Canada Adapts to Trade Tensions and Demographic Shifts
Canada's economy has been adapting to structural changes, including trade tensions and demographic shifts, according to Bank of Canada Governor. The country has gone through several stages of grief over the death of open trade with the US, but businesses are now starting to adapt.
The second stage of adaptation is underway, where businesses are making practical adjustments, such as looking for new suppliers and experimenting with new tools and technologies. This process can happen relatively quickly and is often reversible, but it's essential to restore economic activity.
Businesses are also adapting to the shift in trade relationships by diversifying their export markets. Non-energy exports rose 14½% in the second quarter, reaching their highest level since early 2025. While some temporary factors boosted quarterly growth, surveys suggest that businesses are reducing their exposure to tariffs and adjusting supply chains.
The labour market is also telling a similar story, with private sector hiring strengthening and the unemployment rate edging down. However, workers in disrupted industries may need to develop new skills and move into expanding sectors of the economy.