Experts see hope for Canada's growth as tariff threats recede
Canada’s economic outlook has brightened considerably as US tariff threats diminish, according to a new report from RBC Economics (RBC).
The bank’s analysis suggests the country’s economic path forward appears “considerably less treacherous” than just months ago, despite ongoing challenges including rising unemployment and weakened consumer confidence.
“It’s been a tough go for Canada so far in 2025,” the report states, noting that growth projections have fallen well short of forecasters’ predictions from a year ago.
However, five key developments have emerged as more positive than anticipated, providing hope for the struggling economy.
Most significantly, 86% of Canadian exports to the US remain duty-free under current rules. According to the RBC report, Canada now has the lowest US tariff rate of any major trading partner at 2.3%, compared to rates exceeding 30% for some countries like China.
“Canada has swung from being firmly in the focus of US trade ire in February and March to having the lowest US tariff rate of any major trading partner in April,” economists noted.
While consumer confidence plummeted to record lows in March, actual spending data has proven more resilient than sentiment surveys suggested. Employment has weakened in trade-exposed sectors like manufacturing, but broader consumer spending has held up relatively well.
The Bank of Canada’s aggressive interest rate cuts—225 basis points so far—provide additional flexibility should further economic support be needed, the economists said. They noted that the central bank has room to cut rates further if economic conditions deteriorate.
Provincial impacts vary significantly. Resource-dependent economies like Newfoundland and Labrador (2.6% growth), Alberta (2.4%) and Saskatchewan (2.2%) are expected to outperform manufacturing-heavy central provinces. Ontario faces particular challenges with growth projected at just 1.3% this year.
The report highlights Canada’s strategic advantages, including fiscal capacity to respond to economic shocks and abundant natural resources increasingly valued by global partners seeking to expand AI, data and defence capabilities.
Despite structural challenges including productivity concerns and slower population growth, the combination of manageable trade impacts, monetary policy flexibility, and resource advantages positions Canada better than many had feared during the height of trade tensions earlier this year.
A 90-day pause on more extreme US tariffs is set to end in early July, but current conditions suggest a more stable economic environment ahead.
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