Canada’s economy weakened in the second quarter of 2025 as trade tensions with the United States weighed on exports, manufacturing, and employment, according to a new presentation from Statistics Canada.
The presentation, Research to Insights: Canada’s Economy During Recent Canada–U.S. Trade Developments, provides “an integrated summary of recent economic developments, highlighting key movements in the economic data during the current trade conflict.” It focuses on “how economic conditions have changed as trade tensions between Canada and the United States continue to unfold.”
Exports fell 7.5 per cent in the second quarter of 2025, following the implementation of U.S. tariffs on Canadian steel, aluminum, automobiles and other goods not compliant with the Canada–United States–Mexico Agreement. Statistics Canada said this was the largest quarterly decline since 2009, excluding the COVID-19 pandemic period. Real gross domestic product contracted 0.4 per cent after six consecutive quarters of growth.
After rising earlier in the year, manufacturing output and wholesaling activity also declined in the second quarter as tariffs reduced cross-border trade. Statistics Canada reported that in April, 54 per cent of manufacturers and 44 per cent of wholesalers said they were affected by tariffs. The share of all businesses reporting impacts declined in May and June. “Many businesses that engage in cross-border trade are pursuing mitigation strategies to deal with the disruptions from tariffs,” the agency said.
Employment remained flat between February and August 2025. The pace of private sector job growth slowed before the trade tensions began and has remained below two per cent for the past 17 months. “Employment growth in the public sector has also slowed considerably in 2025,” the presentation said.
Consumer prices have been directly or indirectly affected by U.S. tariffs and Canada’s countermeasures. Goods and services impacted include new cars, clothing and footwear, certain household appliances, grocery items and travel services.
“In the third quarter of 2025, one-quarter of businesses (24.9%) reported having passed on cost increases attributable to tariffs to their customers over the previous 6 months, while nearly two-fifths (39.4%) of businesses reported being very likely or somewhat likely to pass on costs to their customers over the next 12 months,” Statistics Canada said.
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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