Business and market leaders see slightly better growth but deep trade anxiety
The Bank of Canada’s latest survey of financial-market participants pointed to a modestly brighter growth outlook than the central bank’s own projections, even as trade tensions with the United States remain the dominant threat hanging over Canada’s economy and housing market.
In the fourth‑quarter Market Participants Survey, 93% of respondents cited an “increase in trade tensions” as the top downside risk to Canadian growth, well ahead of tighter global financial conditions and weaker consumer spending.
Participants still assign a 20% probability to a recession over the next six months, but their median forecast calls for real GDP growth of 1.6% by the end of 2026 and 1.9% by late 2027, slightly stronger than the Bank’s own projections of 1.1% and 1.5%.
Trade tensions stay at the centre of risk
While the survey suggests some stabilization in expectations, it underscores that tariff policy remains the key macroeconomic swing factor. The upcoming joint review of the Canada–United States–Mexico Agreement (CUSMA) in July was described by the Bank as a “key source of uncertainty” for Canada’s outlook, with most goods still flowing duty‑free across the border under the pact.
Vanguard’s Ashish Dewan said Canada entered talks with “the lowest effective tariff rate from amongst the major trading partners,” estimating it at about 6% compared with “between 16% and 19%” elsewhere. He warned that sector‑specific US tariffs on steel, aluminum and lumber are “the main negative drags on Canada’s economy” – a direct concern for construction and housing costs.
Meanwhile, PwC Canada’s latest survey among 133 CEOs showed that only 27% expect the domestic economy to improve over the next 12 months, down from 42% a year earlier, and just 47% sees brighter prospects for global growth, compared with 61% of CEOs worldwide.
“This year’s survey results mark a watershed moment for Canadian business leaders,” said Nicolas Marcoux, CEO of PwC Canada.
“For the first time in over five years, Canadian CEO sentiment is moving in the opposite direction of global optimism. The headwinds in Canada – trade uncertainty, tariff pressures, and slower adoption of transformative technologies like AI – are significant and very real.”
Housing and mortgage outlook remain in the crosshairs
In March 2025, Marcus & Millichap said that “tariffs could dampen demand across the manufacturing, warehousing and transportation industries,” adding that projects were likely to be postponed and that industrial vacancies could rise.
A separate outlook warned that tariffs were putting Canada’s housing market recovery “in jeopardy” by raising costs and undermining confidence just as mortgage rates began to ease.
By late 2025, RBC Economics stressed that monetary policy “cannot resolve trade uncertainty or offset the impacts of a trade war,” even as rate cuts helped pull mortgage costs down from their peaks. Industry voices also described tariffs and the CUSMA review as “the biggest question mark” over the 2026 housing outlook, with buyers and lenders alike staying cautious in the face of shifting US policy.
Make sure to get all the latest news to your inbox on Canada’s mortgage and housing markets by signing up for our free daily newsletter here.
