OTTAWA, ON, Oct. 9, 2025 /CNW/ - Following a steep contraction in the second quarter, Canada's economy is poised for a sluggish rebound as trade patterns begin adapting to higher tariffs, according to new research from The Conference Board of Canada. Real GDP is forecast to increase by 1.1 per cent in 2025.
"The Canadian economy is certainly feeling the impact of a turbulent 2025, with tariffs and ongoing uncertainty weighing heavily on export performance and business confidence," said Cory Renner, Associate Director, Economic Forecasting at The Conference Board of Canada. "While U.S. trade policy will continue to constrain growth over the coming year, the economy is projected to expand by 1.3 per cent in 2026."
Across the border, the United States economy rebounded strongly following a slight contraction in the first quarter of 2025, when tariffs disrupted import activity. Recent trade agreements have eased some of the immediate volatility, but policy uncertainty remains high. Real GDP growth for the U.S. is projected to slow to 1.8 per cent in 2025 as a cooling labour market and weaker household spending growth curb momentum.
Canada's trade sector continues to face headwinds. Export activity showed a modest recovery after a sharp decline in the second quarter, but growth remains constrained by softening U.S. demand and targeted tariffs on key products. Imports are also facing challenges from weak domestic demand. Trade will continue to drag on the economy over the next year.
After showing resilience through the first half of 2025, Canada's labour market is showing signs of weakness under the strain of tariffs and ongoing uncertainty. Hiring is expected to remain subdued for the remainder of the year, keeping job growth largely flat. Looking ahead to 2026, labour demand should strengthen as trade tensions gradually ease, but the job growth will face new challenges from a shrinking workforce.
U.S tariffs and Canada's counter measures have continued to disrupt cross-border trade, contributing to a notable decline in machinery and equipment investment in the second quarter of this year. Uncertainty is expected to carry into 2026, with the electric vehicle sector facing significant headwinds. Despite these challenges, investment prospects are projected to improve, supported by federal government measures aimed at stimulating business activity.
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SOURCE Conference Board of Canada
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