The Canadian economy is facing challenges amid the ongoing trade dispute with the United States. Despite this, recent signs suggest that the country has managed to avoid slipping into a recession.
Jeremy Kronick, co-chair of the C.D. Howe Institute’s Business Cycle Council, stated that while the economy is experiencing strain, the current downturn does not meet the technical definition of a recession based on available data. The upcoming release of GDP figures is expected to confirm this assessment.
During the second quarter of this year, the Canadian economy contracted by 1.6 percent on an annualized basis. Typically, a recession is declared when there are consecutive quarters of economic decline.
Forecasts indicate that the GDP numbers for July and August will likely show growth, with estimates ranging from 0.0% to 0.5% annualized growth in the third quarter, as projected by Desjardin’s deputy chief economist, Randall Bartlett.
The slight growth is attributed to exemptions from U.S. tariffs, which have helped the majority of Canadian exports remain tariff-free. Following the initial shock in April, various sectors such as manufacturing, wholesale trade, and housing have shown signs of improvement.
Despite the positive indicators, concerns linger about potential future declines that could lead to a recession. The Bank of Canada recently reduced interest rates, and the federal government is planning significant spending initiatives to support the economy.
Regions heavily reliant on trade, like Windsor, Ontario, have been particularly affected by the trade tensions, with unemployment rates soaring to 11 percent. Consumer and business confidence has declined, despite the economic uptick.
While the current economic situation shows some promise, economists remain cautious about declaring a full recovery. However, there is optimism that growth, employment, and exports will strengthen in the latter part of this year and into 2026.