Ottawa – August 29, 2025 – Statistics Canada reported Friday that the Canadian economy contracted 1.6 per cent in the second quarter on an annualized basis, marking the sharpest slowdown since the onset of recent U.S. tariffs.
The downturn followed 2.0 per cent growth in the first quarter (revised down from 2.2 per cent), with the decline driven largely by steep drops in exports and business investment. Exports of passenger cars and light trucks plunged 24.7 per cent, while machinery, equipment, and travel services also weakened.
Business investment in machinery and equipment fell 9.4 per cent, the slowest pace since 2016 outside the pandemic period. Imports were down as Ottawa imposed counter-tariffs, while Canadians reduced travel to the U.S., further dampening cross-border flows.
The report noted that households and governments increased spending, and businesses stockpiled goods, which helped cushion the downturn. However, June data showed a 0.1 per cent monthly GDP decline, marking the third straight month of contraction, largely due to weakness in the manufacturing sector.
StatCan’s advance estimates suggest a slight 0.1 per cent rebound in July, though economists warn that trade tensions and persistent tariffs will continue to weigh on growth.