Canada’s economy continued its upward trajectory in the final quarter of 2024, demonstrating resilience despite mounting uncertainty over impending U.S. trade tariffs.
Statistics Canada reported a 0.6% growth in GDP for the fourth quarter, an increase from the 0.5% growth in the third quarter, driven primarily by household spending and a strong export sector. However, the gains come just days before U.S. President Donald Trump’s proposed tariffs on Canadian goods are set to take effect, raising concerns about potential economic disruptions.
A major contributor to Canada’s economic expansion has been a surge in household spending, which rose 1.4% in the fourth quarter, marking its strongest increase since mid-2022. For the full year, consumer spending increased by 2.4%, with notable gains in purchases of new trucks, vans, and SUVs, as well as increased expenditures on rent, telecommunications, and financial services.
The construction sector also saw significant growth, with residential construction expanding by 3.9%, its largest quarterly increase since early 2021. Meanwhile, Canada’s export sector remained strong, with goods and services exports increasing by 1.8% in Q4 and by 0.6% over the full year. Crude oil and bitumen exports, alongside travel services and pharmaceutical products, played a key role in driving this growth.
Despite these positive indicators, Canada’s economic future faces heightened uncertainty as the U.S. prepares to impose new trade tariffs as early as next week. Experts, including Bank of Canada Governor Tiff Macklem, warn that the effects of such broad-based tariffs could be devastating for key industries.
“In the pandemic, we had a steep recession followed by a rapid recovery as the economy reopened,” Macklem said in a recent statement. “This time, if tariffs are long-lasting and broad-based, there won’t be a bounceback.”
While some economic recovery might still be possible, Macklem cautioned that the damage could be long-term, affecting manufacturing, exports, and job stability across the country.
As trade tensions escalate, policymakers and economists will be closely watching how the Canadian economy reacts to potential disruptions in cross-border trade. While domestic spending and strong exports have provided short-term stability, the full impact of tariffs could reshape Canada’s economic trajectory in the coming months.