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2mo ago

Canada’s Economy Holds Flat in Q2 Despite 35% U.S. Tariffs

Bank of Canada’s decision to keep its key rate at 2.75% reinforces Ottawa’s accelerated spending to shield the economy from elevated U.S. tariffs.

Bank of Canada governor Tiff Macklem said this week that the economy is showing "some resilience" to U.S. tariffs. Canadian and American flags fly near the Ambassador Bridge at the Canada-USA border crossing in Windsor, Ont. on Saturday, March 21, 2020. THE CANADIAN PRESS/Rob Gurdebeke

Overview

  • Statistics Canada’s flash estimate shows real GDP remained flat in the second quarter even after Trump’s 35% duties on steel, aluminum, autos and copper took full effect.
  • The Bank of Canada held its policy rate at 2.75% for a third straight meeting, pointing to “some resilience” under higher trade barriers.
  • Export-reliant industries such as manufacturing and transportation contracted in June while service sectors sustained modest growth.
  • Ottawa launched targeted programs for tariff-affected workers and sped up defence and infrastructure spending to mitigate trade uncertainty.
  • Carve-outs under CUSMA have kept effective U.S. duties near 7%, although dropping those exemptions could shave an additional 1.25% off real GDP by 2027.