in cross-border trade are pursuing mitigation strategies to deal with the disruptions from tariffs.

There was no net employment growth from February to August 2025. On a year-over-year basis, the pace of growth in the private sector slowed before the trade tensions began and has been below 2% for the past 17 months. Employment growth in the public sector has also slowed considerably in 2025.

Prices for various consumer goods have been directly or indirectly affected by US tariffs and Canada's tariff countermeasures, including new cars, clothing and footwear, certain household appliances, a range of grocery items, and travel services. In the third quarter of 2025, one-quarter of businesses (24.9%) reported having passed on cost increases attributable to tariffs to their customers over the previous 6 months, while nearly two-fifths (39.4%) of businesses reported being very likely or somewhat likely to pass on costs to their customers over the next 12 months.