Ottawa, August 29, 2025 – Statistics Canada has reported that the Canadian economy contracted by 1.6 per cent on an annualized basis in the second quarter of 2025, reversing the 2 per cent growth recorded in the first quarter.
The decline has been attributed largely to U.S. tariffs, which have placed significant strain on Canadian businesses, particularly in the manufacturing, transportation, and wholesale trade sectors. The tariffs have disrupted cross-border trade flows, directly impacting Canada’s export-driven industries.
This marks the sharpest quarterly slowdown since the pandemic-era downturn, raising concerns over the resilience of the Canadian economy amid escalating trade tensions.
Economists caution that if tariffs remain in place, Canada could face further challenges in terms of growth, investment, and employment. However, opportunities for recovery may arise should trade negotiations result in a relaxation of duties.
Policymakers and industry stakeholders are closely watching the Bank of Canada’s upcoming interest rate decision for signs of adjustment to support stability, while Q3 export data will serve as a critical measure of whether this downturn is temporary or deepening.