Prime Minister flagged a potential 2% hit to Canada’s economy if growth stalls
Prime minister Mark Carney cautioned that the Canadian economy could shrink by nearly two per cent in the coming years if growth fails to keep pace, largely due to the ongoing impact and uncertainty of United States tariffs.
Speaking in Fredericton, New Brunswick, Carney addressed reporters following a meeting with premier Susan Holt, where he promoted the federal government’s new “Buy Canadian” policy and outlined strategies to bolster local industries.
Carney, referencing figures from the federal budget, said, “Our economy a few years out is likely to be almost 2% lower. 1.8%,” pointing to the combined effects of American tariffs and global economic uncertainty. The Trump administration had imposed steep tariffs on Canadian steel, aluminum, automobiles, copper and, lumber.
“It’s affecting the forest products sector, it affects the steel, aluminum sector, it’s affecting the cabinetry sector,” he said, highlighting the widespread reach of these trade measures.
Translating the impact for Canadians, Carney added, “That’s $1,300 for every Canadian. So the government, we’re not gonna take that. We’re gonna get that back and then some. And the way we do it is to build more homes, to build nation building projects, to build cleaner energy, to build out this country and that’s what we’re doing. So that’s in many respects, what’s at stake here.”
Build Canada Homes, a flagship program aimed at ramping up residential construction, will now be required to prioritize Canadian steel, wood, and aluminum. This shift is expected to benefit local builders and suppliers, potentially speeding up project timelines and creating new lending opportunities for mortgage professionals.
The Buy Canadian Policy, first unveiled last September, will see nearly $186 million in new funding from Budget 2025 to ensure its full implementation.
The policy will initially apply to sectors like defence and construction, with a phased rollout to infrastructure and housing projects—including the Build Canada Homes initiative—by spring 2026. In total, as much as $70 billion in additional public investment is expected to flow into Canadian-made products and services.
Carney’s remarks come amid persistent questions about Canada’s ability to sustain robust growth in the face of external pressures. The Bank of Canada and several industry analysts have warned that prolonged trade friction and sluggish productivity could further weigh on gross domestic product (GDP).
Canada’s economy took a step back in August, with GDP contracting by 0.3%. That's a sharper decline than economists had anticipated.
The pullback, driven by broad-based weakness across both goods and services sectors, has reinforced expectations among leading economists that growth will remain subdued into next year.
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