Canada’s economy is forecast to grow modestly in 2025 following a significant contraction earlier this year, according to new research from the Conference Board of Canada.
In its latest outlook, the organization projects real gross domestic product (GDP) will rise by 1.1 per cent in 2025 as trade patterns begin to adjust to higher tariffs.
Cory Renner
“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.
The report also forecasts slightly stronger growth in 2026, with the economy expected to expand by 1.3 per cent. However, U.S. trade policy is anticipated to continue limiting Canada’s economic momentum into the next year.
South of the border, the U.S. economy showed a stronger rebound following a mild contraction in early 2025, driven by disruptions to imports. Though recent trade agreements have reduced some volatility, policy uncertainty remains high. The U.S. is projected to see real GDP growth of 1.8 per cent in 2025 as labour market cooling and slower household spending begin to weigh on activity.
Canada’s trade sector remains under pressure. Exports have seen a modest recovery following a sharp second-quarter decline, but growth continues to be limited by weaker U.S. demand and targeted tariffs on key Canadian goods. Imports are also struggling due to sluggish domestic demand, and trade is expected to remain a drag on the economy into 2026.
Canada’s labour market, which had shown resilience in early 2025, is now showing signs of strain. “Hiring is expected to remain subdued for the remainder of the year, keeping job growth largely flat,” the report said. The Conference Board anticipates labour demand will improve in 2026 as trade tensions ease, though a shrinking workforce will pose new challenges.
Cross-border tariffs have also affected business investment, particularly in machinery and equipment, which saw a notable decline in the second quarter. The electric vehicle sector is facing “significant headwinds,” and overall investment uncertainty is expected to continue into 2026. However, the Conference Board noted that federal government support measures could help bolster investment activity.
Mario Toneguzzi
Mario Toneguzzi is Managing Editor of Canada’s Entrepreneur. He has more than 40 years of experience as a daily newspaper writer, columnist, and editor. He was named in 2021 and 2024 as one of the top business journalists in the world by PR News. He was also named by RETHINK to its global list of Top Retail Experts 2024 and 2025.
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