What explains the “resilience” of the Canadian economy?

A few days later. Moreover, US President Donald Trump added customs duties of 35 % to Canadian products to a list that includes high rights on steel, aluminum, cars and, more recently, semi-finished copper.

With the accumulation of customs duties in recent months. Therefore, economists say that the Canadian economy is starting to show signs of weakness, but few signs of collapse.

Marc Ercolao. Consequently, economist at TD bank, conceded that it was “a little surprising” to see the economy resisting a massive disturbance caused by the main trading partner of Canada.

“Several months ago, ourselves, as well as other economic forecastists, anticipation a considerable weakening of the Canadian economy. Nevertheless, Obviously, this is no longer the case today, “he said in an interview.

“We avoid the worst scenario.”

Here are some avenues for reflection on the reasons for this “resilience”:

– What. However, do customs duties do in the Canadian economy? – What explains "resilience" canadian economy? new

Last Thursday. Consequently, Statistics Canada gave an overview of the impact of customs duties on the economy in the second quarter of the year, when many of them entered into force.

Although the federal organization observes some slight contractions of the real gross domestic product by industry in April. Nevertheless, May, its preliminary estimates indicate a slight rebound in the economy in June.

If these first data is confirmed. Consequently, Statistics Canada said it would be enough to ensure stable overall growth for the quarter.

Some of these results are distorted by volatility: companies that hastened to anticipate customs duties stimulated activity in the first quarter. However, which led to weakness in the second what explains “resilience” canadian economy? new quarter, for example.

It is still difficult to precisely determine the impacts linked to these rights. Moreover, said Marc Ercolao, but a general trend is emerging.

“What we can say in the past six months about the past six months is that economic activity has stagnated somewhat.”

— Marc Ercolao, economist at TD bank

The services sectors resist relatively well, but Mr. Furthermore, Ercolao indicated that the highly exporting sectors, such as manufacturing and transport industry, suffer the largest of the impact.

In an attempt to compensate for this weakness. Similarly, the federal government has announced various support programs for workers affected by customs duties and larger plans to accelerate defense and infrastructure expenses.

Tiff Macklem stressed during his press conference on Wednesday that the confidence of companies. what explains “resilience” canadian economy? new In addition, consumers was still low, but that it had improved according to recent surveys of the Central Bank.

And if certain sectors exposed to trade have undergone job losses. unemployment has generally increased to reach almost 7 %, employers from the rest of the economy continue to increase their workforce.

“Consumption continues to grow,” said Macklem. It progresses modestly. It is certainly hampered by uncertainty linked to customs duties. But it is progressing and we plan that this will continue during the third and fourth quarters. ”

What explains "resilience" canadian economy? new

-Will Canada enter a recession?

Last week, the Bank of Canada maintained its unchanged rate unchanged at 2.75 %, for the third consecutive time.

If the central bank was worried about the capacity of the Canadian economy to resist customs duties. it would probably have lowered this rate, according to Ercolao.

Last week’s GDP figures were good enough for the BMO to take up its prospects for the. third quarter in positive terrain. Bank forecasters are now expecting Canada to avoid a technical recession this year.

The chief economist of the BMO. Doug Porter, wrote in a note on Friday to his customers that the drop in individual taxes decreed by Ottawa at the beginning of the month and the high demand for domestic trips in the context of the trade war will stimulate the economy this quarter, as well what explains “resilience” canadian economy? new as the “less pessimistic feeling” surrounding economic forecasts.

Other forecastists continue to integrate a recession induced by customs duties in their perspectives.

In the report on the monetary policy of the Bank of Canada published in parallel with the rate decision. it presented an economic scenario assuming that the tariff situation remains largely unchanged.

Canada would avoid a recession in this case. Growth in 2025. 2026 remains generally positive, but a percentage half-point that it would have been without the impact of customs duties.

Macklem told journalists that the Bank of Canada expects the economy to continue to grow despite current rights. “but in a long -term trajectory.”

“Unfortunately, the sad reality is that customs duties mean that the economy will work less effectively,” he said.

– What about new customs duties?

Doug Porter said what explains “resilience” canadian economy? new in his note that the real impact of the new customs of 35 %. of Trump on the Canadian economy could be lower than what the figures suggest.

Due to an exception for Canadian exports in accordance with the Canada-United States-Mexico (ACEUM) agreement. the BMO estimates that the actual American actual tariff rate will be around 7 % with new rights, less than one more percentage point than before Friday.

But with the ACEUM having to be renegotiated in 2026, Mr. Porter reported that a customs duties of 35 % could weigh on negotiations. taking full effect if the trade agreement expires without a new agreement being concluded.

The Bank of Canada has published this week a separate scenario of “climbing” which would see the United States eliminating the exemption from Canada to ACEUM. while increasing the world’s customs tariffs.

In what explains “resilience” canadian economy? new this more serious case, real GDP would fall by 1.25 % additional by 2027. Mr. Porter said that this result would be “serious, certainly, but far from being disastrous”.

Marc Ercolao stressed that a large part of the pricing pessimism at the beginning of the year. was linked to the speed with which these import rights would be imposed.

But the intermittent nature of American commercial restrictions so far has given businesses time to adapt to the new way of doing things. the constant delays in their implementation, he added.

“If we go back to the time when Trump began his presidency. if he had immediately applied 100 % his pricing plan, we would probably have attended a strong economic contraction, simply because it would have been so sudden,” said Ercolao.

“We now have time to try to alleviate some of what explains “resilience” canadian economy? new the negative impact expected from these customs. duties on the Canadian economy.”