Canada begins the economic recession journey by the fire of the trade war

It is likely that the Canadian economy is already going through the early stages of economic stagnation, according to a number of economists, in light of the high unemployment rates and the decline in exports due to the trade war with the United States of America.

Economists that “Bloomberg” polls their opinions that the gross domestic product will shrink 1% on an annual basis in the second quarter of this year, and 0.1% in the third quarter, which means entering the economy in “technical stagnation”.

Export
Exports are witnessing a significant decline, as it is expected to decrease by 7.4% on an annual basis during the current quarter, after the threats of US President Donald Trump to impose customs duties, American importers, pushed to accelerate their shipments early this year. Nevertheless, economists expect exports to be able to recover slightly from later this year.

The trade conflict with the largest commercial partner of Canada shades its shadow on the labor market and the spending of families. Experts expect that unemployment rates will rise to 7.2% in the second half of this year before starting to decline during 2026.

They also expect inflation to remain above the central goal of Canada, at 2.1% in the third quarter and 2.2% in the last quarter of this year.

This scene puts Canada Bank in a difficult situation, as data on “possible global interest rates” from “Bloomberg” shows that the possibility of changing the interest during its meeting in June is less than 30%.

The governor of the Canadian Bank Tif, McAlam, said yesterday: “The more we reduce the uncertainty, the more we can focus on the future in our decisions on monetary policy.”

Consumers and companies prefer to wait until the relationship with the United States of America becomes clear before making large decisions, which contributed to a remarkable slowdown in the housing market, as the prices of homes and sales decreased. Economists say that the pace of housing construction may be weaker in the second half of 2025 compared to the second quarter.

An agreement with the United States American
“I know that Canada is keen to sit with the United States and work to resolve differences and reach an agreement. If we get this clarity, we can return to growth. It is clear that if things go in the opposite direction, the consequences will be worse.”

Canadian Prime Minister Mark Carney is expected to win another opportunity to meet Trump soon, as the US President is scheduled to make his first visit to Canada since his return to power, to attend the Group Leaders ’Summit in Alberta next June.

But Carney warned that the period of deep integration between the two countries was forever.

Economists expect that GDP will increase 1.2% and 1% during 2025 and 2026, respectively, which are in line with previous estimates in the “Bloomberg” poll.

The poll was conducted with the participation of 34 economists, between 16 and 21 May.