Canadian economy contracts 1.6% in Q2 as tariffs hit, StatCan says
The Impact of U.S. Tariffs on the Canadian Economy
The Canadian economy took a hit in the second quarter of the year due to the imposition of U.S. tariffs, according to Statistics Canada.
Key Points:
- Real GDP declined by 1.6 per cent on an annualized basis in the second quarter.
- This was a significant drop from the 2 per cent growth seen in the first quarter.
- Exports and business investment were major contributors to the decline in GDP.
President Donald Trump’s tariffs on Canadian steel, aluminum, and autos had a direct impact on the country’s economy, leading to a sharp drop in exports and investment.
Impact on Industries:
International exports of passenger cars and light trucks saw a steep decline of 24.7 per cent, while industrial machinery and equipment exports also dropped.
Business investment in machinery and equipment was down by 9.4 per cent, the slowest pace since 2016.
Counter-Tariffs and Imports:
Canada retaliated with counter-tariffs against the U.S., resulting in a decrease in imports from American companies.
The decline in imports helped offset the overall drop in GDP, while government and household spending provided some support to growth.
Monthly Trends:
In the month of June, real GDP declined by 0.1 per cent, with the manufacturing sector being particularly affected by the ongoing trade war.
Goods-producing sectors saw a 0.5 per cent decrease, while services industries showed a slight increase of 0.1 per cent.
Looking Ahead:
Despite the challenges faced in the second quarter, early estimates suggest a slight uptick of 0.1 per cent in July.
It remains to be seen how ongoing trade tensions will continue to impact the Canadian economy in the coming months.
This article was originally published by The Canadian Press on August 29, 2025.
