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Trade Tensions Stall Canada’s Growth in Q2 2025
Canada’s economy contracted sharply in the second quarter of 2025, underscoring the toll that escalating trade tensions have taken on the country’s growth. Statistics Canada reported a 1.6% annualized decline in real GDP, far steeper than the 0.5% drop economists had anticipated.
The slowdown was most pronounced in the spring, when tariff uncertainty disrupted exports and dampened business investment. June saw a 0.1% month-over-month GDP dip, while a preliminary estimate for July suggested only a modest 0.1% rebound.
The Bank of Canada had already projected a significant contraction for the quarter, citing the drag from U.S. tariffs and weaker global demand. Analysts note that further softness in the labour market could influence the central bank’s next interest rate decision.
The downturn follows a surprisingly strong first quarter, when GDP grew 2.2% as companies rushed to ship goods ahead of tariff deadlines. With trade negotiations still unresolved, economists warn that uncertainty could continue to weigh on Canada’s economic momentum into the second half of the year.
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